What happened
Shares of Monster Beverage (MNST 0.04%) fell as much as 13.2% on Thursday morning, following a combined earnings and revenue miss in the fourth quarter of fiscal year 2017. As of 12:15 p.m. EST, the energy drink specialist's stock had recovered slightly to an 11.7% drop.
So what
In the fourth quarter, Monster's sales rose 7.5% year over year to land at $810 million. Analysts had been expecting something more like $843 million. On the bottom line, unadjusted earnings increased 17% to $0.35 per diluted share. Here, the Street was looking for $0.37 per share.
The evolving distribution partnership with Coca-Cola continued to drive sales growth in the face of global headwinds for the sweetened beverage market. Top-line revenue was held back by Chinese bottlers working through some existing inventory.
Image source: Author.
Now what
Monster and Coke are still working out some kinks in their worldwide energy drink distribution efforts, making the company's quarter-by-quarter results somewhat unpredictable. At this point, Monster hasn't delivered a positive earnings surprise since the first quarter of 2016. The stock has still delivered a market-beating 32% return over the last 52 weeks -- a period including four earnings misses and today's big drop.
Several analysts defended Monster Beverage after this disappointing report, calling the stock a buy since the misses were related to simple shipment shifts from one quarter to another. Macquarie analyst Caroline Levy described the company's wobbly sales this way: "As we have seen over the years, very often a bad quarter is followed by a good one, and we are comforted to see consumer takeaway remains healthy."
Takeaway is a technical term in the food sector, essentially referring to retail sales. I would agree with Levy and others that this sudden plunge looks like a nice buy-in window for an exciting growth stock with plenty of international expansion ahead of it.
