Shares of Monster Beverage (MNST 6.86%) charged sharply higher Friday, soaring as much as 11.8%. As of 12:44 p.m. ET, the stock was still up 8%.
The catalyst that sent the energy drink purveyor higher was its robust financial report, which delivered profit that far outpaced expectations.
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A Monster quarter
For the third quarter, Monster generated record net sales that grew 14% year over year to $1.86 billion, despite a $29 million — or nearly 2% — hit from foreign currency exchange rates. Helping fuel the results was a solid performance by the company’s Monster and strategic brands segments, which increased sales by 14% and 11%, respectively. The alcohol brands segment delivered a standout performance, up 58%. Net income of $453 million resulted in diluted earnings per share (EPS) of $0.43, an increase of 43%.
To give those numbers context, analysts’ consensus estimates were calling for revenue of $1.87 billion and EPS of $0.41, so while sales were a little lighter than investors expected, Monster more than made up for it with more robust profits.
The company benefited from easing of both freight costs and the price of aluminum cans, which contributed to its expanding bottom line. Furthermore, net sales have held up remarkably well, despite price hikes, which helped increase its gross margin to 53.4% from 53%.
Here’s why Monster Beverage stock is a buy
One of the highlights of the report was news that Monster had completed its acquisition of Bang Energy, which included not only energy drinks, but also a beverage production facility in Phoenix, Arizona. The impact on the financials was mixed, as gross profit was negatively affected by $7.8 million, while the company recorded a gain of $45.4 million in the other income and expenses line. With this behind it, management can focus on the future.
Monster Energy continues to lead the energy drink category despite rising input inflation and the resulting price increases, which helps illustrate the company’s pricing power. This, combined with an expanding energy drink market, helps illustrate why Monster Beverage is a buy.
Danny Vena has positions in Monster Beverage. The Motley Fool has positions in and recommends Monster Beverage. The Motley Fool has a disclosure policy.
