Consumer Products
How Coca-Cola Is Winning on Monster and Losing on Keurig
August 8, 2015 9:40 am
Last Updated: August 8, 2015 9:40 am
Coca-Cola Co. (NYSE: KO) made some key investments over the past year, expanding its portfolio into other beverages besides just soft drinks. Keurig Green Mountain Inc. (NASDAQ: GMCR) and Monster Beverage Corp. (NASDAQ: MNST) were the key targets for this investment. However, looking at the performance of both investments, Coca-Cola may be faced with the choice to let one go as they have each performed as polar opposites.Source: courtesy of The Coca-Cola Company
The tales of the tape are strikingly different for both Monster and Keurig. For one, Monster is sitting at the high end of its 52-week trading range while Keurig is stuck at its low end. Secondly, Monster shares are up over 33% year to date while Keurig shares are down a whopping 60%. It did not help that Keurig’s most recent earnings precipitated nearly a 30% drop in just this past week.
Keurig reported earnings per share (EPS) of $0.80 from operations, on $969.5 million in revenue. That is a 5% sales decline, and the numbers compare to Thomson Reuters consensus estimates of $0.79 EPS and $1.04 billion in revenue.
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Back in February, Coca-Cola was noted as having a 16% stake in Keurig, with 25.87 million shares at the time. Just looking at Keurig’s performance in the past quarter alone, shares were down 46%, which means Coca-Cola would have lost nearly half of its investment in just the past few months.
Coca-Cola also owns an approximately 16.7% stake in Monster. This was the result of a long-term mutual partnership agreement enacted in mid-June. As part of this partnership, Monster transitioned the vast majority of its U.S. distribution of Monster Energy products to Coca-Cola’s distribution network and agreed on a framework for transferring additional Monster Energy distribution to Coca-Cola’s system internationally.
As a result of the transaction, Monster incurred obligations related to distributor terminations totaling $12.2 million and $218.2 million during the three and six months ended June 30, 2015, respectively. However, as part of the transaction with Coca-Cola, Monster received a payment of $2.15 billion, which more than balances out these obligations. This is resounding clear on the balance sheet.
At the end of the second quarter, Monster had $2.93 billion in cash, cash equivalents and short-term investments, compared to $1.15 billion at the end of December 2014.
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Shares of Coca-Cola were down 0.4% at $41.77 on Friday’s close. The stock has a consensus analyst price target of $45.28 and a 52-week trading range of $39.12 to $45.00.
Keurig shares were up 1.4% to $53.43, in its 52-week trading range of $52.40 to $158.87. The stock has a consensus price target of $78.69.
Monster shares were up 2.9% at $149.17, in a 52-week range of $68.49 to $155.83. The consensus price target is $151.73.
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