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What Awaits Monster Beverages (MNST) in Q1 Earnings?

Monster Beverage Corporation MNST is set to report first-quarter and fiscal 2016 resultson Apr29, before market opens. Last quarter, the company posted a negative earnings surprise of 18.29%.  

The company’s earnings have missed the Zacks Consensus Estimate in three of the trailing four quarters, with an average negative surprise of 8.91%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Monster Beverage’s revenues in the first quarter of 2016 are expected to gain from the new products launched in the U.S. over the past few quarters, solid international sales and growing momentum of the energy drink category.

Gross margins are benefiting from strong product sales and a favorable segment mix. The brands acquired from The Coca-Cola Company KO, which are produced as concentrates or beverage bases are high-margin products that make significant positive contribution to sales and gross margins.

Moreover, the price increases and lower cost of certain raw materials also drove gross margins in the past quarters. We expect the trend to continue

However, Monster Beverage generates more than 20% of its consolidated gross sales outside the U.S. The growing international presence is exposing the company to currency exchange risks, which in turn is hurting its sales and profits. 

Earnings Whisper

Our proven model does not conclusively show that Monster Beverage is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Monster Beverage’ Earnings ESP is 0.00% as both the Most Accurate estimate and the Zacks Consensus estimate stand at 75 cents.

Zacks Rank: Monster Beverage carries a Zacks Rank #3 which increases the predictive power of ESP, however, the company’s ESP of 0.00% makes surprise prediction difficult.

Conversely, the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Stocks to Consider 

Here are some companies in the broader food sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

The Hershey Company HSY has an Earnings ESP of +2.86% and a Zacks Rank #3.

Pinnacle Foods Inc. PF has an Earnings ESP of +5.00% and a Zacks Rank #3.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
COCA COLA CO (KO): Free Stock Analysis Report
HERSHEY CO/THE (HSY): Free Stock Analysis Report
MONSTER BEVERAG (MNST): Free Stock Analysis Report
PINNACLE FOODS (PF): Free Stock Analysis Report
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