Despite Earnings Beats, Netflix and Coca-Cola Sink

The Dow Jones Industrial Average (DJINDICES: ^DJI  ) was up 59 points, to 17,110, at 1 p.m. EDT Tuesday as tensions in Eastern Europe took a back seat to positive inflation data from the Labor Department and some major earnings wins for U.S. corporations.

Positive signs for the U.S. economic recovery
The Labor Department reported today that the Consumer Price Index rose 0.3% in June, a deceleration from the trend so far this year. Core CPI, which excludes more volatile items such as food and energy, rose just 0.1%. 

The markets welcomed this news, as lower inflation gives the Federal Reserve more leeway to hold interest rates lower for longer. As an explicit component of the Fed's dual mandate on monetary policy, inflation is a primary driver in the central bank's decision-making process. With inflation in check, Fed Chairwoman Janet Yellen and her colleagues can continue to focus on the labor market and promoting broader economic growth. 

US Core Inflation Rate Chart

US Core Inflation Rate data by YCharts.

The National Association of Realtors also said today that existing home sales rose 2.6% in June on an annualized basis. The 5.04 million homes sold is the largest monthly total since October of last year, but still represents a year-over-year sales decline.

The report painted an optimistic picture, citing improving inventory levels and stable price appreciation as factors that should support continued improvement in the real estate markets.

Strong earnings and a fickle market
The broad markets were driven higher by the macro news today, while several individual stocks bucked the trend for specific reasons. Take Netflix  (NASDAQ: NFLX  ) , for example.

Last night after the closing bell, the video streaming and DVD rental company reported strong second-quarter results. Netflix surpassed the 50-million subscriber level for the first time as viewers binge-watched hits including House of Cards and Orange Is the New Black.

Netflix added 570,000 new U.S. subscribers in the quarter, alongside a very impressive 1.1 million additional subscribers in foreign markets. Both growth areas outpaced even management's expectations.

The company reported net income of $71 million for the quarter, more than doubling last year's second-quarter mark of $29 million.

But the stock dropped 5.6% by early Tuesday afternoon in spite of the positive earnings report. Investors sold shares on anticipation that further growth into the European market would erode margins. Other investors claimed that the company's growth upside was already priced into the stock's price. 

Even with today's decline, the stock is up about 17% year to date, far outpacing the Dow's 3.3% gain over the same period.

Coke fizzles
The news also wasn't positive for Dow component Coca-Cola (NYSE: KO  ) , which traded down 3%. Coke reported second-quarter results today, and the market largely did not like what it saw.

The beverage giant beat earnings estimates by a paltry $0.01 per share, and investors turned their focus to a big decline in top-line sales. 

Analysts had expected $12.83 billion in quarterly sales. Instead, Coca-Cola reported $12.57 billion, a 1% decline from the year-ago quarter.

The miss was primarily driven by stagnant sales in North America, the company's largest market. This release marks the second consecutive quarter in which Coke has struggled for any growth in this key region. Strong growth in the Asia-Pacific and Eurasia/Middle East regions failed to overcome the North American weakness.

Top dividend stocks for the next decade
The smartest investors know that dividend stocks simply crush their nondividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3038740, ~/Articles/ArticleHandler.aspx, 12/21/2014 7:04:22 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement