Monster Beverage shares saw a decline early Friday as the energy drink company's third-quarter results did not meet Wall Street's expectations, highlighting challenges in consumer demand and tightening spending patterns. Adjusted net income dropped to $0.40 per share in the three-month period ending September 30, down from $0.41 a year prior, falling short of the consensus estimate of $0.43.
Sales saw a slight increase of 1.3% year-over-year, reaching $1.88 billion, but this also failed to meet projections of $1.91 billion. A negative impact of $62.8 million was noted due to foreign currency fluctuations. Co-Chief Executive Rodney Sacks remarked during a conference call, "A number of other consumer packaged goods companies have also seen a tighter consumer spending environment for certain income groups and weaker demand in the quarter." He added, "Hurricane Helene and Milton impacted sales at retail in certain states in September and October 2024.
However, we cannot determine the impact on our business." As a result, Monster Beverage shares dropped over 6% in premarket trading. The company reported that their energy drink segment sales slightly increased by 0.8% year-over-year, reaching $1.72 billion, while the strategic brands division surged by 14% to $112.6 million.
Despite slower growth rates in the overall energy drink category in the US, Sacks noted that the category, excluding convenience channels, was growing at a sharper rate, with signs of improvement in October within convenience settings. Revenue from alcohol brands saw a decline of 6% to $39.8 million, mainly attributed to a decrease in craft beer sales.
Meanwhile, sales outside the US, which constituted roughly 40.4% of total revenue, grew by 3.6% to $760.1 million. Operating expenses increased to $519.9 million compared to $473.2 million during the same quarter last year, primarily driven by higher payroll, sponsorship, and endorsement costs, alongside intellectual property claims.
The company confirmed plans to raise prices in the US by around 5% for core brands and packages starting November 1. Truist Securities noted, "We cannot yet gauge the impact of the company's 5% price increase in the US this fall but continue to believe the company will have to give up most of the benefit via promotions." While management expressed optimism that the slowdown was nearing its conclusion, analysts remain skeptical given ongoing consumer pressure and the highly promotional nature of the sector.
The brokerage maintained a sell rating on Monster Beverage shares. Price: 51.44, Change: -3.29, Percent Change: -6.01.