Monster Beverage Pre-Q4 Earnings Review: Is a Surprise in the Cards?

Core Viewpoint - Monster Beverage Corporation (MNST) is expected to report fourth-quarter 2024 results on February 27, with anticipated revenue and earnings growth despite facing several challenges in the energy drink market [1]. Revenue and Earnings Estimates - The Zacks Consensus Estimate for revenues is $1.79 billion, reflecting a growth of 3.6% compared to the same quarter last year [2]. - The consensus estimate for earnings is 40 cents per share, indicating a rise of 5.3% from the previous year's quarter [2]. - The consensus estimates have remained unchanged over the past 30 days [2]. Recent Performance and Expectations - In the last reported quarter, the company experienced a negative earnings surprise of 4.8%, with an average negative surprise of 5.2% over the last four quarters [3]. - The current Earnings ESP for Monster Beverage is -0.35%, and it holds a Zacks Rank of 4 (Sell), suggesting a lower likelihood of an earnings beat this time [4]. Challenges Impacting Performance - The energy drink category has seen decelerated growth in the U.S. convenience channel, attributed to tighter consumer spending and weaker demand [5]. - Elevated operating expenses, driven by costs related to sponsorships, endorsements, payroll, and intellectual property claims, have negatively impacted profitability [6]. - Fluctuating foreign exchange rates have also complicated maintaining profitability in international markets [6]. Growth Initiatives - The company is focusing on growth initiatives through its diverse portfolio of energy drink brands, including Monster Energy, Monster Rehab, Java Monster, and Monster Hydro [7]. - Product innovation is a key strategy, with ongoing plans for new product launches expected to support performance in the upcoming quarter [8]. Pricing Strategies - Monster Beverage has implemented pricing actions to counter rising commodity costs and inflation, including a planned 5% price increase on core brands effective November 1, 2024, in the U.S. [9][10]. Valuation Insights - From a valuation perspective, Monster Beverage appears expensive, trading at a forward 12-month price-to-earnings ratio of 27.44X, above the industry average of 18.58X [12]. - The stock trades at a significant discount compared to its five-year high of 44.73X, indicating potential for growth [12]. Market Performance - Over the past three months, MNST shares have declined by 5.3%, contrasting with a 1.5% rise in the industry [13].