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Monster Drink (MNST) announced solid results for the first quarter on Thursday night, after the energy drink maker's stock took a heavy toll in November on its new distribution partner Coca Cola (KO) develops its own energy drinks.
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Monster gains
estimates: Wall Street expects Monster's earnings per share to rise 10 percent to 43 cents, according to Zacks Investment Research. Revenues are expected to increase by 8% to $ 916 million.
Results: 48 cents EPS on revenues of $ 946 million. Monster Energy's beverage sales increased 11.5% to $ 870.4 million. Sales of the strategic brand segment, which includes energy drink brands acquired from the energy-efficient brands of Coca-Cola and Monster, increased 6.9% to $ 70.3 million. Sales outside the United States increased 17.4% to $ 284.1 million and accounted for 30% of total sales, compared with 28.5% a year earlier.
"Record gross and net sales for the first quarter of 2019 were once again driven by the growth of our Monster Energy brand energy drinks, Monster Energy brand new energy drinks, and the launch of our high-performance Reign energy drinks. Total Body Fuel, "said President and Chief Executive Officer Rodney Sacks.
"Our strategic alignment with the bottling systems of the Coca-Cola system in the United States is now complete, following the divestiture of Kalil Bottling's distribution territories in March 2019 and the transition of Big Geyser's territory. Inc. in April 2019. We are making progress in launching or transitioning our Monster Energy brand to Coca-Cola bottlers in other countries. "
But Coca-Cola is in arbitration with Monster, who says the launch of coke-based energy drinks puts the two in direct competition, violating their partnership agreement. As part of this transaction, Coke acquired a 17% stake in Monster, making Coke the largest shareholder and distributor in global markets. At the time, the soft drink giant called Monster an "exclusive energy game".
Monster stock
Stocks jumped 5.6% late after closing up 0.1% to 57.99 today on the stock market, testing their trajectory at 50 days. The stock of monsters has consolidated in the last nine weeks after a very rapid break-up of the double bottom. According to the analysis of MarketSmith, it aims a point of purchase of 66.48 points.
However, the relative strength of the Monster stock has been choppy, which means he's struggling to outperform the S & P 500. In addition, he's struggling to bounce decisively over the its moving average of 50 days after breaking the bar last Thursday.
The inventory control tool indicates that Monster's profits were high, although they decelerated sharply in the last quarter. Growth slowed to 2% from the previous 25%. EPS has increased 23% over the past three years, but its average earnings growth rate of 16% is less impressive.
Profits are a key part of CAN SLIM's investment formula. Investors should look for stocks whose current quarterly earnings have increased by at least 25%, as well as profits having risen by at least 25% or more over the past three years.
Fear of the monster of the analyst
Before profits, Wells Fargo analyst Bonnie Herzog said Monster shares were performing well on the market with a target of 53, citing concerns about "moderate growth" and pricing power.
"It is increasingly clear to us that the prices of the NMST do not hold up completely (especially given the low volumes of the NMST), which we have been concerned about for a long time," she said in a research note. . "In fact, Monster has increased promotions based on our contact with retailers, and we note that these promotions are not necessarily fully taken into account by Nielsen."
She also highlighted the increased competitive pressures exerted by Red Bull, as well as Bang and other emerging energy brands. In addition, Coca-Coal recently introduced Coca-Cola Energy in certain European markets despite the ongoing arbitrage.
The analyst also expects upward pressure on long-term margins due to higher marketing costs, as well as geographic spread, channels and the negative product mix.
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