Earnings Preview: Stable energy drink sales keep Monster Beverage fizzing

Monster Beverage Corporation (NASDAQ: MNST) has restructured its alcohol segment to improve performance and growth under new management. Meanwhile, the brewer continues to innovate its portfolio with a focus on new product launches, both in the alcohol and non-alcohol segments. The stable demand for its energy drinks in key markets has helped the company overcome the slowdown in alcohol sales lately.

The owner of popular brands like Reign and Full Throttle is expected to report positive results for the fourth quarter of fiscal 2024, with market watchers forecasting a 3.8% year-over-year increase in net sales to $1.8 billion. It is estimated that earnings rose to $0.40 per share in the December quarter from $0.35 per share in Q4 2023. The report is expected to come on Thursday, February 27, at 4:10 pm ET. In the trailing two quarters, earnings and sales missed analysts’ estimates.

The Stock

Monster Beverage’s stock has gained about 13% in the past six months, after recovering from a losing streak. Over the past few decades, MNST has consistently ranked among the top-performing stocks on Wall Street. Despite the uptrend, the shares experienced volatility this year. The last closing price is broadly in line with the stock’s 52-week average. Given the stock’s impressive track record of resilience, it is unlikely to disappoint long-term investors.

“…the energy category continues to grow globally. Growth opportunities in household penetration of capital consumption, along with consumers’ need for energy, are positive factors for the category. We continue to expand ourselves in non-Nielsen-measured channels. As reported earlier, we have implemented a price increase in the United States on November 1, 2024. We continue to review opportunities for price increases internationally. Our AFF facility in Ireland is now providing a large number of flavors to our EMEA region, enabling better service levels and lower landed costs to our EMEA region,” Rodney Cyril Sacks, the company’s co-chief executive officer said a few months ago.

Q3 Results

In the September quarter, net sales increased modestly to $1.88 billion from $1.86 billion a year earlier. Energy drink sales, which account for nearly 90% of total revenues, rose by 1% while sales of the company’s alcohol brands decreased by 6%. It reported a net income of $370.9 million or $0.38 per share for the third quarter, compared to $452.7 million or $0.43 per share in last year’s Q3. Adjusted earnings, excluding one-off items were $392.4 million or $0.40 per share, vs. $430 million or $0.41 per share in the corresponding quarter in 2023.

Monster Beverage’s successful journey can mainly be attributed to its strategy of delivering what the market demands and a marketing strategy focused on sponsorships of extreme sports and high-profile athletes. That, combined with its broad portfolio of products, has helped the company stay on the growth path. While the company achieved record sales in the most recent quarter, earnings declined. The bottom line suffered from higher operating costs and a shift away from high-margin products due to economic pressures.

Shares of Monster Beverage have lost 13% since hitting an all-time high a year earlier. On Monday, the stock mostly traded lower after opening the session at $53.0.