Monster Beverage Corporation MNST is set to report first-quarter 2015 results on May 7, after the market closes. Last quarter, it posted a positive surprise of 22.03%. Let’s see how things are shaping up for this announcement.
Factors to Consider
The carbonated soft drinks (CSD) category has remained soft since the past few years. However, energy drinks, within this category, has been gaining traction. Monster Beverage’s top line in the first quarter of 2015 will benefit from this growing momentum of the energy drink category. The company’s revenues are also expected to gain from its new product launched in the U.S and solid sales in international markets.
However, Monster Beverage has been facing several other headwinds for the past few quarters, which is hurting its profits.
New Monster Energy branded products like Ultra and Muscle Monster are cannibalizing sales of the existing brands like Absolutely Zero, Rehab, Import and Lo-Carb. We expect the trend to continue in the first quarter. Also unfavorable currency transactions are likely to hurt quarterly results.
Moreover, Monster Beverage has been involved in several controversies. The Food and Drug Administration (FDA) is currently investigating the impact of caffeine in food and dietary supplements, which includes Monster Beverage products. All these regulatory and litigation issues are increasing Monster Beverage’s professional service expenses, which are eroding margins.
Earnings Whisper?
Our proven model does not conclusively show that Monster Beverage Corp. is likely to beat earnings this quarter. That's because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
Zacks ESP: Its Earnings ESP is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 68 cents.
Zacks Rank #1 (Strong Buy): Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, Monster Beverage’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies in the cConsumer Staples sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Constellation Brands Inc. STZ with an Earnings ESP of +0.82% and a Zacks Rank #3 (Hold).
Brown-Forman Corp. BF.B with an Earnings ESP of +1.52% and a Zacks Rank #3.
Treehouse Foods, Inc. THS with an Earnings ESP of +1.72% and a Zacks Rank #3.
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