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Monster Beverages Corporation MNST remains well positioned for long-term growth thanks to continued momentum in the energy drinks business and various product launches in national and international markets. Driven by these factors, it reported better-than-expected revenue for the third quarter of 2021. Net sales of $ 1,410.6 million increased 13.2% year-over-year.
Zacks Rank # 3 (Hold) stock has gained 6% in one year compared to industry and the Basic consumer products sector growth of 8.1% and 6.9%, respectively.
Factors determining stock
Monster Beverages has long witnessed a persistent strength in the energy drink category, which has boosted its performance. In the third quarter of 2021, Monster Energy Drinks segment net sales grew 14.3% year-over-year to $ 1.33 billion. Sales of the company’s energy brands, including Reign, increased 4.3% for the same period. Management is optimistic about the strength of the energy drink category and the significant growth of the Monster Energy brand. Product launches across the Monster family will drive the overall results of the company.
She remains committed to product launches and innovation to drive growth. In the third quarter, the company launched Monster Zero Ultra in Paraguay, Monster Energy Zero Sugar in Peru, Monster Ultra Fiesta Mango in Puerto Rico, and Monster Ultra Watermelon in the Caribbean. It has also introduced Monster Pacific Punch, Monster Dragon Tea Peach, Reign Orange Dreamsicle and Reign Mango Magic in Brazil and plans to launch all of these products in the United States in the first half of 2022. In Australia, Monster Beverages has launched Mother Sugar Free Raspberry and Monster Ultra Fiesta Mango. In Japan, it launched Monster Super Fuel, Blue Streak, and Red Dawg in July, while Monster Rossi was relaunched in October. In Canada, the company introduced three flavors to the Monster Energy Rehab line in July.
In the third quarter, Monster Mule, Monster Nitro and Monster Assault were launched in the EMEA zone, while the malt-flavored energy drink Predator was introduced in Nigeria. Additionally, the company has introduced Ultra Fiesta, Juiced Monster Monarch, and Predator in a number of countries. It extended Predator Gold Strike to Mexico by launching a slim 355ml can during the quarter under review. Monster Beverages also launched two flavors, watermelon and white pineapple, in its New Reserve line of Monster energy drinks in October.
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Obstacles in the way
Despite these advantages, the company continues to face shortages of aluminum can needs in the United States and the EMEA region, due to the higher cost of importing aluminum cans and the high prices of the products. base of aluminum. Monster Beverages is also experiencing delays in the supply of certain ingredients, both nationally and internationally. This led to increased challenges in meeting increased consumer demand in North America and the EMEA region in the third quarter.
Higher import costs for aluminum cans and higher logistics costs weighed on third quarter margins. Gross and operating margins contracted 320 and 530 basis points (bps), respectively, for the said quarter.
Management has taken steps to source additional quantities of aluminum cans in excess of its contractual volumes in the United States, South America and Asia. It also has supply agreements with two suppliers of aluminum cans in the United States, which are expected to be operational in the fourth quarter of 2021.
Yet Monster Beverage faces freight inefficiencies, port congestion, insufficient co-packing capacity and delays. It experiences high costs of ingredients and other inputs including shipping and freight, labor, trucking, fuel, co-packing charges, secondary packaging materials and increasing outbound freight costs.
He expects challenges related to supply constraints in the aluminum can industry, shipping container shortages, global port congestion and higher freight and input costs to continue over the course of the year. the next few months. This will continue to have a negative impact on gross margin rates.
Monster Beverages appears to be in good shape despite the challenges of the industry, with the introduction of innovative products throughout the Monster family to meet the needs of consumers. The company has also taken actions to respond to demand shortages, the effects of which are not yet visible.
Actions to consider
We’ve highlighted a few top-ranked stocks from the set Basic consumer products space, namely, Albertson Enterprises ACI, Helen of Troy HELE, and Procter & Gamble PG.
Albertsons currently wears a Zacks Rank # 2 (Buy). The company has a surprise profit for the last four quarters of 37.6% on average. The company’s shares jumped 124.8% in one year. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
Zacks ‘consensus estimate for sales for Albertsons’ current year suggests growth of 3.6%, while the same for earnings per share indicates a decline of 16.7% from the period of the previous year. ACI has an expected long-term earnings growth rate of 12%.
Helen of Troy currently wears a Zacks Rank # 2. The company has a surprise profit for the last four quarters of 19.8% on average. The company’s shares have gained 19.5% in one year.
Zacks’ consensus estimate for sales and earnings per share of Helen of Troy for the current year suggests a decline of 15.9% and 16.2%, respectively, from the period of the last year. HELE has an expected long-term earnings growth rate of 8%.
Procter & Gamble, a stock in Zacks Rank # 3, has a surprise four-quarter profit of 5.3%, on average. The company’s shares have gained 9.9% in one year.
Zacks’ consensus estimate for Procter & Gamble’s sales and earnings per share for the current year suggests growth of 3.2% and 1.2%, respectively, from a year ago. PG has an expected long-term profit growth rate of 6.7%.
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