about 3 years ago • 3 mins
What does this mean?
Like the rest of 2020, last quarter was hard for oil companies, with ongoing travel restrictions continuing to hammer demand for and the price of the slippery elixir. So it might come as no surprise that Shell posted a worse-than-expected 87% drop in profit compared to the same time the year before.
The oil company’s feeling surprisingly upbeat about the road ahead though: it’s expecting the vaccine to drive an economic recovery by the second half of the year – and with it, oil demand. In fact, Shell reckons things will be completely back to normal by 2022. And in the meantime, it’s doing whatever it can to reassure investors: namely boosting shareholder payouts by 4%.
Why should I care?
For markets: Energy companies are all in the same boat.
There were some early signs of improvement for energy companies in the third quarter of last year, but they’ve gone out the window since: Exxon, BP, and Chevron have all reported weaker-than-expected results over the past week. And analysts didn’t even set the bar particularly high: they’d forecasted that of all the sectors, energy companies would see the biggest drop in earnings.
The bigger picture: Hasn’t oil gone green yet?
Oil companies aren't just struggling with the pandemic: they're trying to keep up with the transition away from fossil fuels too. And thanks to an eco-conscious new US president, that transition might be about to happen faster than anyone expected: he’s already rejoined the Paris climate agreement, ripped up the Keystone Pipeline permit, and suspended new oil and gas leases on public land. That might be why shares of oil producers have underperformed the global stock market by 6% since his inauguration.
Keep reading for our next story...
What does this mean?
Times have been kinder to Unilever than they have the rest of us: shoppers have been hoarding its everyday essentials, from stock cubes to mayonnaise. But while its underlying sales growth was in line with analysts’ estimates, the company couldn’t hit profit expectations: turns out pandemic-related expenses and a lack of out-of-home business have taken their toll on its bottom line.
That’s not the only thing that’s rubbed investors the wrong way. Unilever had ditched its long-term sales growth target of 3-5% back in the early days of the pandemic, and the company finally had enough confidence to restore that target. But hard-to-please investors had much more ambitious goals in mind, and they sent its shares down by 6% – a big move for a usually stable “defensive” stock.
Why should I care?
For markets: Quit it, guys – you’re making Unilever look bad.
One of the reasons expectations were so high was because Unilever’s rivals raised the bar last month. Spirits maker Diageo and consumer goods rival Procter & Gamble both delivered better-than-expected updates, and the latter even upped its forecasts for the rest of the year.
The bigger picture: Unilever is your dad in a backwards cap.
Unilever’s now tweaking its strategy to focus more on fast-growing markets – like plant-based foods and high-end beauty products – and fast-growing regions, like China and India. It’s hoping to boost its sustainability “cred” too, in an effort to make millennials and Gen Z think it’s really “lit”. But investors are skeptical: the company’s long been under pressure to bump up sales growth, and it hasn’t delivered so far…
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