A nearly 50% run-up during the past 12 months has seen shares of beverage company Monster Beverage (MNST 55.89, -7.48 -11.8%) break out to gains of nearly 300% during the last five years. However, the advance received a significant set back today in reaction to the company’s sales and earnings miss in its Q4 report.
Monster saw revenues fall short of market expectations, despite growing 7.5% compared to last year, at $810.4 million. Net income for Q4 was up 16.4% to $201.3 million; per diluted share, net income in Q4 was $0.35.
Net sales for the Monster Energy Drinks segment, which is comprised of the company’s Monster Energy drinks, Monster Hydro energy drinks and Mutant Super Soda drinks, increased 7.6% to $736.1 million for Q4, from $684.4 million for the same period last year. Net sales for the company’s Strategic Brands segment, which includes the various energy drink brands acquired from The Coca-Cola Company (KO 43.24, +0.02 +0.1%), increased 7.8% to $69.6 million for Q4, from $64.5 million in the comparable 2016 quarter. Net sales for the company’s Other segment, which includes certain products of American Fruits & Flavors sold to independent third parties, were $4.7 million for both the 2017 and 2016 fourth quarters.
Net sales to customers outside the United States increased 8.7% to $210.4 million in Q4, from $193.5 million in the corresponding quarter last year.
In the period, Monster’s effective tax rate was 24.8%, compared with 29.9% in the same period last year. The decrease in the effective tax rate was due primarily to an increase of $69.2 million in the stock compensation deduction related to excess tax benefits that are recorded in net income. The decrease in the effective tax rate was partially offset by a provisional charge of $39.8 million related to the revaluation of the company’s deferred tax assets at December 31, 2017 and a $2.1 million charge for a one-time deemed mandatory repatriation of post-1986 earnings and profits, as a result of the Tax Reform Act signed into law on December 22, 2017.
While Monster does not give traditional guidance, management commented on the conference call that January gross sales were 25.1%. This “guidance” holds a caveat that less than half the increase was due to increased purchases made by certain distributors following an inventory reduction in Q4 and the relaunch of Caffe Monster and Muscle Monster.
All told, Monster’s quarter was tough to swallow for some investors. Management made sure to toe the line, reiterating the company’s international prospects and launch efforts. That seems to be the area of growth Monster is focusing on for the time being, as domestic sales seem to be facing increased competition, and by extension, pricing pressure.