Higher sales of Monster Energy drink lift Hansen Natural (HANS)

Shares of Hansen Natural (HANS) are trading nearly 20% higher following the company’s earnings release after yesterday’s close. Hansen said profits grew 14% on higher sales of its Monster Energy drink and improved margins.

Although slightly below consensus estimates, revenue climbed 6% to $300.3 million. Demand is strong for Monster Energy drinks despite tough economic conditions that have led some consumers to replace their consumption of soda and energy drinks with tap water.

Hansen noted their distribution deals with certain Coca-Cola bottlers and Ansheuser-Busch last year has paid dividends for the company and market share has grown in its main distribution channels nationally, namely in convenience and grocery stores. The distribution deals have also helped Hansen grow sales outside the U.S. to $39.4 million, compared with $27 million a year ago.

Gross margins jumped to 53.9% from 51.8%. Distribution costs as a percentage of net sales were 4.2% for the second quarter, compared with 5.5% from the year-ago period. Selling expenses as a percentage of net sales were 11.2%, compared with 12.1% a year ago. The distribution deals mentioned have played a part in lower distribution and selling costs.

Monster is the leading brand in terms of volume share and growth. Distribution agreements and lower expenses have positioned Monster for even higher sales once the economy improves.

Not included in the earnings report, but also of interest – Hansen announced that Monster Energy drinks are hitting fast-food chains, with Hardees company-owned units offering Monster Energy in mid-August and franchised units joining later. Carl’s Jr. will immediately begin offering Monster Energy drinks in all units.
--

Peter J. Lazaroff, Investment Analyst