Opinion on  Hansen Natural Corp (HANS)     Sector: Consumer/Non-Cyclical  >  Industry: Beverages (Non-Alcoholic)
Hansen: Fourth Quarter Not What It Appears

When Hansen Natural (hans) reported it's sketchy "preliminary" fourth quarter results on February 12, it only gave sales and other metrics so analysts could back into an earnings number. The company blamed the limited results on an options probe. Analysts had been expecting 27 cents per share, and based on reports after the release, that's pretty much what analysts calculated the company did.

Now hear this: Based on a 10-K filed late today, it appears the analysts missed the mark -- and not by a small amount. As it turns out, fourth quarter earnings per share were just 23 cents

The question now: Was the options probe a convenient excuse not to report the bottom line?

Going into the fourth quarter, Hansen's stock had run from $24 after the third quarter release to $37 two days before the fourth quarter release on optimism that bad news was behind the maker of the Monster energy drink (no stranger to readers of this space.) After earnings were reported, and analysts backed into their number, the stock lifted as high as $42 before sinking as low as $32 and then back up to its current price of $39.

Don't ask me how it got to $39, but this much is clear: When first quarter "preliminary" results were released in May -- another quarter in which earnings weren't reported due to the options probe -- investors ignored falling gross margins and a sales shortfall relative to expectations believing, once again, the worst is behind the company.

Now, not that anybody will care, it turns out the fourth quarter wasn't just a miss, but a BIG miss. Can't wait to see what happened in the first quarter.

The beat goes on...

Hansen Natural's (hans) first quarter earnings, reported in the company's 10-Q today, missed expectations. This marks the second quarterly miss. Don't expect to see headlines about the miss -- the second in two quarters.

As was the case in the fourth quarter, Hansen didn't include earnings in its earnings release last month, citing an ongoing options investigation. Instead, the numbers were included in the company's quarterly SEC filings, the latest of which was filed late Tuesday. In that filing, Hansen said it earned 21 cents per share vs. estimates of anywhere from 25 cents to 29 cents, depending on which service you're watching. Goldman Sachs, whose bullish report last week juiced the price of the shares, had been expecting 30cents.

Another way of looking at this: Since its stock ran from an October low of $24, Hansen has reported 43 cents in earnings per share for the past six months versus expectations of 56 cents. In other words, the stock (now at around $44) is up 83% on a 23% earnings shortfall. Or, looking at it yet another way, over the past six months, the company has earned less money on higher sales as it is forced to spend more in marketing to keep the top-line growing (which, by the way, was the bears' original argument before the stock and the business took off the way they did.)

Bulls are likely to say the company is very net cash positive and that it is may even announce a big buyback. Maybe, but keep this in mind: With its $4 billion market value, Hansen (mostly for its Monster brand energy drink) is valued at a quarter of the roughly $16 billion Cadbury Schweppes hopes to get for selling ALL six of its beverage brands, among the best known anywhere, including 7-Up, Snapple and Dr. Pepper.

Either one's too cheap...