Monster Beverage Seeks to Keep Its Earnings Momentum

Extreme sports have been a key part of Monster's marketing image. Image source: Monster Beverage.

Beverage giant Monster Beverage (MNST +1.26%) has pioneered the energy-drink industry, bringing innovation to a beverage market that has been showing signs of decline. Even as traditional carbonated products have struggled to find their footing amid greater calls for regulation and taxation, Monster Beverage has survived past controversies about the health impact of its products. As the company's second-quarter financial report approaches, Monster Beverage investors want to see the same kind of positives that helped send the stock higher after the company's previous earnings announcement.

Let's take an early look at the latest from Monster Beverage with an eye toward gauging whether the company can keep up its momentum going forward.

Stats on Monster Beverage

Data source: Yahoo! Finance.

What's ahead for Monster Beverage earnings?

In recent months, investors have gotten more optimistic about Monster Beverage earnings, raising their full-year 2016 and 2017 projections by between 2% and 3%. The stock has also done extremely well, climbing more than 20% just since mid-April.

Nearly all of the stock gains Monster Beverage has earned came in the aftermath of its first-quarter financial report. The pace of revenue growth for Monster doubled to almost 16%, and adjusted net income rose by nearly half from year-ago levels. Those figures even included a hit from currency impacts, and case volumes rose enough to offset a drop in the average price per case. CEO Rodney Sacks pointed to the company's integration of its purchase of American Fruits and Flavors as being successful thus far, and the announcement of a new stock buyback also helped send shares higher.

Since then, Monster has quickly moved to implement some of what it talked about in its earnings report. The final results of Monster's tender offer to buy back $2 billion in shares were available in June, and the beverage company said it accepted about 12.8 million shares for buyback at $156 per share. The company accepted all but about 1.3% of shares tendered at or below that $156 price, and that included extensive holdings of roughly 1.83 million shares from the CEO and 1.05 million shares from board member Hilton Schlosberg. Some were concerned about the insider sales, but the two executives still hold more than 17.3 million in total after the tender offer.

Will new products send Monster higher?

Monster has also kept up its pace of innovation by going after some of the most popular beverage franchises of its rivals. In June, Monster introduced two new products, and one drew particular notice from investors as a departure from its core area. The new Mutant product will be a "super soda," and many believe the carbonated beverage is designed to target customers who currently drink Mountain Dew. Mutant will have even more caffeine per ounce than its rival, and Monster hopes the energy emphasis of the beverage will help it avoid the drop-off in demand that most traditional carbonated-beverage sellers have seen with regular colas and other sugary drinks. With Mountain Dew having done a lot of marketing in connection with extreme-sports events like the X-Games in an effort to go after younger customers, most industry analysts see Monster's move as a direct assault on Mountain Dew's leadership role in that segment of the market. In addition to Mutant, the new non-carbonated energy drink Hydro will also be available and adds to Monster's already impressive lineup of available beverages.

In the Monster Beverage report, investors will want to look closely at whether its efforts to take advantage of competitors' weakness result in greater sales. With shareholders having weathered so many fears about whether the energy-drink industry will end up getting beaten down by regulatory or health concerns, Monster Beverage has a real opportunity if it can keep on growing with its existing products and also expand to cover larger pieces of the market worldwide.