Monster Beverage Soars on Surprise Earnings Gain in Q2

Shares of Monster Beverage were on the rise late Tuesday after the energy drink company reported its second quarter financial results and revealed a surprise earnings gain.

Wall Street expected Monster earnings per share to slip 9% to 48 cents, according to Zacks Investment Research. Earnings per share instead increased 10% to 59 cents per share. Revenue slipped 0.9% to $1.06 billion while it was expected to fall 10% to $998 million.

The company said the coronavirus pandemic hurt Q2, partly due to some bottlers/distributors reducing inventory levels but that it experienced sequential improvement in sales in the latter half of the quarter as certain countries and states began to gradually re-open.

Looking ahead, CEO Rodney Sacks said, “According to Nielsen, the energy drinks category continues to grow in many countries, including the United States. Now that certain countries and states are gradually reopening, our teams are working to ensure the implementation of our 2020 product innovation launches, which were disrupted due to the Covid-19 pandemic.”

Sacks believes the firm has a “robust innovation plan for the remainder of 2020.”

During the second quarter the company launched Monster Energy Dragon Tea in China and launched energy products Fury Gold Strike in Honduras and Predator Gold Strike in Nigeria.

Sacks said on the earnings call, “From the beginning of the COVID-19 pandemic, our top priority has been the health, safety and well-being of our employees. As mentioned on our previous call, in early March 2020, we implemented global travel restrictions and work-from-home policies for employees who are able to work remotely. For those employees who are unable to work remotely, safety precautions have been instituted which were developed and adopted in line with guidance from public health authorities and professional consultants. Our offices have partially reopened in the United States and in certain countries, and our field sales teams are operating in the field with our bottlers, distributors and retailers, subject to safety protocols.”

He added, “We are incredibly proud of the teamwork exhibited by our employees, co-packers, and bottlers and distributors around the world who are ensuring the integrity of our supply chain. Our flavor manufacturing facilities, our co-packers, warehouses and shipment facilities are all operating.
Certain of our bottlers and distributors have implemented modifications to their core points and service levels. But generally, our products remain available to consumers. In limited countries, the operations of our bottlers and distributors have been more affected. The COVID-19 pandemic had an adverse impact on our net and gross sales for the 2020 second quarter in part due to certain of our bottlers and distributors reducing their inventory levels. However, we did see a sequential improvement in sales in the latter half of the quarter as certain countries and states began to gradually reopen.”

Deutsche Bank raised its rating on the stock to “buy” and raised their price target to 83 from 79 heading into earnings.

“Though we continue to model 2Q as the trough for MNST, rising virus cases experienced in parts of the U.S. (including California) may serve to prolong a recovery in momentum, even as other areas of the US and Western Europe normalize sooner,” the bank said in July. “Nevertheless, in areas that are normalizing quicker, we believe bottlers/retailers continue to prioritize and place greater relative emphasis on the energy category given its profitability.”

Disclaimer: We have no position in Monster Beverage Corp. (NASDAQ: MNST) and have not been compensated for this article.