This Thursday, energy drink phenom Hansen Natural (NASDAQ:HANS) is scheduled to report earnings for Q3 2006. Let's see what to expect now that some of the fizz has gone out of the stock.

What analysts say:

  • Buy, sell, or waffle? Only four Wall Street analysts currently follow Hansen Natural. Two of them have a buy rating, and two prefer to hold. In our Motley Fool CAPS service, however, there's a plethora of opinion: 64 all-star players are bullish on the two-star stock, and 15 more have bearish feelings for it.
  • Revenues. Sales of $179 million would satisfy the average analyst this time. That would be a 70% improvement over last year's $105.4 million.
  • Earnings. The analyst consensus has settled on $0.33 per share with a rather narrow range of $0.31-$0.35. In the year-ago period there was $0.21 of net income per share.

What management says:
In its latest earnings release, CEO Rodney Sacks said that Hansen had only just begun to transition into the Anheuser-Busch (NYSE:BUD) distribution network. The company was building up inventory levels to feed the anticipated spike in demand when more markets than just Florida come online through the beery partnership, and this quarter is expected to see significant fruits of that distribution network.

What management does:
Up, up, up she goes! And, hey, the last quarter saw an end to the steady margin improvements. On the top line, the downtick resulted from increased promotion, again related to that Anheuser partnership. You see, Hansen accounts for in-store display promotions as cost of revenues, not as sales and marketing expenses. The rest follows from that starting point. You have to spend money to make money, right?

Margins %

3/05

6/05

9/05

12/05

3/06

6/06

Gross

48.1

50.2

51.8

52.3

52.7

52.4

Op.

21.8

25.2

28.6

29.6

30.7

30.8

Net

12.9

15.0

17.2

18.0

18.4

18.4
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
I've been shooting coy looks (Motley Fool Rule Breakers subscription required -- here, have a free 30-day trial!) at Hansen for a long time now, but the skyrocketing stock price always kept me at arm's length. Now, the Q2 report uncharacteristically met Wall Street's expectations rather than blowing them out of the water, and the stock dropped 26% overnight. With some of Mr. Market's overblown expectations thusly taken out of the system, I am now a shareholder.

That Monster energy drink simply sells like bananas in the monkey cage. I live in Florida, where the new distribution system already has gone active, and still run into sold-out Monster shelves at gas stations, grocery stores, and my local wholesale club. Hansen is still a small company, and sales seem restricted more by manufacturing and distribution than by demand.

There's no arguing with superior results, though Hansen's valuation is still too steep for some tastes. It's hardly a value stock, trading at 31 times trailing earnings and 14 times tangible book value, but it does look cheap next to the other upstart drink mixer, Jones Soda (NASDAQ:JSDA). That one goes for 72 times earnings today.

Back to this week's report. The $0.33 per-share forecast is a modest sequential improvement over last quarter's $0.28, and remember that management believes the distribution efficiencies will kick in now, turning Anheuser-Busch into a revenue and income driver rather than mostly a cost center. The market may not expect a return to the regular blowout results of, oh, two quarters ago, but there's really no reason for pessimism here. Do your own homework, Fool, but this jingly cap is nodding its approval.

Related Companies:

  • Jones Soda
  • Coca-Cola (NYSE:KO)
  • PepsiCo (NYSE:PEP)

Further Foolishness:

Coca-Cola and Anheuser-Busch are both Motley Fool Inside Value selections. Find out more about the mystical link between hyphenated company names and deep, deep values with a free 30-day trial to our bargain-hunting service.

Fool contributor Anders Bylund owns shares of Hansen Natural and Coca-Cola, but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is always cool and refreshing.