Monster Beverage (MNST 60.75, +1.35, +2.27%)
erases the lion's share of its late-July’s losses on Thursday after the company
once again reported double digit revenue growth, surpassing $1.0 bln in
quarterly sales for the first time ever.
Despite the otherwise impressive quarterly results, some on the Street were scrutinizing the company’s gross profit decline. Specifically, Monster’s gross profit as a percentage of net sales for Q2 was 61.1% compared to 64.3% last year. Management reasoning for the decline was primarily attributable to an increase in promotional allowances as a percentage of gross sales, the $12.2 mln of commissions accounted for as a reduction to net sales due to the adoption of ASC 606, increases in certain input costs such as aluminum cans and other costs, domestic product sales mix and geographical sales mix.
All told, net sales in the second quarter were up double digits again as Monster saw a 12% increase in revenues to $1.02 bln. This result was the first time in the company’s history that quarterly revenues had surpassed the $1.0 bln mark. Additionally, net income for Q2 was up 21.3% to $270.1 mln from $222.6 mln in the comparable quarter last year. Net income per diluted share for Q2 was $0.48.
What’s more, case sales in the quarter were up 13.2% year/year to about 110.06 mln. However, the average price per case fell $0.10 in the quarter to $9.17. On this point, management reiterated its plans for a 4% increase in pricing to its customers effective November 1, 2018 for Monster and January 1, 2019 for NOS and Full Throttle.
Gross sales for Q2 were up 14.7% to $1.19 bln from $1.04 bln in the same period last year. Net sales for Q2 were negatively impacted by the aforementioned adoption of ASC 606. Under ASC 606, commissions paid to The Coca-Cola Company, based on sales to certain of the company’s customers which TCCC accounts for under the equity method, or consolidates, are included as a reduction to net sales. Prior to January 1, 2018, commissions based on sales to the TCCC Related Parties were included in operating expenses. Net changes in foreign currency exchange rates had a favorable impact on net and gross sales for Q2 of $16.8 mln and $21.4 mln, respectively.
Net sales for the company’s Monster Energy Drinks segment, which includes the company’s Monster Energy drinks and Mutant Super Soda drinks, increased 14.0% to $929.4 mln for Q2, from $815.3 mln for the same period last year. Net sales for the company’s Monster Energy Drinks segment for the 2018 second quarter were negatively impacted by $5.1 mln, due to the adoption of ASC 606.
Net sales for the company’s Strategic Brands segment, which includes the various energy drink brands acquired from TCCC, decreased 6.8% to $79.8 mln for Q2, from $85.6 mln in the comparable 2017 quarter. Net sales for the company’s Strategic Brands segment for the 2018 second quarter were negatively impacted by $7.1 mln, due to the adoption of ASC 606. Net sales for the company’s Other segment, which includes certain products of American Fruits & Flavors sold to independent third parties, were $6.6 mln for the 2018 second quarter, compared with $6.2 mln in the 2017 second quarter.
Net sales to customers outside the United States increased 18.5% to $293.8 mln in the 2018 second quarter, from $247.9 mln in the corresponding quarter in 2017.
Shares of MNST were down more than 5% in the two weeks leading up to the results. The stock quickly recouped those losses this morning as it momentarily touched the 200-day simple moving average (59.14). The stock now holds gains of 3.0% today, trimming its YTD losses to 3.3%.
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