This Guidance is not Guidance

MNST, which suddenly saw the light at the end of last year and decided it would no longer issue guidance, "corrected" analysts today on what number they should plug into their models for Q1 operating expenses. This "correction" should have the result of reducing the non-GAAP EPS by about half of what analysts currently projected for the quarter. Below are a rough snapshot of consensus estimates before the announcement.

Revenue: $369

Non-GAAP OPEX: $300

EBITDA: $85

EBIT: $52

Interest Inc: $6

EBT: $58

Net Income: $38

EPS: $.30

And now my own estimates, using this announcement as guidance:

Revenue: $368

EBITDA: $54

EBIT: $37

EPS: $.19

These are pro-forma estimates, which means they don't include one-time charges. Given the decline in business and the ongoing restructuring, I would not be surprised if actual GAAP earnings were to turn negative.

The important takeaway from this announcement is that we are finally starting to see the consequences of heavy investment in a business with declining growth. EBIT margins should decline by over half YoY. If this trend continues, as I expect it will, the affect on MNST's operating results, and share price, should be severe.

I also think this announcement speaks a lot to management credibility. If there was any doubt that management was withholding guidance on principle, those doubts should be put to rest. Their operating margin guidance (another form of guidance that apparently doesn't count) is now basically unattainable unless trends reverse themselves drastically in the back half of the year. Expect this to be the first of many "corrections" to come.

Author is short MNST. Above writing should not be construed as "guidance" of any kind. Do you own DD.