Coca-Cola And Philip Morris Earnings

Coca-Cola And Philip Morris Earnings

over 3 years ago2 mins

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Drinks magnate Coca-Cola and tobacco firm Philip Morris (PM) can forget about their worries and their strife for a moment: the “consumer staples” companies both reported better-than-expected earnings on Tuesday 👍

What does this mean?

Consumer staples companies sell essentials that people tend to buy no matter what, which was pretty clear from PM’s results: the tobacconist had the addictive qualities of its smoky products to thank for its own stronger-than-expected quarter. Coke, meanwhile, reported a profit that beat investors’ forecasts, even as the number of products it sold in April and May shrank 🥤 That might’ve been because about half its revenue comes from home drinkers, unlike arch-rival Pepsi which relies more on eat-out locations. The cash it saved late last month might’ve helped too: the soda purveyor announced it’d pause all social media advertising for 30 days.

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Why should I care?

The seemingly ever-present demand for consumer staples’ products gives their stocks a “defensive” quality that investors look for in an economic downturn ⚔️ Stable demand makes it easier to predict how much those companies are likely to earn – and at a time when American companies are expected to report 44% lower profits than the same time last year, that relative certainty can give defensive stocks the edge over their “cyclical” counterparts, whose earnings rise and fall with the economy.

Source: Markets Insider
Source: Markets Insider

Shares of companies that enable vices like high sugar consumption and smoking are sometimes referred to as “sin stocks”, and some investors avoid buying them for ethical reasons 🚭 But those undesirable characteristics are precisely what make such companies attractive to less conscientious investors, since lots of customers are hooked on their products. Just look at cigarettes: their prices have risen relentlessly around the world, but PM still managed to shift 766 billion packets last year.

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