Analysts raise targets on Hansen after strong results
By Amitha Rajan
BANGALORE, May 8 (Reuters) - At least four analysts raised their target prices on the shares of Hansen Natural Corp HANS.O, which sells the Monster Energy drink, a day after the company posted a quarterly profit ahead of expectations as its energy drinks continued to perform well and gain share.
Shares of the company rose as much as 10 percent to $41.88, before paring some gains to trade up $2.91 at $40.97 in morning trade on Nasdaq.
Analysts attribute Hansen's performance to effective cost controls and better-than-expected contribution from international sales, which drove margins significantly higher.
International revenue jumped more than 75 percent, while selling expenses as a percentage of net sales were 12.5 percent in the first quarter, compared with 14.9 percent a year ago.
Gross margin in the first quarter rose to 46.7 percent from 42.9 percent a year earlier. [ID:nBNG495812]
"We continue to expect that international sales will be a significant growth driver for Hansen going forward, especially as the company successfully transitions into the Coke systems in the U.S., Canada and Western Europe," analyst Mark Astrachan of Stifel Nicolaus said.
According to analyst Kaumil Gajrawala of UBS, international sales now represent 13 percent of total sales versus 8 percent as of Dec. 31.
"Going forward, our international expectations assume Hansen's market share in its Western Europe markets is about 6 to 7 percent in 2009," Stifel's Astrachan said.
Hansen, which signed a distribution agreement with Coca-Cola Co (KO.N: Cotización) and its largest bottler Coca-Cola Enterprises CCE.N late last year, has launched its energy drink, Monster, in six European countries this year.
"While it is too early to measure the success of Monster's penetration into Europe under CCE's distribution, this could provide a meaningful boost to earnings at some point in 2009," analyst Alton Stump of Longbow Research said.
Analysts expect growth in international sales to help partially offset weak U.S. energy drink sales as consumers continue to be thrifty.
Since its launch in the U.S. in 2002, Monster has nearly doubled its market share and is now the leading energy drink in the country, outstripping Austria-based rival, Red Bull.
Under the distribution agreement with Coke, Hansen has also launched Monster in select parts of the United States, a move that analysts believe will further strengthen the drinks position in the nation.
"We believe Monster will continue to gain share over its domestic competition, due in part to superior support from new CCE distributors," Longbow's stump said.
The price target changes made by the brokerages are as follows:
BROKER NAME NEW OLD RATING
Goldman Sachs $42 $32 Neutral
Longbow Research $46 $44 Buy
Citigroup $44 $32 Hold
UBS $48 $41 Buy (Reporting by Amitha Rajan in Bangalore; Editing by Anil D'Silva)
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