What happened
Shares of Monster Beverage (MNST -0.97%) are falling today, down 7% as of 10:55 a.m. EDT, after the energy-drink specialist reported a weaker-than-expected first quarter.
So what
Sales increased 15% year over year to $850.9 million, which was just slightly ahead of analysts' estimates. The company's bottom line checked in a little short at $216 million, or $0.38 per share, compared to analysts' estimates calling for $0.39 per share.
In the press release, Chairman and CEO Rodney Sacks said:
In the first quarter of 2018, we successfully launched our Monster Energy brand with the Coca-Cola bottlers in Argentina. Subsequent to the 2018 first quarter, we relaunched Monster Energy with a Coca-Cola bottler in a lead market in India. In the ensuing quarters, we are also planning a transition in Ecuador, as well as launches of Monster Energy in Uruguay and in a number of other countries in the Middle East and Africa with Coca-Cola bottlers.
Image source: Getty Images.
Now what
It really wasn't a horrible quarter from Monster Beverage, and while expanding internationally is great for its top line, it's hurting margins in the near term. Gross profit as a percentage of net sales during the first quarter was 60.6%, down 420 basis points year over year. This should be a short-term problem, as eventually Monster Beverage will benefit from growing economies of scale worldwide, which should push gross margin higher.
