Celsius Stock Surges on Huge Earnings and Revenue Beats

Celsius (CELH 2.12%) stock gained 20.5% on Wednesday, following the energy beverage maker's release of a powerful second-quarter 2023 report on the prior afternoon.

The stock's rise is attributable to the quarter's revenue and earnings crushing Wall Street's consensus estimates. 

In 2023, shares were already solidly outperforming the broader market prior to the release of the Q2 report, and now they're walloping it. The stock is up 66% this year through Wednesday, versus the S&P 500 index's 17.5% return over this period. 

Celsius' key numbers

Data source: Celsius. GAAP = generally accepted accounting principles. YOY = year over year.

Wall Street was looking for EPS of $0.28 on revenue of $276.1 million, so the company sped by both expectations. 

CEO John Fieldly attributed the company's all-time quarterly record revenue to "expanded availability and increased consumer awareness" and the further leveraging of PepsiCo's distribution system.

PepsiCo is Celsius' strategic distribution partner, as of August 2022. The partnership involves PepsiCo's distribution network handling Celsius' U.S. distribution and PepsiCo being Celsius' preferred distribution partner globally. At the time of the agreement, PepsiCo made a $550 million investment in Celsius in exchange for convertible preferred stock, which gave it an approximate 8.5% ownership stake in Celsius on a converted basis.

In Q2, gross profit margin was 48.8%, up from 38.5% in the year-ago period. This big improvement was driven by lower input costs, reduced product waste, and improved freight efficiency.

Thanks largely to its cash investment from Pepsi in August 2022, Celsius ended the quarter with $681 million in cash and cash equivalents, about 11 times the $60 million it had at the end of the prior year's period. It had $249 million in long-term debt.

Revenue breakdown

Geographic:

• North American revenue surged 114% to $310.8 million. Growth was driven by "continued gains in distribution points, [an] increase in average SKUs [stock-keeping units, or unique products] per location, accelerated club channel growth, and increased sales and marketing investments," the company said in the earnings release. 
• International revenue increased 76% to $15.1 million, driven by new flavor innovation and increased brand awareness.

Sales channel:

• Most of Celsius' sales come from various brick-and-mortar retail and convenience store outlets.
• Club channel revenue was $67.9 million, up 120% year over year.  
• Amazon online sales revenue was $28.2 million, up 108% year over year.

A super quarter

In short, Celsius had a super quarter. Investors had good reason to cheer and send shares up more than 20% on Wednesday.

Celsius stock has lofty valuation, trading at about 197 times its projected one-year forward earnings. That said, this is a very profitable and fast-growing company that still has a humongous runway for growth. Wall Street expects Celsius to grow earnings per share at an average annual rate of 56% over the next five years. Of course, there's always the possibility that the company could exceed this expectation, just as it did in the just-reported quarter by a huge margin. 

At the very least, growth stock investors might consider putting Celsius on their watch list.