Monster Beverage (MNST 47.09, +5.08 +12.09%), after reporting results which beat market expectations and giving favorable guidance for the start of January, trades to about four-month highs on strong volume.
Specifically, MNST reported net sales for Q4 of $753.8 million, up about 16.8% versus a year ago. Unfavorable currency exchange rates reduced net sales by about $3.3 million and gross sales by about $5.9 million in the 2016 fourth quarter. Earnings per share (EPS) for Q4 came in at $0.30 and gave the caveat that distributor termination expenses in the period were $46.3 million, and reduced reported diluted earnings per share by about $0.05 per share, after tax.
MNST’s main Monster Energy Drinks segment, which is comprised of Monster Energy drinks, as well as Mutant Super Soda drinks, increased 17.0% to $684.4 million. Net sales for the company’s Strategic Brands segment, which includes the various energy drink brands acquired from The Coca-Cola Company, increased 6.9% to $64.5 million. Net sales for the Other segment, which includes certain products of American Fruits & Flavors sold to independent third parties, were $4.7 million. As a result of the AFF deal, MNST achieved raw material cost savings of $22 million in the quarter, broadly in-line with expectations.
Additionally, gross profit, as a percentage of net sales, increased to 66.1% from 62.5% for the comparable 2015 fourth quarter. The increase in gross profit as a percentage of net sales was primarily attributable to cost of goods savings as a result of the AFF transaction and product mix as well as reduced promotional allowances as a percentage of sales in Q4. Further, the company estimates that the lower promotional allowances as a percentage of sales as compared to prior periods together with the reduction of Java Monster sales and the effect of increasing gross profit percentage by about 2% in Q4. To that end, promotional, advertising, marketing and ingredients spending was down about $900K in Q4 to $5.1 million.
Internationally, MNST announced plans to launch the brand in Nigeria with a planned re-launch in India later in the year. The company also reiterated their potential for growth in China, one of the largest energy drink markets in the world. MNST also benefitted to the ongoing transition to Coca Cola bottlers distribution in certain international markets.
Looking ahead, MNST sees January 2017 gross sales growth of about 10.4% compared to the prior year. On an FX-adjusted basis, January 2017 gross sales are expected to be about 11.6% higher than last year.
Lastly, MNST announced a $500.0 million repurchase program authorization for outstanding common stock.
In closing, shares of MNST have been relatively weak in 2017, shedding about -5.9% ahead of today’s move. Today’s move brings the stock closer to the torrid pace YTD that the broader market has thus far posted.