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Insights into Monster Beverage’s Mixed 2Q17 Results

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Insights into Monster Beverage’s Mixed 2Q17 Results PART 1 OF 5

Why Monster Beverage’s 2Q17 Earnings Missed Analysts’ Estimate

2Q17 earnings

Leading energy drink maker Monster Beverage (MNST) reported its 2Q17 results after the financial markets closed on August 8, 2017. It delivered adjusted EPS (earnings per share) of $0.39, lagging behind the consensus analyst estimate of $0.40.

Why Monster Beverage’s 2Q17 Earnings Missed Analysts&#8217; Estimate

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Year-over-year growth

The company’s adjusted EPS improved to $0.39 in 2Q17 from $0.33 in 2Q16. That significant improvement was a result of higher sales and margin expansion. Note that adjusted EPS for 2Q16 excluded the impact of non-recurring items such as stock repurchase expenses of $1.5 million and transaction expenses of $3.6 million associated with the acquisition of flavor supplier American Fruits and Flavors.

A lower effective tax rate also benefited Monster Beverage’s earnings in 2Q17. The effective tax rate fell to 35.9% in 2Q17 from 36.1% in 2Q16 due to a rise in equity compensation deductions.

The company’s reported EPS rose about 30.0% to $0.39 in 2Q17 from $0.30 in 2Q16.

Better than peers

Monster Beverage’s 2Q17 earnings growth was better than nonalcoholic beverage peers Coca-Cola (KO), PepsiCo (PEP), and Dr Pepper Snapple (DPS). Coca-Cola’s adjusted EPS fell 1.7% to $0.59 in 2Q17 due to lower revenue, currency headwinds, and the costs related to refranchising. PepsiCo’s 2Q17 adjusted EPS rose 6.7% to $1.44, which was due to higher revenue and a lower effective tax rate.

Dr Pepper Snapple, the third-largest US soda maker, delivered adjusted EPS in 2Q17 of $1.25, which was flat on a year-over-year basis. Higher sales in the second quarter were offset by a rise in marketing spending on Bai Brands and other priority brands.

Let’s look next at Monster Beverage’s sales.

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