Monster Beverage Looks to Sustain Its Big 2015 Gains

Source: Flckr--Benpop318.

It can be hard to identify changing trends until years after the change actually occurs. The beverage industry is a prime example, where Monster Beverage (MNST 0.87%) has emerged as one of the biggest players in the relatively new energy-drink market, a niche that was pretty much nonexistent until experiencing soaring growth over the past decade. Coming into its first-quarter financial report on Thursday, Monster Beverage has already posted gains of 30% for the year, and investors still expect fast growth in what has traditionally been one of the company's weaker periods from a seasonal standpoint. Let's look more closely at the situation that Monster Beverage faces right now and what its quarterly results are likely to reveal.

Stats on Monster Beverage

Source: Yahoo! Finance.

What's next for Monster earnings?
Investors have gotten more positive about Monster Beverage earnings in recent months, boosting their estimates for the first quarter by roughly 6% and adding 4% increases to their projections for the full 2015 and 2016 years. The stock has kept rising, with gains of 21% just since late January.

The lion's share of Monster Beverage's gains came after its fourth-quarter financial report in February. The company reported an impressive 12% rise in revenue on 11% higher sales volume, but what really turned heads was a 65% jump in net income. Better margins from cost-cutting efforts and strong performance in its international markets showed that Monster had started to take advantage of some of its more favorable long-term opportunities, and that spurred shareholders to send the stock soaring by more than 13% the day after the report.

Yet perhaps the most anticipated news will come when Monster Beverage closes on its long-awaited partnership with beverage giant Coca-Cola (KO 0.63%). Ever since last summer, the two companies have expected a long-term strategic partnership aimed at unifying the companies' energy-drink businesses under Monster's corporate roof while transferring Monster's non-energy drinks, such as its Hansen's Natural sodas, to Coca-Cola's control. For Monster, the move essentially has it doubling down on the future of the energy-drink niche, but it also opens up Coca-Cola's unparalleled distribution network for its use. Monster hopes that the partnership will help it with its international growth strategy while also helping it save costs throughout its coverage area.

Source: Monster Beverage.

Monster Beverage can't afford to get cocky about its new partnership, though. Rival Red Bull still has a market-share lead in many important markets worldwide, and its marketing strategy has greater prominence in some markets compared to Monster's campaigns. With the key millennial segment becoming an increasingly important swing market for beverage companies, Monster needs to defend its territory at the same time that it makes aggressive moves to lure Red Bull's customers away in an effort to bolster its own growth.

Fortunately, Monster has a solid balance sheet that should let it take advantage of any opportunities that come its way. With nearly $1 billion in cash and no debt, Monster Beverage has the flexibility to make further strategic moves in the future.

In the Monster Beverage report, take a look at whatever comments the company makes with respect to any outstanding litigation. For years, the company has been plagued by fears that its energy drinks pose a health risk to consumers, with some calling for limitations or outright bans on sales of the products. So far, Monster has been able to avoid any serious infringement on its business model, but investors can't afford to take for granted that the company will be able to fend off future attacks effortlessly. With the completion of the Coca-Cola deal approaching, though, Monster investors have many positives to look forward to that could outweigh any lingering negative concerns.