Nestle climbs to a record high after its exclusive deal with Starbucks boosts earnings

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Arnd Wiegmann/Reuters

  • Nestle reported second-quarter earnings Friday that beat analyst expectations.
  • Shares rose to a record high on the news.
  • The quarter was boosted by growth in pet care and coffee, following Nestle’s deal with Starbucks to sell its branded packaged coffee exclusively.
  • Watch Nestle trade live on Markets Insider.

Americans love their pets and their caffeine.

Shares of Nestle, the packaged-foods company behind brands such as Nespresso and Perrier, rose more than 2.27% to a record high Friday after the company reported second-quarter results that exceeded analyst expectations, driven by sales of coffee and pet-care products.

The strong earnings were led by growth in the United States and Brazil. Organic growth was up 3.6%, and total reported sales increased by 3.5% to roughly $45 billion. The company also confirmed its full-year outlook for 2019. It expects organic sales growth of about 3.5% and the full-year operating profit margin at or more than 17.5%.

“Across our categories increased investment behind our brands and in innovation is clearly paying off, as reflected in our strong momentum in PetCare and the return to mid single-digit growth in coffee,” said CEO Mark Schneider in a statement.

The momentum in coffee comes after Nestle’s $7.15 billion deal with Starbucks for exclusive rights to sell its packaged coffee. Nestle began selling Starbucks-branded beans at grocery stores and online in February. The company has since launched Starbucks products in 14 markets, and said it will launch in more markets in the second half of the year following strong demand for the products.

Nestle also saw positive mid- to single-digit growth from improved sales of Nespresso and Nescafe. The quarter was a turnaround from the first quarter of the year when coffee sales dipped.

In pet care, the Purina brand was the largest contributor.

The company also saw a large contribution from infant nutrition, it said. It owns the Gerber brand, as well as Cerelac and a line of organic baby foods.

Shares of Nestle are up year-to-date.

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Markets Insider