Monster Beverage Corp (MNST)

[candeeman]

Monster Beverage Corp (MNST.O), facing investigations into the safety of its energy drinks, reported a smaller-than-expected quarterly profit as it stepped up promotional spending.

Shares in Monster, which again rejected the safety concerns as "baseless," slid 12 percent in after-hours trading even as the company reported rising sales.

The U.S. Food and Drug Administration said last month it was investigating reports of five deaths that may be related to Monster Beverage's namesake drinks.

The company is also being sued by the family of a 14-year old Maryland girl with a heart disorder who died after drinking two cans of Monster Energy drink in a 24-hour period.

As well, the company said in August that it had received a subpoena from an unnamed state attorney general related to its ingredients and advertising.

Energy drinks have come under review due to health concerns surrounding high concentrations of ingredients such as caffeine.

The earnings for the three months to September 30 predated news of the investigation and company officials did not say if they were seeing an impact on sales in the current quarter.

Monster is the top-selling energy drink in the United States but falls behind Austria's Red Bull in dollar sales. The company also sells drinks such as Java Monster and X-Press Monster.

Monster Beverage said it was not aware of a single instance in the world in which its energy drinks have caused deaths.

"There is not a shred of information which causally linked Monster to these adverse events and the lawsuit is the first the company has received alleging a fatality caused by Monster," Chief Executive Rodney Sacks said on a conference call for analysts.

Sacks added that the company should not be singled out in the case as there were many other major energy drinks on the market with comparable or higher amounts of caffeine per ounce than Monster's.

QUARTERLY PROFIT WHIMPERS

Monster's net income for the quarter ended September 30 rose to $86.1 million, or 47 cents per share, from $82.4 million or 44 cents per share, a year earlier.

But analysts on average had expected earnings of 55 cents per share, according to Thomson Reuters I/B/E/S.

Gross margin fell to 50.5 percent from 52.7 percent a year earlier, hurt by the promotional and operational costs. Promotion spending rose 23 percent.

Net sales increased 14.2 percent to $541.9 million, but this lagged analyst estimates of $578.5 million.

Sales in the quarter were partly hurt by a drop in Canada due to inventory adjustments made by distributor Coca-Cola (KO.N) Refreshments Canada, Monster said.

A stronger U.S. dollar had a negative impact of $12 million on sales and lower sales of its Monster Energy Extra Strength drink also hurt revenue, Sacks said. All other energy drinks posted higher sales, he added.

Sales of energy drinks form the fastest growing segment of the soft drinks market. Sales rose 17 percent to $9 billion in 2011 and are expected to exceed $10 billion this year, according to Beverage Digest.

Source: http://www.reuters.com/article/2012/11/08/us-monsterbeverage-results-idUSBRE8A700E20121108