The company is in the process of a buyout by Chinese meat producer Shuanghui International on the heels of a drastic loss in profit for the quarter that ended April 28. The company experienced a breathtaking $49.8 million loss in profit year-over-year, but this was due in part to an increase in 2012 profits that included insurance reimbursements. Sales rose 3.5% for the manufacturer.
So why sell to Shuanghui International? Analysts see this as a sign that the company is acknowledging low prospects in America, but at the same time, the Chinese market is a promising one, with the country’s wealth an ideal place for a food company to find success.
Novo Nordisk A/S (ADR) (NYSE:NVO)’s success
Deen initially experienced controversy last year, when it was revealed that she’d been diagnosed with diabetes in 2008. Since the recipes on her show weren’t ideal for those suffering from the disease, the public expressed hostility that she had continued to promote high-fat foods while knowing she had a medical condition. Novo Nordisk A/S (ADR) (NYSE:NVO) joined forces with Paula Deen just before her condition was publicly disclosed, naming her the spokesperson for its injectable medication.
The partnership seemed to be working. In its most recent earnings announcement, Novo Nordisk A/S (ADR) (NYSE:NVO) announced results were up more than 12% from last year at the same time, with revenue coming in at $19.7 billion. In its first year working with Deen, the company reported an 18% increase in sales, 12% in local currencies. In its end-of-year earnings call, the company pointed to increased sales of Victoza, the very product Deen endorsed, as being partly responsible for its success.
Conclusion
Since Smithfield Foods, Inc. (NYSE:SFD) is scheduled to switch hands later this year, that leaves investors closely watching both Novo Nordisk A/S (ADR) (NYSE:NVO) and Scripps Networks Interactive, Inc. (NYSE:SNI) as this publicity event continues to unfold. Novo Nordisk A/S (ADR) (NYSE:NVO) will benefit from an increased demand for insulins, but investors were disappointed to hear the company’s highly-anticipated Tresiba, an insulin that promises a duration of more than 42 hours, will not hit the market until at least 2016. This prompted a shift in the company’s sales outlook, which now stands at a 9% to 11% expected increase in sales and a slight reduction in net income.
Analysts are concerned about the Food Network’s declining ratings, rating Scripps Networks Interactive, Inc. (NYSE:SNI)Interactive a “hold” amid its most recent earnings forecast. But revenue for the company has grown consistently over the past year and revenue for 2013 is expected to hit $2.5 billion. If growth in Scripps Networks Interactive, Inc. (NYSE:SNI)’s other channels continues, it may be able to sustain revenue increases even without a sudden ratings turnaround at the Food Network.
The article How Paula Deen’s Mishap May Impact the Market originally appeared on Fool.com.
Stephanie Faris has no position in any stocks mentioned. The Motley Fool recommends Scripps Networks Interactive. Stephanie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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