Whatās Going On Here?Food and drinks heavyweights NestlĆ©, Kraft Heinz, and PepsiCo reported earnings on Thursday, but their empty stomachs are all a-rumblinā for some future growth. What Does This Mean?The three companies each had something different to show for last year. Pepsi and Kraft Heinz both reported better-than-expected profit, but unlike Pepsi, Kraftās revenue came up short. NestlĆ©, meanwhile, missed investorsā forecasts on both counts.
Still, it couldāve been their growth expectations for this year that really left investors wanting. Pepsi ruined the mood with a disappointing growth forecast, while Kraft Heinzās investors were likely wondering when, if ever, its shrinking revenue would reverse course. As for NestlĆ©, it said itād need at least another year to achieve its previously promised revenue growth. It did sell off chunks of its business last year, after allā¦ Why Should I Care?The bigger picture: Chowing down the good stuff.
The last few years have seen more and more consumers turn to non-processed food and own-label brands. Even so, NestlĆ©ās kept growing thanks to its strong petcare and coffee businesses, while Pepsiās made some savvy improvements to its snacks business. Kraft Heinz, on the other hand, has been all but left behind, resulting in a $15 billion write-down of some of its brandsā values. In other words, itās lowered the value of some of its assets on paper, acknowledging they were overvalued.
For markets: Have a break, have a NestlƩ.
NestlĆ©ās lowered growth forecast didnāt make any mention of the coronavirus ā or how disruptive it could be to supply and demand. More conspiratorial investors might find the absence conspicuous, given that the epidemic could cause an as yet untold slowing of the global economy ā and maybe even, in the worst case, a recession. Itās particularly odd considering thatād be where a company like NestlĆ© should come into its own: consumers tend to buy staple products no matter the economic weather, making the firmās earnings relatively resilient in a downturn (tweet this). | 