Monster Beverage Corporation MNST is set to report second-quarter 2015 results on Aug 6, after the market closes. Last quarter, it posted a negative surprise of 8.82%. Let’s see how things are shaping up for this announcement.
Factors to Consider
The carbonated soft drinks category has remained soft over the past few years. However, energy drinks, within this category, has been gaining traction. Monster Beverage’s second-quarter 2015 top line should benefit from growing momentum at the energy drink category. The company’s revenues are also expected to gain traction from new products launched in the U.S in the past few quarters and solid international sales.
Gross margin is gaining from favorable changes in the product sales mix, higher production efficiencies and decrease in cost of some raw materials, particularly certain sweeteners. These tailwinds are expected to drive gross margin in the upcoming quarter as well.
However, Monster Beverage’s profitability in the second quarter will be hurt by the expenses related to the execution of its long-term deal with The Coca-Cola Company KO and unfavorable foreign currency.
Earnings Whisper?
Our proven model does not conclusively show that Monster Beverage is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: The company’s Earnings ESP is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate stand on par at 90 cents.
Zacks Rank: Though Monster Beverage Corporation’s Zacks Rank #2 increases the predictive power of ESP, its 0.00% ESP makes a surprise prediction difficult.
Please note that we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies in the consumer 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:
Kellogg Company K with an Earnings ESP of +4.40% and a Zacks Rank #3.
SUPERVALU Inc. SVU with an Earnings ESP of +14.29% and a Zacks Rank #2.
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