The beverage industry has gone through a big transformation, moving away from traditional carbonated sugary soft drinks toward a host of different categories. On top of traditional alternatives like water, juice, and tea, energy drinks have gained a core following among consumers, and Monster Beverage (MNST 0.69%) has retained a stranglehold among the small number of leading companies in the energy-drink space. That's had its pros and cons lately, though, with last-quarter's performance raising some questions about whether the company's future would be as impressive as its past.

Coming into Wednesday's third-quarter financial report, Monster Beverage investors were hoping to see solid gains in revenue and net income while getting a positive read on consumer sentiment. Monster's results exceeded expectations on most fronts, and that helped to build some energy among shareholders who hope that the energy-drink giant will be able to produce further gains in the future.

One large white Monster energy drink can, with six smaller cans pictured along with text.

Image source: Monster Beverage.

How Monster Beverage got a pick-me-up

Monster Beverage's third-quarter results were better than most had expected. Net sales climbed almost 12%, to $1.02 billion, easily beating the $988 million projection among those following the stock. Net income was higher by 22%, to $267.7 million, and adjusted earnings of $0.50 per share exceeded the consensus forecast among investors for $0.46 per share on the bottom line.

Monster continued to profit by focusing on its most important franchises. The company's Monster Energy drink segment, which includes all of its legacy brands, saw net sales rise 13% from the third quarter of 2017. In doing so, Monster was willing to sacrifice growth in the strategic brands that it acquired from Coca-Cola (KO 2.21%) in their partnership arrangement, as that segment saw sales decline 2% to represent only about 7% of the company's total revenue. Other revenue jumped 26% but continued to make up a minuscule part of Monster's overall business.

Interestingly, Monster saw a reversal in the geographical source of its biggest growth. International sales were up just 9%, with negative impacts from adverse currency movements playing at least some role in the slowdown.

Fundamentals were mixed for the company. Monster reported a nice jump in case sales, which climbed by about 14.85 million to more than 111 million. Yet average net sales per case were down $0.31, to $9.09 per case, suggesting a combination of weaker pricing power and the impact of a strong U.S. dollar in relation to the foreign currencies in the countries in which Monster does business internationally.

What's ahead for Monster Beverage?

CEO Rodney Sacks was happy to see strong sales again. "We are pleased to report record third quarter net sales of more than $1.0 billion," Sacks noted, "further demonstrating the strength of our brands." The CEO also pointed to the ongoing transition to Coca-Cola bottling and distribution, as well as expansion in international markets such as India, Ecuador, Ukraine, Myanmar, and Vietnam.

The only big concern that came from the report was in the amount of promotional and other allowances that Monster has given recently. Gross sales climbed almost 14% from year-earlier levels, but a 27% jump in promotional expenses held back some of the sales growth on a net basis. Monster will want to watch promotional payments closely to avoid seeing this become a lasting trend.

Another interesting omission was that Monster didn't mention stock-buyback activity during the quarter. Yet with weighted average share counts falling from about 566 million at the end of June to roughly 560 million currently, it certainly looks as though some repurchases might have taken place despite the lack of clear disclosure.

In any event, Monster Beverage shareholders were happy with the news, and the stock climbed 6% in after-hours trading following the announcement. Bullish investors hope that today's news is only the beginning of a new leg higher for Monster's growth rates. If things go the energy-drink specialist's way, 2019 could be an even better year for the company and its prospective growth.