What happened
Shares of fast-growing energy drink maker Celsius Holdings (CELH 3.21%) notched another win last month, gaining 16% according to data from S&P Global Market Intelligence. The company announced a new partnership with PepsiCo, posted a strong earnings report in the second quarter, and also seemed to benefit from some analyst chatter.
As you can see from the chart below, the stock's movement was erratic over the course of the month, but it still finished up by double digits.
So what
Celsius has taken the market by storm over the last few years as the energy drink maker has put up triple-digit revenue growth and solid profits to go with it. The stock jumped to start the month after it announced a new deal with Pepsi. The beverage giant invested $550 million in Celsius in convertible preferred shares.
The company gained again on its second-quarter results. Revenue in the second quarter rose 137% to $154 million, ahead of estimates at $148.7 million. It also said growth in its direct store delivery (DSD) channel more than tripled in the quarter as it expanded the DSD business and its partnerships with convenience stores.
Even as gross margin fell from 43.4% to 38.5%, the high revenue growth drove a significant increase in profits, with earnings before interest, taxes, depreciation, and amortization (EBITDA) increasing from $8 million to $17.1 million. On the bottom line, earnings per share increased from $0.01 to $0.12, ahead of estimates at $0.08.
Among the other highlights in the quarter, Celsius said it was rapidly expanding its placement with club stores, adding 175 BJ's Wholesale Club Holdings stores in the quarter.
That same day, Aug. 10, Celsius joined the S&P Midcap 400 index, giving the stock a boost as it gets added to exchange-traded funds that follow the index. A pair of analysts also weighed in on the earnings report, raising their price targets on the stock, touting the company's long-term opportunity.
The following week, Jefferies Group advised investors to buy the stock on weakness, saying the new deal with Pepsi would help the company gain scale and accelerate market share gains.
Now what
Fresh off its deal with Pepsi, Celsius does seem poised for its next stage of growth. The two companies also formed a strategic partnership, making Pepsi Celsius' preferred global distribution partner.
Though it may be surprising to see an energy drink maker deliver such strong growth, investors should remember that Monster Beverage is one of the top-performing stocks of the last decade. Now, it seems like Celsius is winning with a similar playbook.
