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Monster Beverage: A caffeine crash

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Monster Beverage: A caffeine crash

Monster Beverage Corporation (NASDAQ:MNST) reported its second quarter earnings after the market close on Thursday. Following the results shares traded sharply lower in the after hours session before working their way higher in pre-market trading on Friday. At the time of this writing shares of the company traded down by 0.66% to $63.05 per share.

Net income fell by 3% to $106.9 million, or $0.62 per share during the second quarter which ended on June 30th. On a year of year comparison we see a mix of higher net income with declining per share results. In the second quarter of last year the company reported a slightly higher $109.8 million in net income, or $0.59 per share. The rise in per share earnings amid declining net income was a result of the company having fewer shares issued during the most recent quarter. These results fall short of analyst consensus earnings estimates of $0.64 by $0.02 per share. However, on the top line the company saw its revenues rise by 7% to $723.9 million from $678.9 million last year. If we account for promotional allowances, revenue came in at $630.9 million below the consensus of $650 million.

What does all this financial jargon mean for Monster in the quarters ahead? Well the company’s days of high growth may be coming to an end. As distribution costs rise and legal expenses mount, margins may be at risk. Over the last year safety fears have caused investors and consumers alike to avoid the company. During the quarter the company paid an additional $5 million in expenses to cover the rising regulatory and legal costs attributed to safety concerns. At 34 times this years earnings, some traders have argued this valuation is stretched considering the headwinds growing strong in the face of the company’s sole product. Over the coming weeks a number of analysts are expected to be releasing their updated guidance to reflect the most recent data.

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