Whatâs Going On Here?Food and drinks heavyweights NestlĂ©, Kraft Heinz, and PepsiCo reported earnings on Thursday, but their empty stomachs are all a-rumblinâ 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, Kraftâs revenue came up short. NestlĂ©, meanwhile, missed investorsâ forecasts on both counts.
Still, it couldâve been their growth expectations for this year that really left investors wanting. Pepsi ruined the mood with a disappointing growth forecast, while Kraft Heinzâs investors were likely wondering when, if ever, its shrinking revenue would reverse course. As for NestlĂ©, it said itâd need at least another year to achieve its previously promised revenue growth. It did sell off chunks of its business last year, after all⊠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, NestlĂ©âs kept growing thanks to its strong petcare and coffee businesses, while Pepsiâs 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 brandsâ values. In other words, itâs lowered the value of some of its assets on paper, acknowledging they were overvalued.
For markets: Have a break, have a Nestlé.
NestlĂ©âs lowered growth forecast didnât make any mention of the coronavirus â 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 â and maybe even, in the worst case, a recession. Itâs particularly odd considering thatâd be where a company like NestlĂ© should come into its own: consumers tend to buy staple products no matter the economic weather, making the firmâs earnings relatively resilient in a downturn (tweet this). | 