Share price of Monster Beverage Corporation MNST reached a fresh 52-week high of $143.90 on Feb 27. Shares of the energy drink company eventually closed at $141.12, yielding a solid year-to-date return of 30.5%.
Shares soared a robust 13.1% since the company announced solid fourth-quarter fiscal 2014 results on Feb 26.
Share prices of Monster Beverage has, in fact, almost doubled since the company declared a deal with The Coca-Cola Company KO in Aug 2014, which includes the sale of an equity stake and swapping of some brands with the cola giant.
Strong Earnings Results
Monster Beverage’s fourth-quarter 2014 adjusted earnings of 72 cents per share beat the Zacks Consensus Estimate of 59 cents by 22% and rose a massive 63.2% year over year on the back of solid revenues, strong margins, better cost leverage and a lower tax rate.
Monster Beverage’s fourth-quarter 2014 net sales of $605.6 million surpassed the Zacks Consensus Estimate of $585 million by 3.5% and rose 12.0% year over year.
Revenues were driven by strong sale in markets outside U.S, particularly in Europe and Japan. Gross sales outside the U.S. increased 16.1% year over year during the fourth quarter.
Revenue was also driven by solid sale of Original Monster Green energy drink, Java Monster and Zero Ultra. Also, new product Ultra Sunrise, which was launched in the third quarter of 2014, performed well in the quarter. Some of the brands that did well in the quarter include Juice Monster and Punch Monster energy drinks.
Fourth-quarter 2014 gross margin rose 360 basis points (bps), attributable to favorable changes in product sales mix, increase in production efficiencies and decrease in cost of some raw materials, particularly certain sweeteners. Gross margin was also driven by higher prices of 24-ounce Monster Energy brand energy drinks and Peace Tea line.
Operating income increased 43.1%, owing to higher operating income from international operations such as Europe and Japan.
The Deal with Coca-Cola Company
The deal with The Coca-Cola Company provides Monster with a worldwide distribution network that can propel Monster to a whole new high. Under the long-term strategic deal, Coca-Cola will transfer ownership of its worldwide energy business to Monster, whereas Monster will transfer its non-energy business to Coca-Cola.
The transaction, expected to close in second-quarter 2015, is awaiting regulatory and customary approvals. With the rapidly increasing demand for the energy drink, this deal is a perfect opportunity for Monster to cater to its worldwide customers.
Monster Beverage carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the beverage industry include Coca-Cola Amatil Ltd. CCLAY, and Youngevity International, Inc. YGYI. Both companies carry a Zacks Rank #2 (Buy).
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