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Monster Beverage: Analysts See Upside after Q1 Results

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Stock rises on strong results

After markets closed on May 2, Monster Beverage (MNST) reported better-than-expected sales and earnings in the first quarter of 2019, boosting its stock by 8.8% on May 3. Monster Beverage’s sales grew 11.2% to $946 million and its EPS rose 26.3% to $0.48 in the first quarter, easily beating analysts’ expectations of $914.1 million and $0.42, respectively. Excluding one-time items, Monster Beverage had adjusted EPS of $0.50. Higher sales, reduced tax, and a lower share count after share repurchases fueled the company’s earnings growth in the first quarter.

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Analysts’ reaction

Analysts raised their price target for Monster Beverage following its first-quarter results, including:

  • Jefferies, to $70 from $65
  • JPMorgan Chase, to $66 from $64
  • Credit Suisse, to $77 from $75
  • Guggenheim, to $74 from $70
  • Stifel, to $69 from $67
  • UBS, to $53 from $50

As of May 3, Monster Beverage stock had risen 28.2% year-to-date, whereas larger nonalcoholic beverage peers Coca-Cola (KO) and PepsiCo (PEP) had risen 2.9% and 15.6%, respectively. Analysts’ average 12-month target for Monster Beverage stock of $66.69 implies a 6% upside.

Monster Beverage expects a decision on its arbitration proceedings with Coca-Cola by the end of the second quarter. The company believes Coca-Cola’s development of three energy drinks violates the two companies’ strategic deal. However, Coca-Cola feels it can market the three energy drinks under exceptions in the agreement.

Monster Beverage is optimistic about its growth prospects, based on its innovation and international expansion plans. The company is on track with its plan to strategically align with Coca-Cola bottlers globally, and its alignment with US Coca-Cola bottlers is now complete.

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