Monster Beverage Corp. Earnings: Another Rip-Roaring Growth Performance

By Markets Fool.com

Liam Doran's rallycross car rips around an icy Norwegian street corner, decked out in full Monster regalia. Image source: Monster Beverage.

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Monster Beverage (NASDAQ: MNST) reported second-quarter results on Thursday night. It's fair to say that investors appreciated the report; Monster shares jumped as much as 5% higher on Friday, setting fresh all-time highs in the process.

Here's a closer look at that market-moving report.

Monster's Q2 results: The raw numbers

Metric

Q2 2016 Actuals

Q2 2015 Actuals

Growth (Year Over Year)

Net sales

$827 million

$694 million

19%

Net income

$184 million

$229 million

(20%)

GAAP EPS (diluted)

$0.90

$1.26

(29%)

Data source: Monster Beverage.

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What happened with Monster Beverage this quarter?

The quarter was affected by several big-ticket events, making it difficult to do an apples-to-apples comparison with the year-ago period. The long-term partnership with Coca-Cola (NYSE: KO) hit its one-year anniversary at the very end of the second quarter, but it took a while to start feeling the effects of this global distribution deal. Closer to home, Monster acquired ingredient supplier American Fruits & Flavors in the first quarter of 2016. Finally, the company bought back $2 billion worth of shares in a modified Dutch auction that ended in June. The buyback reduced Monster's share count by 6.3%.

  • The long-term partnership with Coca-Cola (NYSE: KO) hit its one-year anniversary at the very end of the second quarter, but it took a while to start feeling the effects of this global distribution deal. In fact, the two companies are still implementing their contract, including a large-scale launch in Mexico in August. A Brazilian rollout is slated for November.
  • Closer to home, Monster acquired ingredient supplier American Fruits & Flavors in the first quarter of 2016. Finally, the company bought back $2 billion worth of shares in a modified Dutch auction that ended in June. The buyback reduced Monster's share count by 6.3%.
  • The year-ago quarter included a $161 million gain from selling Monster's non-energy drinks to Coca-Cola. Adjusting the company's bottom-line results to remove this enormous change and other one-time items, diluted earnings increased from $0.79 to $0.99 per share.
  • Case sales increased by 29% year-over-year, stopping at 87.6 million 192-ounce equivalents. Meanwhile, the average net revenue per case declined from $10.20 to $9.37.

The company is not in the habit of providing guidance for upcoming quarters or even fiscal years. CEO Rodney Sacks noted that July gross sales were increased 2% year-over-year on a currency-adjusted basis. However, the month contained 10% fewer business days than the 2015 period, and sales are prone to sharp bounced when you're looking at such a short time period.

What management had to say

Sacks expects the American Fruits & Flavors buyout to start delivering cost savings in the third quarter. Monster is also looking forward to several new product launches in the second half of 2016.

We are continuing with our plans to launch Mutant, an exciting new beverage that will be positioned as "refreshment energized," late in September 2016. We also have additional new products planned for production later this year, and are working on additional new products that we are planning to introduce early in 2017.

-- Rodney Sacks, as transcribed by Seeking Alpha

Looking ahead

Monster Beverage is hardly resting on its laurels. The company is cranking out new products while still stretching its Coke-powered distribution arms into untouched corners of the world. International sales increased by 30% in the second quarterand now amounts to 29% of the company's total revenue.

In short, there's still lots of growth runway left ahead of Monster. These all-time high share prices were not reached on a whim.

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Anders Bylund has no position in any stocks mentioned. He will freely admit to enjoying the products of both Coca-Cola and Monster, probably far too often. The Motley Fool owns shares of and recommends Monster Beverage. The Motley Fool recommends Coca-Cola. Try any of our Foolish newsletter services free for 30 days.

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