Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Disappointing Earnings Drag Down Coca-Cola and Travelers

Earnings season is in full swing and we're starting to see the first signs of weakness on the Dow Jones Industrial Average (DJINDICES: ^DJI  ) . Most companies to report so far are from the financial, energy, or tech industries, and indications are that they're doing very well.

But quarterly reports from Coca-Cola (NYSE: KO  ) and Travelers (NYSE: TRV  ) showed a different story today.

Coca-Cola disappoints
Coca-Cola's earnings of $2.6 billion, or $0.64 per share on an adjusted basis, was slightly ahead of expectations. But in a market in which growth is key Coca-Cola came up short. Revenue fell 1% from a year ago to $12.57 billion, well below the $12.83 billion that Wall Street expected, as the company was hit by major currency headwinds.  

Carbonated drinks like these are falling out of favor for Coca-Cola.

Currency had a negative 11% impact on revenue in Latin America and negative 9% in Eurasia and Africa, so macroeconomic effects were really to blame for the bad second quarter. Volume was even up 3%, driven by noncarbonated beverages -- an area in which Coca-Cola has made a major effort to grow share.

Still, investors weren't excited about the drop in revenue, sending shares down 3.2% in late trading. That's what an earnings miss can do, even if there's fundamental volume growth in the core business.

Travelers brought back to reality
Insurer Travelers has fallen a more worrisome 3.8% after reporting disappointing earnings. Operating profit, which doesn't include some investment results, came in at $1.93 per share for the second quarter, below the Street's $2.07 estimate. Overall, profit was down 26% to $683 million.  

The problem was in part $436 million in catastrophe costs, up from $340 million a year ago, a figure that can vary quarter to quarter. But the broader story is that price increases that were being pushed down to customers have slowed and therefore margin expansion will be curbed as well. Long term, this is part of the ebb and flow of the insurance business, but investors had become accustom to higher margins and we may be seeing them peak for Travelers.

In addition, the 2nd U.S. Circuit Court of Appeals in New York today found that Travelers must pay $500 million for asbestos-related claims. This dates back to the coverage of Johns-Manville, which declared bankruptcy in 1982 because of asbestos-related costs.

Foolish takeaway
While these two earnings reports weren't good for investors, they weren't reason to panic, either. Coca-Cola's volumes are growing, which is great for the company over the long term, and Travelers was still highly profitable despite some higher than usual costs in the quarter. These ups and downs will even out over time, something long-term investors need to keep in mind.

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 (1)

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: 3039312, ~/Articles/ArticleHandler.aspx, 9/1/2015 4:48:01 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...

Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

Today's Market

updated Moments ago Sponsored by:
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASD 4,636.11 -140.40 -2.94%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/1/2015 4:20 PM
^DJI $16058.35 Down -469.68 -2.84%
KO $38.75 Down -0.57 -1.45%
Coca-Cola CAPS Rating: ****
TRV $97.49 Down -2.06 -2.07%
The Travelers Comp… CAPS Rating: ****