Monster Earnings: Strong Growth Led by International Markets; Pricing Holds Steady in US

We don’t plan any material changes to our $52 fair value estimate for narrow-moat Monster Beverage after digesting first-quarter results. Sales and earnings per share both grew 12%, led by double-digit volume gains, reaffirming our optimism on the firm’s long-term outlook underpinned by brand strength and Monster’s partnership with wide-moat Coke. We expect Monster to continue with a two-pronged growth strategy, leveraging innovations (zero-sugar recipes, new fruit flavors, slim packaging) to drive growth of the core Monster brand in developed economies while widening distribution of affordable brands Predator and Fury across Asia, Latin America, and Africa. Our 10-year projections for high-single-digit annual sales growth and operating margin averaging in the low 30s remain in place. The shares appear slightly overvalued.