Monster Beverage (MNST) recently reported its third-quarter earnings, and the only surprise was just how much upside remains for this energy drink company.
In August 2014, MNST and Coca-Cola (KO) formed a strategic partnership, and that deal is having enormous repercussions for MNST.
Basically, the deal gave a 16.7% share of MNST to KO, MNST would transfer all its non-energy drinks to KO, and KO would transfer its energy drink portfolio to MNST. KO would also become the exclusive distributor for MNST and its products, opening up its global distribution channel.
Because of its massive distribution clout, Monster is now moving into Russia, China and Nigeria, which will mean huge opportunities for growth. Bear in mind, though, that a MNST competitor, Red Bull, started the entire sector and its founders launched the idea after visiting China and seeing the huge energy drink market there — decades ago.
Red Bull is actually a derivation of a Thai energy drink. So, coming into this market now with a major global brand name is like being the Apple (AAPL) of energy drinks.
Could This Monster Take Over the World?
Monster started life as a niche product in the Hansen’s Natural Soda family, which had been a solid craft soft drink brand for years. But as MNST took off, Hansen was eaten by Monster.
And now, as it continues to expand into the remaining international markets, the KO deal opens up another thrilling step — getting onto the menus of major fast food chains.
Currently, MNST is almost neck and neck with Red Bull in global market share, 39% to 43%, respectively. Expanding into Russia, China and Nigeria should close that gap, and more.
Plus, a pilot program with McDonald’s (MCD) could send Monster stock over the top. Because of KO’s reach into restaurants, MNST drinks will soon be offered in various eateries.
Adding MNST drinks to KO’s available product lines will mean enormous growth for Monster stock.
It doesn’t stop there, either. MNST is constantly churning out new products targeting unassailed market share, and even creating new niches.
For example, Java Monster is coffee-based energy drink that is going up against Starbucks‘ (SBUX) Doubleshot. And there’s not just one flavor — there’s six.
Its four flavors of Muscle Monster — a ‘coach in a can’ — have 25 grams of protein and are targeted at workout, health and diet-focused consumers.
Bottom Line on Monster Stock
With all of this, it’s no surprise that Monster stock operating margins are the highest in the industry — up from a stunning 30% same quarter last year to 38% this year. The industry average is around 20%. Add to that the fact sales were up 15%, operating profits were up 25% and earnings were up almost 17%.
This is one sector of the market that will grow whether global recovery is fast or slow, or whether the dollar is weak or strong. And the crazy thing is, with all this growth on the books and in the near future, Monster stock is only up 16% year to date.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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