Monster Beverage Earnings: Strong Volume on Innovation and Marketing, Pricing Discipline Upheld

Narrow-moat Monster Beverage posted accelerating volume and better-than-expected profit growth in the third quarter, reinforcing our confidence in its long-term prospects underpinned by brand intangibles and the strategic partnership with wide-moat Coca-Cola. Sales grew 14% (on an 11% volume expansion, accelerating from 8% in the first half) and EPS rose 43%, outpacing our estimates for 13% and 25% increases, respectively. We plan to tick up our 2023 forecasts, but our 10-year projections for high-single-digit annual sales growth and operating margin averaging 32% remain in place. As such, our $48 fair value estimate will likely rise by a low-single-digit percentage. We view the shares as fairly valued.