Hansen Blew Out Sales Estimates In Q2

Includes: AHBIF, MNST
by: David Kretzmann

Hansen (HANS) reported 2Q 2007 results on Wednesday.

  • Gross sales up 54.1% to $280.6 million from $182.1 million in 2Q 2006
  • Net sales up 56.9% to $244.76 million from $156.04 million in 2Q 2006
  • Gross profit margin 52.4% from 51.9% in 2Q 2006
  • Net income up 35.9% to $38.3 million ($0.39 per share) from $28.2 million ($0.28 per share) in 2Q 2006
  • Diluted share count 98,455,000
  • Cash and short-term investments $198.09 million
  • No debt
  • Inventory $87.5 million from $77.01 million in 2Q 2006
  • Anheuser-Busch (NYSE:BUD) distribution transition arrangements are largely completed [this basically means other distributors have largely been replaced by A-B and that A-B will soon be running the whole show]
  • Press Release

    Analysts were expecting an EPS of $0.36 on sales of $217.72 million. This quarter showed people that absolutely nothing has changed for the worse with Hansen's business over the past six months or so, as Wall Street had assumed. Hansen blew out sales estimates and met the high end of EPS expectations. This should be the final quarter in which Hansen will have a good amount of expenses from the options investigation, it is now officially over[(the SEC officially closed it yesterday].

    Anheuser-Busch has also made a lot of progress getting everything sorted out to become Hansen's U.S. distributor. I don't think people realize how important this deal is. This is the deal that will push Monster onto the top over Red Bull. Why? This agreement will get Monster more shelf space in more places with better shelf locations. According to CEO Rodney Sacks, Monster is continuing to gain market share, and my guess is that Red Bull is continuing to lose market share.

    monsterThis is an important topic that shows why I love Hansen so much. Why is it that Monster is gaining so quickly on Red Bull? Simply because of innovation. Red Bull calls innovation coming out with a sugar-free option. Then they come out with a 12 oz can. Monster, on the other hand, has the original Monster Energy, but as well as Monster Khaos, Monster Lo-Carb, Monster Assault, and Monster M-80. Now they have three kinds of Java Monster on the market and it has been flying off the shelves. Hansen has a very popular brand with Monster, and as a result management develops it and expands it. The reason Hansen has done so well as a business is because it has new ideas, an innovative management team, and management is excellent at developing new products.

    The balance sheet is now the strongest it has ever been. With this load of cash and an excellent management team, I can't wait to see what happens with it. Curiously enough, Hansen recently trademarked the name Monster Chai Hai. Could a tea monster be in development? It certainly looks that way. I hope this cash goes to continued product development that this team is so superb at.

    Shareholders will probably be pushing for a buyback or dividend, but that's not the right move at this point in time. This is an excellent time to develop, because with A-B and Pepsi (NYSE:PEP)behind distribution, getting new products out into the public will be much easier for the company. An interesting note on a personal level; I was recently driving with my parents late at night and we stopped at a rest area gas station, and curiously enough, Monster was on display with the Anheuser-Busch products.

    This has been a fantastic year for Hansen considering what they've been through. Management signed two huge distribution deals which immediately got the company on an international expansion path, Hansen released Java Monster in April, and now the balance sheet is as strong as ever. The company's growth is far from over and I think we've only seen the tip of an iceberg with the development of the Monster brand. I highly encourage you to keep an eye on this blog, this person closely follows Hansen, Monster, and the competition.

    For the 3Q 2007, analysts are expecting an EPS of $0.47 on sales of $248.24 million. Offhand these results look slightly conservative to me, I think margins will increase enough to push earnings growth higher. I'm curious to see if analysts will raise their expectations after this quarter, my guess is that they will. Personally, I think Hansen will report an EPS in the $0.50-$0.55 area, because the 3Q is a very strong quarter for the company and I think margins will improve a bit as well.

    HANS 1-year chart