Monster shares fall after disappointing quarter

NEW YORK (AP) -- Shares of Monster Beverage fell Thursday after the energy drink maker reported disappointing first-quarter results and a slowdown in sales.

THE SPARK: The company, based in Corona, Calif., said after the market closed on Wednesday that its quarterly profit fell as it was hurt by distributor termination obligations, foreign currency exchange rates and legal costs tied to regulatory matters and litigation regarding its namesake drink.

Monster and other energy drink makers are facing increased scrutiny over the caffeine levels in their drinks and their marketing practices. New York's attorney general has subpoenaed companies including Monster. The Food and Drug Administration is investigating reports of deaths and adverse health effects of energy drinks, although the agency has noted that the reports do not necessarily mean the drinks cause the deaths or injuries.

Earlier this week, San Francisco's city attorney also sued Monster, saying the company markets to kids as young as six years old. The company had sued the office the previous week over its demands that Monster reduce caffeine levels and adjust its marketing practices.

Monster is facing a lawsuit from the family of a 14-year-old girl who died after drinking two cans of the company's energy drinks in a short period.

Monster has repeatedly stood by the safety of its drink, noting that its cans have less caffeine than Starbucks coffee.

THE BIG PICTURE: Energy drinks have enjoyed enormous growth in the U.S. in recent years, far outpacing the performance of the broader beverage industry. But that growth has been slowing as the industry faces greater scrutiny. Last year, for example, sales volume for energy drinks rose by 14 percent, according to Beverage Digest. That's down from nearly 17 percent the previous year.

And so far this year, the growth has slowed even more dramatically.

For the first quarter, Monster noted that revenue rose 6.5 percent to $484.2 million. John Faucher, an analyst with J.P. Morgan, noted that the company had said previously that sales were up about 9.5 percent in January, implying sales decelerated as the quarter progressed.

The analyst lowered his earnings-per-shares estimates for 2013 and 2014 and maintained a "Neutral" rating and $52 price target on the stock.

SHARE ACTION: Monster's stock was down more than 6 percent, or $3.77, to $53.20 in midday trading while the broader markets were mixed. The stock is virtually flat for the year to date.