FILE — A prescription injector for Ozempic, a weight loss drug, in Portland, Maine on May 23, 2022. Every now and then a drug comes along that has the potential to change the world. Medical professionals say the latest to offer this possibility are the new obesity drugs Ozempic, Wegovy, Mounjaro and others that may soon hit the market. (Ryan David Brown/New York Times)
By Bailey Lipschultz, Katrina Kompoli and Angel Adegbesan | Bloomberg
A new class of weight-loss drugs has rocked global stock markets, sending shares of everything from food and beverage companies to medical device makers soaring. As earnings season gathers pace, firms are expected to reveal whether consumer behavior is being changed by the likes of Ozempic.
So far, fear has driven investors to sell stocks exposed to consumer risk. A basket of such companies — including Oreo cookie maker Mondelez International Inc. and Modelo beer maker Constellation Brand Inc. — is down nearly 9 percent since early August with losses roughly double those of the S&P 500, while makers of things like insulin pumps have erased nearly a third of their value over the same period amid concerns that less people will need their products.
See also: Ozempic for weight loss disrupts the companies business model
Commentary from food company Nestle SA and alcohol supplier Pernod Ricard SA, along with surgical robot maker Intuitive Surgical Inc., will shed more light on the impact of Novo Nordisk A/S’s Ozempic on consumers’ appetite and overall health on Thursday.
These weight-loss drugs — known as GLP-1s — are expected to dominate corporate earnings calls. References to the injectables — including Ozempic, Mounjaro and Wegovy — have increased in recent quarters.
PepsiCo Inc. set the tone last week by saying that appetite suppressants are not working for her. The soda and snack giant raised its 2023 earnings forecast as consumers splurge on higher-priced snacks. Rival Coca-Cola Co. is due to report results on Oct. 24, followed by Hershey Co. and Keurig Dr Pepper Inc. next week.
“That will be addressed on every call they make,” said Jeff Doerfler, senior lead equity analyst at Huntington Private Bank.
Wider adoption of the weight-loss drugs, which cut food and beverage volumes by 1% to 2%, could be detrimental to snack pack makers, according to Citigroup analyst Anthony Pettinari, who cut his price target on Ardagh Metal Packaging SA and Crown Holdings Inc.
See also: Oprah Winfrey joined the Ozempic chat
“This could account for half or more of the packers’ volume growth trend,” the analyst wrote in a note. Crown and Packaging Corp of America are among those to start group earnings on Monday.
Similarly, restaurant investors fear the worst, according to BTIG analyst Peter Saleh. Most of the S&P Composite 1500 Restaurants Index has spiraled over the past two months, nearing a 12-month low last week before recovering.
Investors will have to wait until the end of the month for McDonald’s Corp.’s results. and Chipotle Mexican Grill Inc. Saleh expects the drugs to have a limited negative impact on the revenue of food operators. Meanwhile, Nestle SA said GLP-1 drugs had no impact on sales after the company reported revenue growth slowed to the slowest pace in nearly three years.
“This isn’t the only fear affecting restaurant sentiment right now, recent consumer malaise and soft industry sales are also at the fore, but we think the impact of diet pills is overblown,” he wrote.
For healthcare companies, management teams will need to reassure investors that Ozempic will have little impact on earnings expectations. Abbott Laboratories provided some relief on Wednesday morning, reporting quarterly results that revealed growth for its heart disease and diabetes medical devices, shrugging off concerns that GLP-1 would hurt the business.
“We’re no longer guessing what the impact is or isn’t,” said Jared Holtz, managing director of Mizuho, adding that whether investors will believe what they’re hearing remains to be seen.
As the GLP-1 market could reach $100 billion by 2030, according to analysts at Goldman Sachs Group Inc., the drugs will continue to captivate investors and analysts across all sectors. Just this week, some frantic stock investors looking to find potential winners were burned when a Chinese company apologized for misleading investors after touting links to weight-loss treatments.