Monster Beverage Planning to Repurchase More Shares

CALIFORNIA Monster Beverage Corp. on Tuesday announced its board has authorized the company to buy back up to $250 million of its outstanding common stock. Monster (NASDAQ: MNST) noted the timing of the deals will depend on market factors and other conditions.

The fast-growing maker of energy drinks also disclosed it may suspend or discontinue the share repurchase program at any time.

Monster's stock price has been getting hammered in recent weeks and plunged to a 52-week low last week after third-quarter results were announced.

Monster said Tuesday it has exhausted a previously authorized $500 million share repurchase program. The company bought back 6.9 million shares of its common stock at an average price of $57.99 in the third quarter and acquired 1.9 million shares at an average price of $54.99 after Sept. 30., according to its third-quarter earnings announcement on Nov. 7.

The Corona, Calif.-based company continues to achieve growth, with third-quarter gross sales rising 15.4% to $632.3 million from $548.1 million in the same period last year, Monster revealed last Wednesday.

Net income increased 4.6% to $86.1 million, but Goldman Sachs said earnings per share (47 cents) missed analysts' expectations by 8 cents due to lower gross margin and weaker sales growth.

Still, Goldman Sachs expressed confidence in Monster's future sales growth and ability to expand margins as it builds scale abroad. The Wall Street giant maintains a "buy" rating on Monster shares.

J.P. Morgan analyst John Faucher, who rates Monster stock a "neutral", noted the company has fared well in international markets where it has rapidly expanded operations. Sales in South Africa, Europe and the Middle East were up 42.6 percent year over year, the analyst noted in a Nov. 8 research report.

In spite of the growth, recent weeks have been hard on Monster, which has faced questions over the caffeine levels and safety of its beverages. FDA is investigating five deaths connected to Monster energy drinks, although the agency cautioned it has no evidence the beverages are responsible for the deaths. The company has reiterated its drinks are safe.

"Our products are just as safe as a cup of coffee," Monster Chairman and CEO Rodney Sacks said last week during a conference call with investors, as reported by The Wall Street Journal.

In a research note last month, Goldman Sachs analyst Judy Hong expressed her view that recent developments in the regulatory sphere wouldn't impact Monster's sales growth in the United States. Still, she acknowledged "having little clarity on the path of the stock in the near term and see this overhang capping" Monster's "valuation for the time being." But she said in a Nov. 8 research note the current stock price could provide "an attractive entry point for longer-minded investors."

Shares of Monster were up $1.34, or nearly 3 percent, to $46.50 in trading this afternoon on the NASDAQ. The stock has traded between a 52-week high of $83.96 (April 30) and one-year low of $39.99 (Nov. 8).