Monster Beverage (MNST) Q2 Earnings Miss, Revenues Beat

Shares of Monster Beverage Corporation (NASDAQ:MNST) rose 1.56% in afterhours on Aug 4, as the energy drink company reported impressive revenues for second-quarter 2016. The company also revealed that on Jun 15, it completed the modified Dutch auction tender offer worth $2.0 billion.

Second Quarter 2016 in Detail

Monster Beverage’s second quarter adjusted earnings of 99 cents per share missed the Zacks Consensus Estimate of $1.04 by 4.8%. However, earnings per share increased 25.3% year over year owing to lower tax rate and strong revenues.

During second-quarter 2016, Monster Beverage incurred $1.5 million of expense in relation to the modified Dutch Tender stock repurchase, $3.6 million as AFF transaction expenses and $25.3 million as distributed termination costs in relation to its long-term strategic partnership with The Coca-Cola Company (NYSE:KO) . However, the company’s second-quarter 2016 results benefitted from $5 million of accelerated deferred revenues.

Monster Beverage’s net sales of $827.5 million beat the Zacks Consensus Estimate of $808 million by 2.4%. Net sales increased 19.3% year over year.

Foreign currency had an unfavorable impact of $4.1 million on net sales. Net sales outside the U.S. increased 32.3% year over year to $200.2 million.

Segment Details

Monster Energy Drinks Segment (previously the Finished Products): The segment reported net sales of $743.5 million, up 14.2% year over year. Excluding the acceleration of deferred revenues, net sales of Finished Products were down $5 million during the quarter.

Strategic Brands segment (previously the Concentrate segment): This segment includes brands acquired from Coca-Cola. Net sales of the segment were $77.4 million in the second quarter of 2016 compared with $13.0 million in the comparable quarter of 2015.

Other: During second-quarter 2016, net sales of the segment were $6.6 million compared with net sales of $29.5 million in the prior-year quarter. The Other segment includes third party sales acquired as part of the AFF transaction in the quarter.

Margins

Second-quarter 2016 gross margin rose 570 basis points (bps) to 62.6%. Excluding acceleration of deferred revenue, gross margin was 62.4% for the second quarter of 2016. Gross margin gained from favorable product sales.

Adjusted operating income increased 37.4% to $313.9 million.

On Aug 2, 2016, the board of directors authorized a new repurchase program worth $250.0 million.

Monster Beverage carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader beverage sector are Fomento Económico Mexicano, S.A.B de C.V (NYSE:FMX) and Constellation Brands Inc. (NYSE:STZ) . Both the companies carry a Zacks Rank #2 (Buy).

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