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Monster shares fall after third-quarter profit misses forecasts

November 07, 2012|By Laura J. Nelson
  • Monster Beverage Chairman Rodney Sacks at the company's warehouse in Corona.
Monster Beverage Chairman Rodney Sacks at the company's warehouse… (Irfan Khan / Los Angeles…)

Monster Beverage Corp., facing scrutiny over the effects of its energy drinks, reported a lower-than-expected third-quarter profit of $86.1 million, sending its shares down as much as 12% in after-hours trading.

Executives at the Corona company, which controls 35% of the energy-drink market, attributed the lower profit to increased sales efforts in Asia and higher cost of promotional offers.

Monster's profit of $86.1 million, or 47 cents a share, was 4% higher than earnings of $82.4 million, or 44 cents a share, in last year's third quarter. Revenue rose 15.4% to $632.3 million.

Analysts, on average, had expected net income of 55 cents a share, or 8 cents more, according to a Thomson Reuters survey.

Shares fell 12 cents, or 0.3%, to $44.97 in regular trading Wednesday, before the company released its results. After hours, shares fell as much $7.77 more, to $37.20.

Monster stock has fallen almost 43% since June, when it peaked at $78.72.

The company came under scrutiny last month when the Food and Drug Administration opened an inquiry into the circumstances of five people who died after consuming Monster energy drinks. Monster also is facing a negligence and wrongful death lawsuit in connection with the death of a 14-year-old girl, Anais Fournier.

The FDA inquiry is pending.

Lawmakers and consumer advocates also are calling for tougher regulation of energy drinks sold by Monster, Red Bull and other beverage companies. Most recently, Sens. Richard Durbin (D-Ill.) and Richard Blumenthal (D-Conn.) urged the FDA to clarify how it classifies energy drinks.

Monster Chairman Rodney Sacks said the company was not responsible  for Fournier’s death. He said there is no “causal link” between his company’s drinks and the five deaths. The lawsuit was the first they had received, he said.

Sacks argued that coffee contains more caffeine than his energy drinks do and that there already is too much FDA regulation of the industry.

The FDA limits caffeine levels in soft drinks to 71 milligrams in 12 ounces. But most energy drinks are labeled as dietary supplements and, therefore, are allowed to exceed those requirements.

“There is absolutely no basis for singling Monster out in this regard,” Sacks said.

His company’s beverages, he said, comply with FDA standards and the standards of the 69 other countries in which they’re sold.

Sacks said the controversy would not affect the company’s ability to buy back shares. Monster launched a plan in August to repurchase 6.9 million shares at $57.99 and 1.9 million at $54.99.

ALSO:

FDA probing reports of energy-drink deaths

Senators urge stricter energy-drink rules; Monster stock falls

Consumer Reports: Energy drink labels have shaky caffeine counts

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