Consumer Products

How Coca-Cola Is Winning on Monster and Losing on Keurig

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.

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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