“The FTSE takes a step back on Tuesday, trading five points lower at 7,209. Gains in the oil and mining sectors are offset by losses among consumer goods companies and insurers,” says AJ Bell Investment Director Russ Mould.
“Can you imagine drinking gin without tonic? The same goes for Fevertree Drinks and earnings upgrades. The two have to go together otherwise people get upset.
“There has scarcely been a time when the company hasn’t beaten market expectations with its financial results and trading updates, events which have prompted analysts to regularly upgrade their earnings forecasts.
“So when it only meets and not beats expectations, you know the stock market is going to stamp and shout in disgust.
“That’s exactly what’s happened today with the tonic water specialist failing to smash expectations. Analysts don’t upgrade forecasts and the share price takes a beating.
“In Fevertree’s defence, its full year results published today are still very good with revenue up 66% to £170.2m and pre-tax profit up 65% to £56.4m.
“The next step is all about increasing market share in the US. That will require additional investment but as the saying goes, ‘you have to spend money in order to make money’.”
“It is never a good look for a company to warn on profit a matter of weeks after reporting everything was on track and yet that is the sin committed by convenience foods maker Greencore this morning.
“After a reassuring first quarter update at the end of January the company is now guiding for lower earnings per share for the 12 months to 30 September 2018 thanks to currency headwinds as well as under-utilised assets and delays to anticipated new business in the US.
“The firm is reacting to the sluggish performance across the Atlantic by removing the current head of the American business and giving group chief executive Patrick Coveney a more direct role.
“The new guidance, which relies on a strong second half, essentially amounts to a 6% downgrade and yet the shares were down more than 20% on the news.
“This implies the market is sceptical of the company’s ability to make up any first half shortfall in the remainder of the year and is spooked by the timing of this announcement.”
These articles are for information purposes only and are not a personal recommendation or advice.