These 3 American Giants Had Very Different Days

Coke pops, Johnson & Johnson beats, and rumors of a leadership shake-up at GE make headlines on Tuesday morning.

Apr 15, 2014 at 1:00PM
Take The Long View

The Dow Jones Industrial Average (DJINDICES:^DJI) was down 98 points early in the Tuesday afternoon trading session. The Consumer Price Index ticked up 0.2% in March, slightly higher than the expected 0.1% boost, driven by shelter and food prices. Overnight, Japanese markets were up, while Europe saw flat-to-moderate weakness across the continent's stock exchanges.

Domestically, headlines again revolved around earnings as the markets entered the heart of the first-quarter releases.

Big names report earnings on Tuesday
Johnson & Johnson (NYSE:JNJ) reported fantastic numbers before the bell, beating analyst expectations on revenue and earnings. Earnings were particularly strong, rising 35%, primarily on the back of the company's pharmaceutical division. The stock opened the trading session up over 2% but retreated to a 1.1% gain as of 1 p.m. EDT. 

Also delivering fresh earnings numbers Tuesday was Coca Cola (NYSE:KO), the largest beverage company in the world. In recent quarters, Coke has been pressured by falling revenue primarily linked to declining demand in the U.S. In its latest quarterly report, though, Coke beat analyst expectations for revenue. 

However, revenue and earnings were still down. In other words, it's not good news, it's just better than everyone anticipated That was good enough for Wall Street, as the company's stock was up 3.5%..

Coke Featured

A Coca Cola advertisement in Rio de Janeiro.

The existing big-picture trends largely continued for Coke, with the U.S. unit lagging more than its foreign sales could mitigate. Consumers have moved away from carbonated drinks, particularly diet carbonated drinks. That's bad news for Coca Cola's second biggest brand -- Diet Coke. I've written that four particular countries are the key to Coke's future, and the first quarter supported that long-term thesis.

General Electric might pivot philosophy on CEO tenure
While Coke and Johnson & Johnson investors celebrated Tuesday morning, General Electric (NYSE:GE) shareholders had more complicated news to digest.

Rumors swirled that CEO Jeff Immelt might choose to leave his leadership position earlier than the anticipated 20 years.

Speculation immediately began on who might replace Immelt, but the more interesting question may be why 20 years was ever considered the standard at GE in the first place.


Former GE CEO Jack Welch

Even at GE, the precedent for that long tenure is thin. Yes, legendary CEO Jack Welch held the position for two decades, but Welch was a singular leader with endless energy, passion, and vision. Reginald Jones, the General Electric CEO prior to Welch, only served nine years, the same length as Jones' predecessor Fred Borch.  Even at a company with GE's depth of management talent, it would take lightning striking twice to successfully hire two Jack Welch-level CEOs. 

The conglomerate has had 11 CEOs in its history, and five have served longer than 13 years. But since 1945, only Welch has served 20 years.

Immelt, now in his 13th year as CEO, has led the company through some extremely trying times. The terrorist attacks of Sept. 11, 2001, devastated the company's airline and reinsurance businesses just four days into his leadership term. The financial crisis also nearly brought the entire company down due to risk-taking in GE Capital. The company during those 13 years was also forced to cut its dividend and lost its AAA credit rating. 

GE Chart

GE data by YCharts.

Fortunately, GE has a long list of both young and seasoned executive talent fully capable of leading the company into the next chapter. The stock is up 36% over the past 24 months, and the post-financial crisis transition away from GE Capital appears to be going smoothly. 

General Electric's stock was largely unchanged Tuesday morning on the news, and perhaps rightly so. The company has always taken the long view, and all indications are that GE will continue to be a leader of American business for the next 20 years -- whether headed by Jeff Immelt or another of GE's talented managers.

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Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and Johnson & Johnson. The Motley Fool owns shares of Coca-Cola, General Electric Company, and Johnson & Johnson and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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