Whatâs Going On Here?Campbell served up stronger-than-expected quarterly earnings on Wednesday, but the soup-maker left a suspicious aftertaste in investorsâ mouths. What Does This Mean?Ordinarily, investors mightâve been happy with an update like this one. Campbellâs profit, after all, beat investorsâ forecasts last quarter, thanks in part to lower-than-expected marketing expenses. Its revenue did too: sales came in ahead of expectations partly because Campbell reduced its promotional offers, forcing customers to pay more.
On this occasion, though, analysts were worried that the âqualityâ of the update suggested weak earnings could be on the way. For one, Campbell had previously promised to increase, not cut back, its marketing spend relative to its sales. And for another, its decision not to invest in promotions was a dubious one, considering a resurgent coronavirus was making shoppers prioritize cost-effectiveness once again. And that could mean itâll struggle both to hold onto customers and win over new ones⊠Why Should I Care?For markets: Look on the bright side.
Campbellâs shares fell 2% on Wednesday, even as US stocks overall rose to a record high. But that drop mightâve been worse if Campbell hadnât announced a higher-than-expected dividend. Spare a thought, then, for wholesale grocery distributor United Natural Foods, whose shares fell 11% on Wednesday after it revealed lower-than-expected quarterly earnings â with no dividend-colored lining to speak of.
The bigger picture: Flavor of the month.
Investors are increasingly eyeing up smaller companiesâ shares, as well as those of âcyclicalsâ like autos and construction that tend to do well in an economic recovery. And as we move into said recovery and away from recession, itâll likely be consumer staples like Campbell â which are generally expected to thrive when the goingâs rough â that are scrubbed off the âflavor of the monthâ chalkboard. | 