almost 3 years ago • 3 mins
Coca-Cola posted better-than-expected quarterly earnings on Monday, and it’s refreshing to see that demand for the soda – if nothing else – is back to normal.
What does this mean?
With the vaccination rollout in overdrive and restaurant reopenings underway, the world’s finally started emerging – parched and bleary-eyed – from their homes. And Coke’s been waiting for them with an ice-cold beverage in hand: the giant sold the same number of drinks last quarter as it did the same time last year, making it the first time since the coronavirus outbreak that sales didn’t drop. By March, in fact, those sales were back to 2019 levels. Investors had a pretty good feeling about Coke’s chances, but they’d still steeled themselves for some drop-off – and when it didn’t arrive, they sent the company’s share price higher.
Why should I care?
Zooming out: Do you prefer Pepsi or Coke?
Arch-rival Pepsi reported better-than-expected results of its own last week, but it’s had an easier time of it than Coke: the company’s big snacks business has benefited from homebound comfort eaters, and it sells more of its drinks in grocery stores than Coke does. Those roles, then, should reverse once going out replaces staying in – so much so that analysts think Coke’s sales will grow 1.5 times faster than Pepsi’s this year.
The bigger picture: A savings boom could unleash a spending boom.
Household incomes have, generally speaking, been protected from the worst of the pandemic-driven slump by canny government schemes. Combine that with fewer spending options recently, and it’s no surprise that folks around the world have stockpiled an extra $5.4 trillion in savings since March last year. Even if they only spend a third of that now businesses are reopening, it could boost global growth by 2% both this year and next.
Keep reading for our next story...
Analysts are expecting to see a huge uptick in European companies’ earnings last quarter – especially now that frivolous nice-to-haves have become the new must-haves.
What does this mean?
US earnings season officially arrived last week, and now Europe’s companies are set to start sharing how they got on last quarter too. Not all of them, mind you: public European firms aren’t obliged to publish quarterly statements like their American counterparts are, and only 60% of them are coming clean.
Still, hopes are high for those of them that are: analysts – encouraged by improvements in economic growth – have upped their earnings expectations by almost 20% over the last three months. That’s their biggest adjustment in two decades, and it’s not the only bold call they’ve made: they’re also forecasting firms will post 55% higher profits on average than the same time last year.
Why should I care?
For markets: Show yourself out, healthcare.
Much like Stateside, consumer discretionary companies – which sell things people want but don’t really need – are expected to see the biggest boost, with shoppers looking for something, anything to spend their cash on. Healthcare companies, meanwhile, are the only ones expected to see their earnings drop compared to the same time last year – probably because they were one of few sectors doing well back then.
The bigger picture: It’s a trap.
Between all-time high stock markets and the promise of a spectacular earnings rebound, investors are feeling remarkably optimistic. That’s not necessarily a good thing, though: it means earnings updates are far less likely to surprise and far more likely to disappoint. And now that this sky-high optimism’s been “priced in” to the wider stock market, enough disappointments could cause a lot of damage…
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