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Here's How Monster Beverage Stock Looks Heading Into 2020

Zacks Equity Research

Monster Beverage Corporation MNST is seeing strength in energy drinks category and gaining from robust strategic endeavors, including international expansion and product innovation. Additionally, the company is smoothly progressing with the transitioning of its Monster Energy brand to Coca-Cola KO bottlers across various markets.

Shares of the leading energy drinks’ company have surged 27.5% year to date, comfortably outperforming the industry’s rally of 17.2% and the broader Consumer Staples sector’s growth of 22%. This Zacks Rank #3 (Hold) company’s impressive long-term expected earnings growth rate of 14.3% further highlights the stock’s inherent potential.

Let’s delve deep.

Factors Narrating Monster Beverage’s Growth Story

Robust momentum in the energy drinks category has been bolstering Monster Beverage’s top- and bottom-line performance. We note that Monster Beverage offers a wide range of energy drinks brands like Monster Energy, Java Monster, Cafe Monster, Espresso Monster and more. The company’s top line in third-quarter 2019 was mainly fueled by gains in the Monster Energy brand’s energy drinks internationally and strength in its high-performance energy drink — Reign Total Body Fuel — which was launched in the first quarter of 2019.

Moving ahead, management is optimistic about strength in the energy drinks category, with the Monster Energy brand growing significantly. Moreover, product launches across the Monster family should continue driving the company’s overall sales and profits.

In addition, progress on Monster Beverage’s deal with Coca-Cola (also referred to as the “TCCC Transaction”) has strengthened the former’s position in the global energy drinks market. Per the terms of this deal, Coca-Cola and its bottling partners act as Monster Beverage's preferred distribution partner globally, ensuring greater reach for the company’s products. Notably, the strategic alignment with Coca-Cola system bottlers is almost complete in the United States. This should enhance the supply of Monster Beverage’s energy drinks in the country.

Monster Beverage has also been expanding its international operations in various markets including China, India, EMEA, Africa and the Middle Eastern countries. The aforementioned transition to Coca-Cola bottlers has significantly aided the company’s international presence. Going forward, management expects to launch Monster Energy brand’s energy drinks in various international markets.
Product innovation plays a significant role in the company’s success. Consistent demand for tasty and healthy beverages propels Monster Beverage to regularly innovate products and their flavors. Apparently, the company has been expanding its recently-launched products, including Predator, its affordable energy brand, in the newer markets.

We remain confident of Monster Beverage’s performance in the next year, given the aforesaid growth drivers. Further, the Zacks Consensus Estimate for 2020 top and bottom line indicates year-over-year improvement of 8.7% and 10.4%, respectively.

2 Beverage Stocks You May Count on

The Boston Beer Company, Inc. SAM has an expected long-term earnings growth rate of 10% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Barfresh Food Group, Inc. BRFH has delivered a positive earnings surprise of 100% in the last reported quarter. It currently carries a Zacks Rank #2.

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