JP Morgan is out with some very interesting comments on Hansen Natural (NASDAQ:HANS), reiterating their Overweight on the stock. Firm says a detailed review of HANS revenue drivers through 2009 points to upside potential versus consensus, which should also drive EPS upside given consensus conservatively assumes no incremental EPS growth beyond revenue growth. Revenue upside would likely drive substantial upside in the stock, given the market is pricing in risk versus consensus as Hansen is trading at only 19.2 times 2008E EPS, well below its high-growth consumer peers despite a 29% consensus EPS growth CAGR through 2009.
Number of HANS positives include: 1) continuing off-premise distribution expansion, particularly with a shift of half of Monster distribution to A-B wholesalers, 2) expansion into the on-premise channel, 3) international expansion through greater penetration of Mexico and Canada as well as an initial entry into Europe (which JPM expects in H2), 4) a strong 2007 new product pipeline, and 5) energy drink price increases expected in H2.
Above consensus results should drive upside in the stock as the market currently appears to be factoring in significant downside versus consensus, given Hansen's NTM P/E of 25.1 times is a large 20% below a peer group of high-growth consumer companies (including Chico's, Urban Outfitters, Coldwater Creek, Starbucks, Panera Bread, and Chipotle). This lower valuation is despite Hansen having much higher returns, a higher free cash flow yield, a higher consensus EPS growth rate forecast, and a stronger balance sheet, than almost all of these peers.
Notablecalls: HANS looks to be primed for some nice upside over the next couple of days.
HANS 1-yr chart: