Monster Beverage Shares Hit New High After Strong Results

By Chelsey Dulaney 

Monster Beverage Corp. traded at all-time highs Friday after the energy-drink maker logged its fourth-straight quarter of better-than-expected earnings.

The Corona, Calif.-based company, whose caffeine-packed energy drinks hit the market more than a decade ago, said it saw sales accelerate in the U.S. toward the end of 2014 and the beginning of this year.

With much of the company's sales coming from convenience stores, Monster is getting a boost from the tumble in gasoline prices, as well as from recent price increases and strong sales from new products such as its Ultra Sunrise drink.

Shares gained 13% to $141.31 in midday trading. Earlier in the session, the stock hit a high of $143.90, more than double its year-ago price.

Monster's strength comes amid a decadelong slump for U.S. soda consumption that has hurt beverage giants such as Coca-Cola Co. and PepsiCo Inc.

According to Nielsen data, Monster sales grew 10.8% in the 13 weeks ended Jan. 24, outpacing the 7.1% sales increase the overall energy drink division posted overall. Earlier this month, both Coke and Pepsi reported slight drops in revenue and sluggish soda volumes in their latest quarters.

In a bid to tap into Monster's growth, Coke agreed in August to acquire a minority stake in the company after years of speculation. The deal, expected to close by summer, will give Coke a 17% stake in Monster while the companies also swap some brands. A standstill agreement limits Coke to increasing its stake to 25% over four years.

The Coke partnership--which expands the companies' distribution relationship--stands to lift Monster as well, especially abroad, as Monster gains access to Coke's global network.

Coke shares rose 1.2% Friday to $42.98 in midday trading and were the second-biggest gainer on the Dow Jones Industrial Average.

Stifel analyst Mark Astrachan said Friday that he expects the combination of Monster's strength and the Coke deal to drive double-digit sales growth and significant operating margin expansion for Monster through 2017.

For the quarter ended Dec. 31, Monster's profit surged 65% to $125.3 million, surpassing the average analyst estimate of $101.5 million, according to Thomson Reuters. Sales, meanwhile, grew 12% to $605.6 million, topping the $584.5 million expected on average by analysts surveyed by Thomson Reuters.

Write to Chelsey Dulaney at [e-mail]

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