Shares of Monster Beverage (MNST -1.89%) fell as much as 11.6% lower on Thursday, following the energy-drink maker's release of third-quarter results. The report itself exceeded Wall Street's expectations, but Monster CEO Rodney Sacks also used this platform to disclose a brewing contract dispute with distribution partner Coca-Cola (KO -0.27%).
Monster's third-quarter sales landed at $1.02 billion, 12% above the year-ago period's result. On the bottom line, earnings rose 20% to $0.46 per share. Your average analyst would have settled for earnings near $0.46 per share on revenue in the neighborhood of $988 million.
So far, so good, but then there's the Coca-Cola dispute. On the earnings call, Sacks explained that Coke has developed two new energy drinks that it might want to market under its own brands -- sidestepping the Monster partnership that essentially transferred all of the two companies' energy-drink business to Monster while moving Monster's non-energy products to Coca-Cola's control. Coke says that the contract has exceptions for situations like this but Monster disagrees. The planned launch of the new drinks has been pushed back to April 2019 and the matter is now in arbitration.
Several analysts rushed to the company's defense this morning, arguing that the Coca-Cola dispute should be resolved without any significant damage to the energy-drink specialist's business, and that dips like these could be treated as buy-in opportunities. In short, brand-new energy-drink alternatives seem unlikely to gain significant market share against the Red Bull and Monster juggernauts -- even if they're tied to well-known brands in the Coca-Cola family.
That logic appears to have made a difference today. As of 2:40 p.m. EST, Monster's shares have climbed back to a 3.6% loss.