Stocks ended the week with a bang Friday, as a strong jobs report lifted all sectors of the market and rising issues outnumbered falling ones by over 3 to 1. The Dow Jones Industrial Average (DJINDICES:^DJI) gained almost 200 points and the S&P 500 (SNPINDEX:^GSPC) missed a record close by a fraction of a point.
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Monster Beverage quenches investors' thirst for growth
Monster Beverage energized investors when it reported strong first-quarter sales and rising profitability, sending shares soaring 8.8%. Net sales grew 11.2% to $946 million and earnings per share jumped 26% to $0.48. Analysts were expecting the energy drink specialist to earn $0.42 per share on sales of $914 million.
Sales growth outside the U.S. boosted results, although less so than last quarter. International sales grew 17.4% and accounted for 30% of the total as the company continues to launch new products into local markets. In the U.S., price increases countered rising input costs, keeping Monster's overall gross margin steady at 60.6% on volume that grew 9.7%. Net income as a percentage of sales improved 2.2 percentage points over the period a year ago.
Monster's shares had come under pressure earlier this year when investors learned that distribution partner Coca-Cola will be launching competing energy drinks. Monster is challenging that as a violation of the agreement between the companies, and CEO Rodney Sacks explained in the conference call that a decision from arbitration proceedings is expected before the end of the quarter. He added that the two companies will continue to cooperate as partners.
Cognizant makes a drastic cut to its outlook
Only five weeks after taking over as CEO of Cognizant, Brian Humphrey had the duty of reporting disappointing results for the IT consultant, stating, "Cognizant's growth and performance in the quarter leaves room for improvement." Investors clearly agreed, sending shares down 11.1%. Revenue rose 5.1% to $4.11 billion and adjusted earnings per share fell 3.2% to $0.91. Wall Street was expecting EPS of $1.04 on revenue of $4.17 billion.
The shortfall came from Cognizant's two largest businesses. Revenue from financial services declined 1.7% on general softness in spending by regional banks, some of which was caused by mergers when both sides of the acquisition were clients. Revenue from the healthcare segment grew a disappointing 3.9%, also impacted by client spending cuts associated with merger activity.
Humphrey acknowledged on the conference call that the company also had execution issues, and lowered guidance for full-year revenue growth to 3.6%-5.1% from the previous range of 7%-9%, and cut EPS guidance 11% at the midpoint. Analysts were surprised at the size of the cuts, which explains the magnitude of the stock's move.