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How Monster Beverage Performed in 3Q17

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How Monster Beverage Performed in 3Q17 PART 1 OF 5

What Affected Monster Beverage’s 3Q17 Earnings?

Earnings in line with estimates

Monster Beverage (MNST) reported its 3Q17 results after the close of financial markets on November 8. The leading energy drink maker’s 3Q17 sales exceeded analysts’ expectations, while earnings were in line with estimates.

What Affected Monster Beverage’s 3Q17 Earnings?

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Strong growth

Monster Beverage delivered adjusted EPS (earnings per share) of $0.40 in 3Q17. The company’s adjusted EPS rose 17.6% on a YoY (year-over-year) basis in 3Q17. The 3Q17 adjusted EPS excludes the impact of distributor termination expenses of about $0.02 per share. Including distributor termination expenses, Monster Beverage’s reported EPS rose ~15.2% to $0.38 in 3Q17 compared to $0.33 in 3Q16.

The strong YoY growth in Monster Beverage’s bottom line was mainly driven by higher sales. We’ll discuss the company’s sales in part two of this series. Also, a lower effective rate had a favorable impact on the company’s 3Q17 bottom line. The company’s effective tax rate fell to 31.9% in 3Q17 from 33.8% in 3Q16. The lower tax rate was a result of profits earned by the company’s foreign subsidiaries in lower tax jurisdictions.

A lower share count due to share buybacks also had a positive impact on the company’s 3Q17 EPS. Monster Beverage’s weighted average number of diluted shares outstanding decreased 0.8% to 578.4 million in 3Q17 from 583.3 million in 3Q16.

Peer performance

Monster Beverage’s earnings growth rate in 3Q17 was better than its peers in the nonalcoholic beverage space.

PepsiCo’s (PEP) adjusted EPS rose 5.7% to $1.48 in fiscal 3Q17. This growth was a result of increased operating margin and a lower effective tax rate. Coca-Cola’s (KO) adjusted EPS grew 2.0% to $0.50 in 3Q17 driven by operating margin expansion.

Dr Pepper Snapple’s (DPS) 3Q17 adjusted EPS fell 6.0% to $1.10 due to the impact of natural disasters and a $0.02 per share write-off of prepaid resin inventory.

Let’s take a closer look at Monster Beverage’s sales in part two of this series.

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