You Gotta Be Kitten Us!

Image source: Purina/Amazon

What's going on?

Nestlé – the world’s biggest food group – announced better-than-expected third quarter results on Wednesday, and it had lockdown-spoiled fur babies everywhere to thank.

What does this mean?

Nestlé grew its third-quarter organic revenue – which excludes the impact from swings in foreign currencies, buying new businesses, and selling parts of its own – by 4.9%. That’s 2% more than analysts were expecting, which might’ve been down to the rush it suddenly saw for coffee, health products, and – you guessed it – pet food. 

The consumer staples giant went on to raise its growth expectations for the year as a whole, so it might surprise you to hear that investors actually sold off its shares. Then again, its growth target’s actually a pretty unambitious one: Nestlé only needs to grow by around 2% this quarter to hit the mark.

Why should I care?

For markets: Must have, will have.

Nestlé’s certainly been doing a lot better than Danone throughout the coronavirus crisis: its European rival reported negative 2.5% growth earlier this week, and it’s thinking about selling off parts of its business as a result. Nestlé’s still some way off its biggest American competition, mind you: Procter & Gamble reported 9% growth on Tuesday. That might be because it offers more pandemic-resistant must-haves than Nestlé, which is more reliant on out-of-home products that’ve been left… well, out of home.

The bigger picture: The tough get going.

Consumer staples like Nestlé are known as “defensive” companies, which means they’re generally not as sensitive to swings in the wider economy. Food and toiletries, after all, are priority number one when it comes to spending your hard-earned cash. Now that companies are starting to scramble out of this coronavirus-shaped hole, though, analysts are expecting “cyclical” stocks – which tend to move in line with the economy – to steal the spotlight once again.

Originally posted as part of the Finimize daily email.

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