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Morgan Stanley
Sep 18, 2026 · MNST
Tags: MNST Monster-Beverage margin-inflection gross-margin EPS-leverage pricing aluminum-costs international-growth
Value Score: 8.0/10
Morgan Stanley reiterates Overweight on Monster Beverage because the report argues investors are underpricing a 2027 margin and EPS leverage inflection. The near-term debate is not whether 2026 faces aluminum, mix, and SG&A pressure; it is whether those pressures are temporary enough for pricing, mix, international scale, and COGS efficiencies to drive a larger 2027 recovery than consensus expects.
Q2 gross margin was better than the headline setup implied. Monster's Q2 gross margin expanded about 25 bps y/y despite higher aluminum costs and adverse geographic mix. Morgan Stanley estimates regional geographic mix was an about 135 bps headwind, implying underlying Q2 gross margin expanded about 160 bps y/y excluding mix. That is the key bridge from "2026 pressure" to "2027 recovery."
EPS leverage is the clearest way to frame the upside case. Exhibit 2 shows Morgan Stanley expecting EPS leverage to ramp back in 2027 after 2026 pressure and the 2019-25 period of limited EPS leverage. The report forecasts long-term EPS growth of 16%, above consensus at 13% and above Monster's FY19-25 EPS CAGR of 12%.
Source: Exhibit 2: EPS leverage margin inflection
EMEA is the proof point that margin recovery is already visible in a scaled international region. EMEA gross margin recovered from 31.2% in FY22 to 36.0% in FY25 and 37.4% in 1H26. That recovery supports the argument that regional margin compression can reverse as supply-chain drag fades and pricing/mix actions flow through.
Source: Exhibit 4: EMEA gross margin recovery
International profit growth is already outpacing sales growth. International 1H26 operating profit grew 57.4%, ahead of 39.7% sales growth and 43.9% gross profit growth. That matters because the report's margin thesis depends on international scale becoming a profit lever, not just a revenue-growth story.
Source: Exhibit 5: International profit leverage
The 2027 forecast gap is material but not heroic. Morgan Stanley forecasts 2027 gross margin and operating margin expansion of about 50 bps and 90 bps y/y, roughly 20 bps and 30 bps above consensus. The firm is also 5% above consensus EPS in 2027 and 8% above in
