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Insights into Monster Beverage’s Mixed 2Q17 Results

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Part 2
Insights into Monster Beverage’s Mixed 2Q17 Results PART 2 OF 5

What Drove Monster Beverage’s Fiscal 2Q17 Sales?

Sales beat estimates

Monster Beverage (MNST) generated sales of $907.1 million in 2Q17. That reflected a 9.6% sales growth on a year-over basis. The company’s 2Q17 sales exceeded the consensus analysts’ sales estimate of $904.4 million.

What Drove Monster Beverage’s Fiscal 2Q17 Sales?

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Sales growth drivers

The growth in Monster Beverage’s 2Q17 sales was a result of strong domestic and international demand for Monster Energy brand drinks. Unfavorable currency fluctuations impacted net sales by $8.2 million in 2Q17. The company’s international sales rose 23.8% to $247.9 million in 2Q17.

Production capacity shortages related to Java Monster and Muscle Monster adversely impacted the company’s 2Q17 sales by $13.0 million.

Excluding the impact of the $5.0 million of accelerated deferred revenue related to distributor terminations in 2Q16, Monster Beverage’s sales growth was 10.3% in 2Q17.

Segment performance

Sales for the Monster Energy Drinks segment rose 9.7% to $815.3 million in 2Q17. That segment, which is Monster Beverage’s largest segment, accounted for 89.9% of the company’s net sales in 2Q17.

Sales for the Strategic Brands segment rose 10.6% on a year-over-year basis to $85.6 million in 2Q17. That represented 9.4% of the company’s 2Q17 net sales. The segment is comprised of various energy drink brands that the company acquired from Coca-Cola (KO) in 2015.

The company’s Other segment, which is comprised of certain products sold by American Fruits and Flavors, which was acquired in April 2016, to independent third-party customers. The segment accounted for 0.70% of the company’s 2Q17 sales. Sales for the Other segment fell 7.0% to $6.2 million in 2Q17.

MNST’s peers

Coca-Cola’s revenue fell 15.9% on a year-over-year basis in 2Q17. The fall was due to the impact of refranchising its bottling territories and adverse currency movements. Higher pricing helped PepsiCo (PEP) deliver a 2.0% rise in 2Q17 revenue.

Overall, Monster Beverage seems to benefit from a higher demand for energy drinks than traditional soda beverages, which are facing weak volumes.

We’ll look at Monster Beverage’s margins in the next part of this series.

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