Updated Research Report on Monster Beverage - Analyst Blog

On Apr 11, 2014, we issued an updated research report on Monster Beverage Corporation MNST.

On Feb 27, this marketer and distributor of energy drinks and alternative beverages reported mixed fourth-quarter 2013 results. During the quarter, the company witnessed a better-than-expected top-line performance, which was offset by higher professional costs, currency headwinds and increased tax rates.

As a result, adjusted earnings of 44 cents per share missed the Zacks Consensus Estimate by 2.22%, despite double-digit year-over-year increase. Net sales of $540.9 million surpassed the Zacks Consensus Estimate by 3.6% and rose 14.7% year over year on the back of a robust increase in sales in international markets and successful launch of new products in the U.S.

The company has been incurring significant foreign currency transaction losses due to unfavorable currency translations especially in Japan, Australia and South Africa. The company has also been witnessing increase in professional service cost related to litigations and regulatory issues.

The company's new Monster Energy branded Zero Ultra, Ultra Red and Ultra Blue energy drinks are also cannibalizing the sales of existing brands.

Monster Beverage has strong fundamentals, with solid brands, such as Monster Energy, Java Monster, X- Presso Monster, Worx Energy, Peace Tea, Hansen, Junior Juice, Blue Sky, Hubert's and Vidration.

Though the carbonated soft drinks CSD category has been declining for the past few years and even the diet versions have begun to struggle with consumers being increasingly aware of diet sweeteners, only the energy drink market has been gaining momentum. In fact, some of the brands of Monster Beverage, such as Monster Ultra Blur energy drinks, new Muscle Monster line, tea plus pink lemonade and energy Monster Rehab line, have been performing better than expected.

Monster Beverage, whose products are available at Wal-Mart, Inc. WMT stores, carries a Zacks Rank #2 (Buy).

Key Picks from the Sector

Investors interested in the beverage industry can also consider stocks like Coca-Cola Enterprises Inc. CCE and Dr Pepper Snapple Group, Inc. DPS. Both the stocks carry a Zacks Rank #2.