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Monster Stock Falls on Large Miss, Result Seen as a 'Big Setback'

Stock Markets Aug 05, 2022 07:14AM ET
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© Reuters. Monster (MNST) Stock Falls on Large Miss, Result Seen as a 'Big Setback'

By Senad Karaahmetovic

Shares of Monster Beverage (NASDAQ:MNST) are down about 3% in premarket trading after the beverage maker widely missed consensus estimates due to inflationary pressures.

Monster reported Q2 adjusted EPS of 51c, short of the consensus estimates of 70c per share. Net sales rose 13% to $1.66 billion, topping the expected $1.61 billion. Gross margin stood at 47.1%, compared to 57.2% in the year-ago period, though below the consensus projection of 52.4%.

Monster reported operating expenses in Q2 of $406.9 million, beating the analyst estimates of $366.1 million. The operating margin stood at 22.5%, while analysts were estimating 29.9%.

“We believe that some of the increased costs that we are experiencing are likely to be transitory, as we begin to decrease our reliance on the use of imported aluminum cans, as well as increase our inventory levels in closer proximity to our customers. Furthermore, the sharp run-up in aluminum commodity pricing appears to be currently moderating,” the company said.

A Jefferies analyst slashed the price target by $1 to $89 to reflect lowered estimates.

“We cut our '22/23/24 EPS ests. by 11%/5%/4% post MNST's (-) 2Q (revs beat; big GM % / EPS miss) to reflect stronger sales (bottler inventory rebuild), offset by much worse GM % and other op costs. July sales update (~21% YoY) was quite (+); h/w, w/ bull case predicated on view GM % had finally bottomed, 2Q is a clear setback. GM % recovery now more protracted, competitive risk worse post CELH/PEP deal, and multiple reasonable at 21x EV/EBITDA,” he explained in a note.

A Morgan Stanley analyst saw a “big Q2 miss” but notes that margins recovery is still on the horizon.

“We remain OW with an outsized margin recovery ahead, and continued strong topline growth, which along with share repurchases, we expect will drive an inflection to ~ 30% EPS growth in FY 23,” the analyst told clients.

Monster Stock Falls on Large Miss, Result Seen as a 'Big Setback'
 

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