Monster Tumbles After Coca-Cola Deal Forces Costly Changes

Updated on

Monster Beverage Corp. shares declined the most in more than two years after its distribution deal with Coca-Cola Co. took a toll on profit in the first quarter, when the company had to cancel contracts with other partners.

Net income fell to $4.41 million, or 3 cents a share, from $95.3 million, or 55 cents, a year earlier, the Corona, California-based company said on Thursday. Excluding some items, earnings amounted to 62 cents a share. Analysts predicted 68 cents, according to data compiled by Bloomberg.

The energy-drink maker is distributed more of its products through Coca-Cola in a transaction slated to close this quarter. The arrangement forced the company to pay $206 million in termination fees last quarter as it backed out of deals with other partners. Monster referred to last quarter as a “transitional period.”

“We are making good progress in working through transitional issues,” Chief Executive Officer Rodney Sacks said in a statement.

The stock fell 10 percent to $128.47, the biggest one-day decline since October 2012. The shares had been up 32 percent this year before Friday’s tumble.

Sales came in at $587 million in the first quarter, missing the $597.5 million estimate.

Results also were crimped by the impact of the strong dollar and litigation over the way Monster markets its energy drinks. New York Attorney General Eric Schneiderman and the U.S. Food and Drug Administration have scrutinized energy drinks over health concerns. Schneiderman also has said that the product promotes the drinking of energy drinks with alcohol.

Monster was among a handful of food and beverage stocks to take a beating on Friday. Sprouts Farmers Market Inc. fell as much as 10 percent after its results missed analysts’ estimates. And Shake Shack Inc. declined for a third straight day as investors scrutinized its lofty valuation.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE