Can Monster Beverage Deliver Another Monster Quarter?

Source: Flickr user Mike Mozart.

Fifteen years ago, few investors would have thought that the natural-soda company then known as Hansen's Natural would ever grow into the colossus it is today. Yet Monster Beverage (MNST +1.85%) has been one of the top-performing stocks since the turn of the millennium, and the company owes nearly all of its success to the booming popularity of its Monster energy drinks. With the beverage maker set to report fourth-quarter financial results on Thursday afternoon, Monster Beverage investors have high hopes it can sustain its impressive track record of growth and produce even more profitable results in 2015. Let's take an early look at what we're likely to see from Monster Beverage this quarter and how those results could set the company up for success throughout the year.

Stats on Monster Beverage

Source: Yahoo! Finance.

Will Monster earnings power up this quarter?
Over the past few months, investors have been generally positive in their views on Monster Beverage earnings, raising their estimates for the fourth quarter and full-year 2015 by about 1% to 2%. The stock has continued its upward trajectory, climbing another 11% since mid-November.

The Hansen's beverage line is set to transfer to Coca-Cola. Source: Monster Beverage.

Monster's third-quarter earnings report in November bolstered the stock's positive momentum, as investors were generally pleased with the beverage company's ability to keep growing. Even though revenue didn't rise as much as anticipated, Monster's earnings continued to pick up pace, sustaining a growth rate above 30% for the third quarter in a row. Monster's market share also demonstrated the company's strength in the energy-drink space, with command of more than 36% of the convenience-store market, surpassing archrival Red Bull's 34%.

One key to Monster Beverage's success has been using its pricing power to boost its overall profit margin. After suffering a downward trend in late 2012 and 2013, Monster has returned its average case sales price to 2011 levels.

Prices can drop temporarily as the company offers promotional discounts to attract new customers, but as it builds up its loyal customer base, those consumers have proven willing to stick around and pay more for the product.

Still, Monster faces a number of unanswered questions. As the company releases new products, it runs the risk of cannibalizing sales of its existing brands rather than bringing new customers into its fold. Moreover, Monster is still dealing with the uncertainty of potential product liability claims, with concerns about the long-term health effects of high levels of caffeine and other ingredients within energy drinks across the industry.

Some worry that new products could simply lead existing customers to switch drinks. Source: Monster Beverage.

Monster Beverage investors also need to see exactly how the operational aspects of its partnership with Coca-Cola (KO +0.97%) will play out. The plan involves Monster transferring its Hansen's Natural brand and other nonenergy drinks to Coca-Cola, while Monster will have access to Coca-Cola's extensive worldwide distribution system. Coke's global reach could help accelerate Monster's growth abroad and also help reduce overhead costs associated with distributing its products.

In the Monster Beverage report, look to see what the company has to say about the Coca-Cola transition. Some analysts expect disruptions to Monster's sales in the short run as retailers get used to a new way of doing business with the beverage company, and Monster said recently it expects about $280 million in costs from the transition. Still, Monster Beverage has the potential to benefit far more from the long-term savings and new sales opportunities the deal will create, and so most investors will want to see what guidance the energy-drink giant offers for 2015 and beyond.