According to an article on Reuters, Coca-Cola (NYSE: KO) is feeling the pressures of the flat domestic marketplace. COO Muhtar Kent, who will soon become the CEO, said in comments at a speaking event in Japan that Coke will be evaluating an acquisition strategy to grow the long-term prospects of its beverage business.
Now, this doesn't mean that a large purchase or merger is on the horizon, but it does mean that shareholders can expect, according to Kent, small, targeted asset buys. He did, however, specifically state that the company isn't giving up on organic growth, either, in its quest to expand its presence in beverages and beat back the ongoing threat of enemy number one, PepsiCo (NYSE: PEP).
He better not be giving up on it. Coke's stock recently retreated from its 52-week high of $65.59 to a price, as of noon today, of $56.37. The stock has done well over the last year, and this could be considered a normal consolidation. However, there has been a lot of buzz lately about Coke's domestic weakness.
Really, the way Hansen Natural Corp. (NASDAQ: HANS) shares are dropping -- down about 14% as I write this and setting a new 52-week low earlier in the session -- you'd think the company reported disastrous results. Not so!
True, Hansen Natural reported Wednesday a lower-than-expected first-quarter profit due to lower profit margins, but the results weren't that bad. For the quarter, the company's net sales rose to $212.2 million and it earned $28.8 million, or 29 cents a share. Analysts, however, expected 35 cents on revenue of $221, according to Thomson Reuters. The thing is, that compared to last year, profit climbed 43% and revenue jumped 28%. It seems that the Monster Energy brand drinks had a lot do with Hansen's revenue growth, especially the new Java Monster dairy-based coffee drink.
The problem? Already in the fourth quarter investors were concerned about decreasing margins, and this quarter as well Hansen said its profit was hurt by higher costs, including a 34% boost in costs of sales and a 15% rise in operating expenses. Talk about margin squeeze.
Yuck! If there's one drink I really dislike it's Dr. Pepper, and yet the company has managed to pick up market share against its largest rivals the past few years. Still, investors are concerned and shares of Dr. Pepper Snapple Group Inc. (NYSE: DPS) received a lukewarm welcome when they began trading today (Wednesday) on the New York Stock Exchange. The company was spun off from under former owner Cadbury Schweppes.
The company has many other brands other than Dr. Pepper and the splashy Snapple, including 7UP, Canada Dry, Schweppes, Mott's, Sunkist and RC Cola. Last year the company's sales totaled $5.7 billion.
No doubt, though, Dr. Pepper will now face the stiff competition from Coca-Cola Co. (NYSE: KO) and PepsiCo (NYSE: PEP), both of which are much larger and have wider portfolios, all on its own. With rising commodity costs, competing against such larger rivals isn't going to be a picnic.
To add to investors' concerns, the company hasn't issued any near-term earnings guidance, making many would-be buyers sit on the sidelines until the now-third-largest beverage company in the U.S. -- with its 15% market share -- has a quarter or two of financial results behind it. Despite giving longer term goals of increasing annual revenue by 3-5% and EPS by 7-9%, it seems that, with the current economic climate, investors want to see actual results before they dive in.
Also, it's no secret that with consumers getting more and more health-conscious, U.S. sales of traditional carbonated soft drinks have fallen in the last few years. The company will to have to adjust and extend its portfolio appropriately if it wants to survive. That, combined with a softening economy and rising costs can only entice me to hold off on this particular stock... at least for now.
DPS shares finished the day up 45 cents, or 1.8%, to $25.50.
News Corp (NYSE: NWS) is scheduled to report earning Wednesday and is estimated to post a profit of 31 cents a share in the fiscal third quarter.
In its attempt to answer consumer demand, Ford Motor Co. (NYSE: F) said Wednesday it plans to greatly increase the use of more fuel-efficient six-speed automatic transmissions. The six-speed automatic transmission, which offers 4-6% better fuel economy, will be in 98% of its North American vehicles by 2012.
Seems that after the recent dealing with Yahoo! Inc. (NASDAQ: YHOO), Microsoft Corp. (NASDAQ: MSFT) Chairman Bill Gates has had enough. He said the company isn't pursuing other deals for now and that Microsoft and Yahoo! should pursue "independent paths." Microsoft still has to show shareholders improvement in Vista and its struggling internet business.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
Behold the humble potato chip, snack food of the ages. Claimed to have been invented in 1853 in the road house kitchen of Native American George Crum, the potato chip traveled through American snack history in a class of it's own. That is, until in the early 1960s, when it was discovered that you could grind potatoes into a slurry and then press them back into a consumable form.
I sat down one day with a bag of potato chips from Lay's and with a can of Pringles. Lay's are made by Frito-Lay, a property of PepsiCo Inc. ( NYSE: PEP). Pringles are made by Procter & Gamble Co. (NYSE: PG). I wanted to compare the two in order to assess their similarities and differences. What I found were two very different snacking sensations although both are derived from the same source. The Lay's ingredient list is simple. They're made with potatoes, oil, and salt, with no preservatives added. The Pringles ingredient list begins with the same potatoes, oil, and salt, but the product also contains at least traces of wheat starch and rice flour in addition to a couple common food chemicals.
"Socially Responsible Investing (SRI) is no longer relegated to a tiny corner of the investment landscape; indeed, according to the Social Investment Forum, SRI now accounts for $2.7 trillion, up more than 18% since 2005," says Chuck Carlson.
Here, the editor of The DRIP Investor offers five stock that both rank high for their social responsibility and also stand out based on more traditional earnings and valuation analysis.
"The Social Investment Forum estimates that more than one in every 10 dollars under professional management in the U.S. is involved in SRI investing. What is driving the growth in SRI?
"One factor is the increasing numbers of women and younger investors among the investor populace have fueled demand for SRI investments.
"In addition, we see an increased focus on environment, social, and corporate governance issues. Further, widely publicized stories concerning global warming as well as various corporate governance issues, have caused many investors to reconsider how they deploy their investment capital.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
When it comes to nonalcoholic beverages, there are two that stand out from all the rest. I'm sure you know the names of the companies behind them -- Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP). That's right, it's Coke-versus-Pepsi time! This battle has been waging for a long, long time, and it is as legendary, as ultimate, as the conflict between good and evil. Of course, which one is "good" and which one is "evil" will depend on your taste buds (or, perhaps, the stock you own).
Oddly enough, I'm sort of on both sides. Consider: I own shares in Coke, but when it comes to choosing between Coke and Pepsi, believe it or not, I actually choose the latter! Nothing wrong with that, certainly; after all, you don't invest based solely on what you personally like or don't like. But I will give Pepsi this much -- its soda, simply put, seems a little smoother, a lot sweeter, and it doesn't have an aftertaste. There's something about Coke's flagship beverage that causes a strange taste to linger after its been downed. Maybe it's just me. But, yes, I have to come clean and confess that I do prefer Pepsi over Coke (although, I tell all my friends that Coke is the better-tasting drink, as you can imagine, and promote it whenever the opportunity arises). I should note, though, that all of this is a bit of a moot point, since I mostly eschew sugary soda these days in favor of the dietary counterpart -- on that count, I am most firmly in Coke's camp, as I happily consume Diet Coke exclusively, and cannot stand Diet Pepsi!
So here's the deal: soda sales have been on the decline as consumers flock to better-tasting, ostensibly healthier, more "natural" beverages like Vitamin Water, which is owned by Coca Cola (NYSE: KO).
According to Beverage Digest, U.S. soda sales in major retail channels overall declined 3.5% in the first quarter, and convenience-store sales dropped fell 4.2%.
How does the soft drink industry plan to combat the trend? According to the Wall Street Journal(subscription required) , "To win back sales, several Coca-Cola and Pepsi bottlers are conducting pilot tests on a variety of bottle sizes they hope will appeal to consumers put off by the 20-ounce bottle or looking for a cheaper option to cushion the blow of high food and energy prices."
I'll be shocked -- shocked -- if this does anything to boost soda sales. Soda sales are declining for a very good reason: soda is bad for you and people now have great-tasting alternatives. At the risk of being alarmist, I think that soda sales -- at least in the United States -- are in a permanent state of decline. I think Coke knows that: they saw the future and bought Vitamin Water.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
Businesswise, it's no real competition between Subway and Quiznos. Subway, the number 1 sub sandwich chain, claims to have more than 29,000 locations in 86 countries, earning more than $11 billion in 2007. Quiznos, on the other hand, has more than 5,000 locations in 20 countries, earning $130 million in 2004, making it a distant number 2. In fact, Subway is the third largest fast-food chain globally after Yum! Brands (NYSE: YUM) (Taco Bell, Pizza Hut, KFC, etc.) with 34,000 locations and McDonald's (NYSE: MCD), with 31,000 locations.
Both Subway and Quiznos are privately owned, franchise fast-food chains. While Quiznos is a limited liability company controlled by chairman Rick Schaden and his family, Subway is a wholly owned subsidiary of Doctor's Associates, Inc., a company founded in 1965 by Fred De Luca and Dr. Peter Buck specifically to oversee the Subway chain of restaurants.
Subway menus vary by store. For instance, its restaurants in Muslim countries serve Halal menu, and Subway has kosher restaurants in New York, Los Angeles, Kansas City, and a suburb of Cleveland. All locations feature submarine sandwiches, ranging from four-inch "mini subs" to its three-foot giant subs. Popular sandwiches include Turkey Breast, Italian BMT, and the Subway Club. All of Quiznos' sandwiches are served toasted, and its best-sellers include the Classic Italian, the Mesquite Chicken with Bacon, the Prime Rib Cheesesteak, the Chicken Carbonara. Last fall Quzinos introduced flatbread "sammies."
Net income at Pepsi increased to $1.15 billion, or 70 cents a share while sales soared 13 percent to $8.33 billion. The company benefited from strong international sales. It also reaffirmed 2008 guidance of "high-single-digit net revenue growth" and earnings of at least $3.72. Analysts were expecting profit of $3.73 on revenue of $42.85 billion, according to Thomson Financial.
"We delivered a strong first quarter," said Chief Executive Indra Nooyi in the earnings release. "During the quarter, we faced the challenge of a macroeconomic slowdown in the U.S. and continued global commodity inflation, but the strength and breadth of our global footprint and portfolio helped us deliver strong first quarter results."
The picture at Hershey was hardly sweet. Net income fell to $63.2 million, or 28 cents per share, compared with $93.5 million, or 40 cents, a year earlier. Total cost and expenses rose to $1 billion from $942.7 million. Revenue rose $1.16 billion. Analysts had expected profit of 39 cents on revenue of $1.17 billion. The chocolate maker also reaffirmed its profit of $1.85 to $1.90 on sales growth of 3 to 4%. Wall Street consensus is for profit of $1.84 on revenue of $5.09 billion.
The problems caused by food inflation have only begun.
I don't think I'll ever own a bottling group over a Coca-Cola (NYSE: KO) or a PepsiCo (NYSE: PEP). The cash-flow and margin scenarios with the sellers of concentrate is a much better long-term story. With that bias stated, let me check out Pepsi Bottling Group's (NYSE: PBG) first-quarter results, which were reported on Wednesday.
Net sales expanded by 7% to $2.7 billion. On a reported basis, earnings per share didn't budge whatsoever -- it was 12 cents this year, and it was 12 cents last year. On an adjusted basis, earnings were 13 cents -- hey, a penny is a penny, I guess. In fact, I see that Briefing.com is reporting that Pepsi Bottling Group beat the Street's outlook by a penny. Talk about symmetry. Operational cash flow was flat, coming in at $20 million, which was a million bucks less than the operational cash flow seen in the previous year's comparable quarter (by the way, I know that the pun "flat" has been used way too many times when talking about a beverage concern). As can be seen, the bottler lost the growth game this time around. It's only the first quarter, though, so we'll have to wait and see how the rest of the year shapes up. Right now, the company expects earnings of $2.30 to $2.38 on an adjusted basis.
Now, I don't hate Pepsi Bottling Group or anything like that (well, except for the fact that it distributes products that compete with my beloved Coca-Cola company, shares of which I own); it's a respectable company linked to a powerful beverage brand, and it has been pretty good on the dividend-increasing front (it recently upped its quarterly payout by over 20%). But I've always been prone to PepsiCo and Coke since they don't have to deal with the capital requirements for distribution; instead, they are the big marketers supporting the bottlers. If you want exposure to sugar water, I figure you may want to check out those two businesses first.
Disclosure: I own shares of Coca-Cola; positions can change at any time.
Beginning next weekmore than 130 million Americans will open their mailboxes to find tax rebate checks, ranging from $600 to $1,200 per household. Retailers across the country desperately want a piece of that action in a U.S. economy flirting with recession, and the sales promotions tied to the government cash injection are already coming fast and furious. Big-box chains are devising crafty ways to coax stimulus checks into their cash registers.
Dow Chemical (NYSE: DOW) reported a smaller-than-forecast 3% profit drop Thursday and said it would have a good second quarter. Higher feedstock and energy costs were blamed for the drop. The chemical giant reported earnings of 99 cents per share, beating the 94 cents estimate.
If two weeks ago some hoped we've seen the bottom of the subprime mortgage crisis, since then more problems, especially with European banks seem to pop. Credit Suisse (NYSE: CS) reported a wider-than-forecast loss of $2.1 billion on a $5.3 billion writeoff as the global effects of the U.S. subprime mortgage crisis continued to spread. Share of CS though are rising in premarket trading about 1.8% as the bank may have seen the worst.
Bank of America Corp. (NYSE: BAC) shareholders don't want the bank to proceed with the $4 billion acquision of Courntrywide Financial Corp. (NYSE: CFC), the mortgage lender that has become the poster child for the subprime mortgage problems. The have pleaded on Wednesday with the bank's CEO.
For nervous investors and analysts looking for good news on the earnings front, it's been a week of mixed blessings. However, judging by the expectations for the following ten so-called barometers of the U.S. economy, or important sectors of it, things could be looking up. All these companies are scheduled to report quarterly results next week (April 21 to April 25).
These first six companies are expected by analysts surveyed by Thomson Financial to post growth in profits in the most recent quarter, compared to the same period of last year:
According to an article on Reuters, Coca-Cola (NYSE: KO) is feeling the pressures of the flat domestic marketplace. COO Muhtar Kent, who will soon become the CEO, said in comments at a speaking event in Japan that Coke will be evaluating an acquisition strategy to grow the long-term prospects of its beverage business. 
Yuck! If there's one drink I really dislike it's Dr. Pepper, and yet the company has managed to pick up market share against its largest rivals the past few years. Still, investors are concerned and shares of 
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So here's the deal: soda sales have been on the decline as consumers flock to better-tasting, ostensibly healthier, more "natural" beverages like Vitamin Water, which is owned by 
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Here are some highlights from this past week's 
Shares of 
For nervous investors and analysts looking for good news on the earnings front, it's been a week of mixed blessings. However, judging by the expectations for the following ten so-called barometers of the U.S. economy, or important sectors of it, things could be looking up. All these companies are scheduled to report quarterly results next week (April 21 to April 25).
Comfort Zone Investing: One thriving area of real estate: Apartments
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Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
