Monster... A Tale of Earnings Clouded By M&A Dreams (MNST, KO, PEP)

Monster Beverage Corporation (NASDAQ: MNST) is looking like a monster all on its own after earnings this morning.  The specialty energy drink maker is seeing shares rise in the double-digit percentages after this company managed to handily beat earnings expectations on Wednesday evening.

Today’s share price reaction to the earnings news is enough that you might wonder if those old buyout rumors might be surfacing again.  The question is whether or not The Coca-Cola Company (NYSE: KO) or another outfit wants to pay more than $12 billion for an acquisition.

Earnings came in up 38% to $0.41 EPS and revenues came to $454.6 million.  We had estimates of $0.38 EPS and $447.1 million in revenues.  There was also an impressive operating margin gain which grew to 27.8% from 24.8% as growth in Asia is paying off.    Shares closed at $65.31 on Wednesday and the pre-market action has shares up 12% at $73.20.  The market cap at yesterday’s close was $11.4 billion and the 52-week trading range is $32.35 to $83.96.

From an outsider’s view, Monster looks like a beverage company where the time to acquire it may have come and gone.  Monster trades at well over 30-times expected 2012 earnings against about 18-times earnings for Coca-Cola and about 16-times expected earnings for Pepsico, Inc. (NYSE: PEP).  Coca-Cola has finally come back in favor for defensive investors, and Pepsico is in a state of flux where many feel it has lost its way.  It seems like for now these two beverage giants would not be wanting to spend well over $12 billion to buy an energy drink outfit, but in the end everything may just boil down to price.

JON C. OGG