Monster Beverage Falls After-Hours Despite 3Q Earnings Beat

Monster Beverage delivered double-digit earnings growth in the third quarter on strong demand for its energy drinks. Yet the company’s shares declined 1.1% in the extended trading session on Thursday.

The company’s 3Q EPS increased 18% year-over-year to $0.65 and beat analysts’ forecast of $0.63. Monster Beverage’s (MNST) 3Q earnings growth was driven by higher sales and reduced expenditure for sponsorships and endorsements as well as travel and entertainment due to the pandemic.

Net sales grew 9.9% year-over-year to $1.25 billion, exceeding analysts’ estimate of $1.23 billion. Sales from the company’s Monster Energy Drinks segment (which includes the Monster Energy drinks and Reign Total Body Fuel brand) increased 9.6% to $1.16 billion. Also, sales from the Strategic Brands segment (which features drink brands acquired from Coca-Cola) grew 12% to $74.3 million.

Meanwhile, international sales increased 17% to $444.5 million and accounted for 36% of the overall 3Q20 sales compared to 34% in 3Q19. (See MNST stock analysis on TipRanks)

CEO Rodney C. Sacks commented “The Company performed well in the third quarter, achieving record quarterly net sales, despite the ongoing impact of the COVID-19 pandemic in most of our markets. In particular, net sales in EMEA, for both the Monster Energy® and the Strategic Brands segments, improved sequentially in the third quarter, although the COVID-19 pandemic continued to negatively impact this region. Our supply chain remains intact and we are continuing to service our customers.”

Ahead of the earnings release, Morgan Stanley analyst Dara Mohsenian upgraded Monster Beverage to Buy from Hold and increased the price target to $90 from $87. The analyst feels that the market is not appropriately pricing in the company’s growth potential. The analyst stated that a reacceleration in US sales trends coupled with “strong” international growth should drive upside to consensus estimates and multiple expansion.

The Street mirrors Mohsenian’s bullish sentiment. A Strong Buy consensus is based on six unanimous Buy ratings. The $91.17 average analyst price target reflects an upside potential of about 9% in the coming months. Shares have already risen 31.5% so far this year.

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