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Monster Beverage (MNST) Stock Slides YTD: Is Recovery Likely?

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Monster Beverage Corporation (MNST - Free Report) stock has lost as much as 12.3% in the year-to-date period, pushing it behind its industry peers and the S&P 500 index. MNST’s stock declined against the industry and the Consumer Staples sector’s growth of 4.8% and 3%, respectively, in the same period. The company also underperformed the S&P 500's 17.6% rise in the same period.

At the current price of $50.49, the stock trades at a 17.5% discount to its 52-week high of $61.23 reached on Mar 13, 2024. Furthermore, MNST is trading below its 50 and 200-day moving averages, signaling potential bearish sentiment in maintaining recent performance levels.

The drop in the Zacks Rank #3 (Hold) company’s share price is likely to have resulted from the changes in market sentiment driven by broader economic indicators, geopolitical uncertainties and sector-wide trends. Investor caution, influenced by concerns over underlying inflation and higher interest rates, has led to stock sell-offs. Additionally, profit-booking by investors aiming to capitalize on prior gains has increased pressure despite MNST’s solid fundamentals.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

MNST Looks Well-Positioned Fundamentally

Monster Beverage continues to display fundamental strength, primarily driven by the momentum in its energy drinks category. In first-quarter 2024, the Monster Energy Drinks segment's sales rose 10.7% year over year. On a currency-adjusted basis, net sales for the segment rose 14.2%.

The company's success is bolstered by the expansion of this category and product launches. Product innovation has been a key factor in its achievements. The company's consistent stream of product launches is expected to sustain its business momentum.

Looking ahead, the company has a solid innovation plan for 2024. Management is optimistic about Nasty Beast Hard Tea and the additional alcohol opportunities that MNST presents. The company has also rolled out Predator and Fury, its affordable energy drink portfolio, in several international markets.

Increased pricing, lower freight-in costs and reduced input costs have contributed to MNST’s robust margins. In first-quarter 2024, Monster Beverage’s gross margin expanded 130 basis points (bps) year-over-year to 54.1%. The operating income rose 11.7% year over year. The upside was driven by an increase in sales and the gross margin. The persistence of this trend may continue to contribute to the company’s profitability.

MNST continues to benefit from its pricing actions across various regions to negate the impacts of rising commodity costs and inflation. The company continued to implement pricing actions in the first quarter of 2024. It has been monitoring opportunities for further pricing actions across the United States and internationally.

Key Picks

We have highlighted three better-ranked stocks from the Consumer Staple sector, namely Vital Farms (VITL - Free Report) , Freshpet (FRPT - Free Report) and Coca-Cola FEMSA (KOF - Free Report) .

Vital Farms currently carries a Zacks Rank #1 (Strong Buy). VITL has a trailing four-quarter earnings surprise of 102.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of 22.6% and 62.7%, respectively, from the year-ago period’s reported figure.

Freshpet presently flaunts a Zacks Rank of 1. FRPT has a trailing four-quarter earnings surprise of 118.2%, on average.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 24.8% and 177.1%, respectively, from the year-ago period's reported figures.

Coca-Cola FEMSA currently carries a Zacks Rank #2 (Buy). KOF has a trailing four-quarter negative earnings surprise of 1.3%, on average.

The Zacks Consensus Estimate for Coca-Cola FEMSA’s current financial-year sales and earnings suggests growth of 11.9% and 26.7%, respectively, from the year-ago period’s reported figures.

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