Strong bottom-line growth
Monster Beverage (MNST) impressed investors with double-digit growth in its EPS (earnings per share), excluding one-time items, in 1Q17. Analysts expect the company to deliver strong bottom-line growth in 2Q17 as well.
Earnings in 1Q17
Monster Beverage’s adjusted EPS rose 18.5% on a year-over-year basis to $0.32 in 1Q17. The company’s 1Q17 adjusted EPS was in line with the consensus analyst estimate. The company’s adjusted EPS growth in 1Q17 was driven by strong sales growth and a lower effective tax rate. Monster Beverage’s effective tax rate was 32.8% in 1Q17 compared to 35.8% in 1Q16. The drop in the company’s tax rate resulted from higher profits from some foreign subsidiaries with lower tax rates compared to the United States. It was also the result of a rise in equity compensation deductions.
Analysts expect Monster Beverage’s (MNST) adjusted EPS to rise 21.2% on a year-over-year basis to $0.40. PepsiCo (PEP), which is the maker of the AMP energy drink brand, posted 6.7% growth in its 2Q17 adjusted EPS. This growth was driven by higher revenue and a lower adjusted effective tax rate.
Higher sales are expected to be the key driver of Monster Beverage’s 2Q17 earnings growth. However, distributor termination expenses might adversely impact the company’s earnings. Pursuant to a strategic deal with Coca-Cola (KO), Monster Beverage has been transitioning from third-party distributors to Coca-Cola’s distribution network.
Over the long term, the transition to Coca-Cola’s distribution network is expected to positively impact Monster Beverage’s position in international markets.
We’ll look at analysts’ recommendations for Monster Beverage’s stock in the next part of this series.