Sweet Beat for Mondelez; Coca Cola’s Earnings Still Have Some Fizz Left; Twitter Needs a Growth Spurt

Ore-oh well…

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Last time Mondelez came up on this blog, it was because it made a $26 billion offer to buy Hershey Co. That deal would have created the biggest confection company. Ever. Except that Hershey Co. rejected the offer. In any case, the company still managed to beat estimates, cranking out earnings with a few ups and downs. Ultimately, Mondelez pulled down a profit of $464 million with 29 cents added per share. Unfortunately, the company also reported that sales fell a whopping 18% to just $6.3 billion. Some of those falling sales are being blamed on the strong U.S. dollar and that’s especially troublesome for Mondelez since most of its revenue is generated outside of the U.S. If you recall, Mondelez makes some of our country’s most beloved snacks including Oreos, Ritz Crackers and Trident gum. But Mondelez really would have liked to add Hershey Co. to its collection since 90% of Hershey’s revenue comes from the U.S. and the deal would have significantly increased Mondelez’s much-needed U.S. exposure. Instead, Mondelez CEO Irene Rosenfeld is going to attempt to trim $3 billion in expenses. The company also plans to bring its Milka brand of chocolate to China, a market where Hershey has struggled to make a dent and, in fact, lost money on the endeavor.

Fizzle out…

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Speaking of things sweet and highly caloric, Coca Cola also reported earnings with lower than expected quarterly revenue. This time China and Latin America are the culprits. Well, partly anyway. Apparently, consumer tastes in China are switching gears from soda to more healthful choices, especially premium water. And who doesn’t like their water premium, right? Latin America is making problems for Coca Cola all because of high levels of inflation in some regions there. On the bright side, revenue in North America picked up by 2%. Too bad that’s about the only place it picked up. And it’s not just Coca Cola that’s feeling the health burn. PepsiCo is also struggling to get consumers to re-embrace it’s fizzier offerings. Coca Cola’s net income came in at $3.45 billion, up 11% from last year’s $3.12 billion.  The beverage company took in $11.5 billion in revenue with 60 cents added per share. Analysts expected $11.6 billion in revenue but 58 cents per share. However, last year at this time, Coca Cola raked in $12.16 billion, a bummer no matter how you slice it. But Coca Cola’s CEO Muhtar Kent isn’t worried and feels that his beloved soda drinkers are still out there. They’re just not drinking as much as he would like them too. The fact is, the total volume of soda consumption in the U.S. declined by 1.5% in 2015, and by .9% in 2014. Which means Mr. Kent better figure out a way to get more soda drinkers or get his current ones to kick back some more.

Grow-tesque…

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On the heels of yet another celeb controversy on its site, this time over the cyber-abuse of Ghostbusters actress, Leslie Jones, Twitter announced its latest earnings.  And no, the results did not help lift the waning spirits of investors. Apparently CEO and Co-Founder Jack Dorsey has yet to pull the rabbit out of the hat as growth was so slow it was practically backwards at a paltry 1%. Revenue came in at $602 million, which was just 20% higher than last year at this time. At least shares picked 13 cents a pop, even though analysts predicted shares would only gain a dime. Expectations, however, were for $608 million in revenue, so nobody was particularly impressed by the three cent beat. Not shockingly, the stock took a nasty fall on the news, diving as much as 14% at one point during the day, and losing as much as $1.7 billion of its market value. That leaves its current market value at $11 billion, despite its $18 billion valuation. But we’re supposed to get excited for Twitter because its got some big plans for video that its hoping will actually reverse its negative fiscal tide. Videos are Twitter’s number one ad format and so it made deals with the NFL, NBA, NHL and MLB. Of course deals with the DNC and RNC are also in place since U.S. politics has turned into a veritable sporting event. But even with all that entertainment on the platform, it’s not crazy to hope for a miracle for the one-time Wall Street darling.

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Google’s Tax Troubles Continue in Madrid; Will Oreo Scoop Up Hershey?; Pier 1 Not Feeling the Outdoor Love

Mucho dinero…

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It was just another day in the life of Google as authorities raided its offices, this time in Madrid, Spain. At issue, yet again, is the search engine giant’s corporate tax practices in Europe and the looming question as to whether or not Google, and other big corporations like it, are steering their profits legitimately, in order to score a reduced tax rate. Spanish authorities are investigating the search engine giant to see if it has been in engaging in the  dark art we know as tax evasion. Back in May, France investigated Google for “aggravated financial fraud” and “organized money laundering” which both sound awfully sinister. France is hoping to get $1 billion from its investigation. Even Italy’s authorities are in on the action and looking to see if Google underpaid its taxes there as well.  Google already forked over $175 million in back taxes to British authorities, whose politicians are still whining because they feel that the amount was too low. Expect more post-Brexit griping. Naturally, Google and its peers are calling out their innocence and are adamant that they comply fully with tax rules. But, at any rate, the investigations still seem far from over.

Yummm…

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The mood is sweet on Wall Street with talk of a Hershey takeover from Oreo maker Mondelez International. Given that there’s a trend to cut back on the amount of sugar people have been consuming, the timing seemed opportune for a buyout of a company that makes the world’s most beloved -in my opinion, anyway – chocolate bar. Mondelez, which also makes Cadbury chocolates, is currently the second largest confection manufacturer in the world. If the buyout goes its way, it will become the number one sweets maker, as 90% of Hershey’s revenue comes from North America. Shares of Hershey shot up 22% on the tasty news, hitting a record high of $117.79. Shares of Mondelez also went up, just not as much. Hershey’s market value is about $21 billion, give or take. But in order for the buyout to go forward, the Hershey Trust would have to give its blessing. After all, it controls 81% of Hershey stock and voting rights. However if you’re looking for some hostile action, might I suggest you look elsewhere. Mondelez already pledged to not shed any jobs and to keep the illustrious Hershey name intact.

Missed it…

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It’s looking like a long walk off a short Pier 1 as revenue for the home store chain came in at a disappointing $418.4 million. That number might seem impressive, except that it wasn’t to analysts, who were expecting revenue closer to $420 million. The company lost $6 million in profits and 7 cents a share when predictions were for a 5 cent per share loss. If those figures weren’t depressing enough, then consider that last year at this time, Pier 1 took in revenue of $436.9 million with a $7 million profit and an 8 cents per share gain. Shares of the company are now 50% less than what they were a year ago. The big area to disappoint was outdoor furniture. Darn you, outdoor furniture. That category was supposed to bring in some boffo results, but instead proved to be a real downer. The table top category did nicely. Just not nice enough. Taking a page from Chipotle, the company will now attempt to march out a rewards program and even add a gift registry. Which is weird, because I assumed the company already had a gift registry. I even went to check just now and wouldn’t you know it? It doesn’t. In any case, the company is forging ahead with plans to close 20 stores, while it already shuttered 8 this past quarter. Pier 1 did, however, open another three stores, presumably in more economically hospitable areas.