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A trio of earnings reports Tuesday morning may have given us a glimpse into how Americans’ consumption habits are shifting. Eli Lilly (NYSE:LLY), which makes Mounjaro, one of the leading weight-loss drugs in the United States, beat EPS estimates and also raised its 2024 revenue guidance, sending the stock higher.
Meanwhile, both McDonald's (NYSE:MCD) and Coca-Cola (NYSE:KO) each reported underwhelming quarters, sending their respective stocks lower. Weight-loss drugs, like Ozempic, Wegovy and Mounjaro, have swept through the country, quadrupling the number of prescriptions to more than 8 million last year. This means that almost 2.5% of all Americans were prescribed some form of weight-loss medication.
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Because of the drugs' impact on limiting appetite, it's safe to assume that some people may eat fewer burgers and fries from McDonald's and other fast-food chains. Undergoing weight-loss treatment through expensive medication may also incentivize patients to cut out unnecessary calories like the ones found in soda.
One market expert, Chris Versace, host of the Thematic Signals podcast, said it's still too early to determine whether weight-loss drugs directly impact McDonald's sales volume. But, Versace points out that markets tend to be a ‘forward-looking animal'. If the adoption of weight-loss drugs continues to grow, the impact on ‘junk food' stocks like McDonald's and Coca-Cola could be more significant.
"So it’s hard to measure, right? So far we haven’t really seen any results. But as we know, the market tends to be a forward-looking animal," Versace said, as reported by TheStreet. "So it’s saying to itself, geez, what could this be possibly in 12, 18, 24 months? And the issue is that when we see forecasts and expectations like this, they tend to get ahead of themselves, and I think that’s exactly what’s happening here again."
The Bottom Line: Weight-loss drugs appear to be continuing to trend upward, while McDonald's and Coca-Cola are lacking growth. Other issues, like inflation, could also be negatively effecting sales from fast-food companies with lower-income customers most impacted.
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Image generated using artificial intelligence via Midjourney.
