Daily Brief: Coke Is The Inflation-Proof Gift That Keeps On Giving

Daily Brief: Coke Is The Inflation-Proof Gift That Keeps On Giving

over 2 years ago3 mins

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Coca-Cola is done playing coy about what a catch it is: the drinks giant posted quarterly earnings that came in ahead of expectations on Wednesday.

What does this mean?

Wherever there’s a social hotspot – a restaurant, a theater, a stadium – there’s sure to be a tap with “Coke” emblazoned on it. So with plenty of spots getting well and truly hot again last quarter, the drinks giant’s organic revenue growth – excluding the effects of currency swings and acquisitions – climbed an expectation-busting 37% compared to the same time last year. That strong growth means Coke’s quarterly revenue has now overtaken pre-pandemic levels, and its outlook for the rest of the year looks like it’ll continue that trend: the drinks maker is now expecting to grow organic revenue and profit by up to 14% this year – up from roughly 9% and 10% respectively.

Coke organic sales

Why should I care?

For markets: Coke’s prices are right.

Investors sent Coke’s shares up on Wednesday, but the company’s better-than-expected results mightn’t be the only reason investors have taken a fancy to the stock. With the specter of inflation looming, they’ve been on the lookout for companies that can easily offset the rising costs of raw materials by nudging up their own product prices. And since “consumer staples” sell things that shoppers tend to buy no matter what, they fit the bill exactly. Case in point: Coke said on Wednesday that its prices will have risen as much as 3% between 2019 and 2021.

Coke stock
Source: Google Finance

Zooming out: Pepsi had a good run.

Arch-rival Pepsi reported better-than-expected results of its own last week, but its 13% organic revenue growth was almost two-thirds lower than Coke’s. The company, after all, has a big snacks business and sells more of its drinks in grocery stores than Coke does. Both of those benefit much more from a world in limbo, as well as from the crushing existential despair that might push someone to drink a Pepsi in the first place.

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Johnson & Johnson Beat Expectations, And It Had Its Vaccine Partly To Thank

Johnson image

Dry your eyes, Johnson & Johnson: the pharmaceutical giant announced better-than-expected quarterly earnings on Wednesday.

What does this mean?

Both Johnson & Johnson’s (J&J’s) revenue and profit beat investors’ expectations, rising 27% and 73% respectively from the same time last year. More than half that revenue growth came from a strong rebound in the company’s medical devices unit, which took a thumping last year as the pandemic forced hospitals to postpone surgeries.

J&J’s pharmaceutical segment – the biggest of its businesses – should be getting a boost too: the pharma giant said it was expecting $2.5 billion in sales from its single-shot vaccine in 2021. That’d be a remarkably strong finish to the year given that the vaccine only generated $164 million last quarter, but the company’s gone all in on the estimate: it upped its growth outlook for both its total revenue and profit this year.

Johnson earnings
Source: Johnson & Johnson

Why should I care?

For markets: Repeat after us: cancer bad.

Curing coronavirus is both ethically responsible and commercially shrewd, sure, but J&J would do well to remember that giving people cancer isn’t: the company recently had to recall its sunscreens after they were found to be contaminated with a carcinogen. And the last thing J&J needs is another fine, with the company already expected to reach an agreement to pay $5 billion to different US states over its role in the opioid crisis.

The bigger picture: Delta’s your captain now.

J&J’s anticipated $2.5 billion in sales is a drop in the ocean compared to how much Pfizer and Moderna’s shots – which are in much wider use – are expected to make. And even that revenue stream could be derailed if US production troubles keep hobbling the vaccine’s rollout, or if the highly contagious delta variant – now dominant in many countries around the world – ends up reducing the shot’s effectiveness, as plenty of experts are worried it’ll do.

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