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How Coke's Earnings Are Saving the Dow

By Dan Caplinger - Apr 16, 2013 at 11:03AM

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Scary times are here, but earnings still look like a positive force for the market.

Yesterday's combination of horrible news, including the tragic explosion in Boston and troubling concerns on the economic front, left investors shaken. Yet this morning, the regular business of the market appeared to calm investors' fears, as some favorable news on the earnings front helped investors refocus on signs of improvement for the U.S. economy. By 10:45 a.m. EDT, the Dow Jones Industrials (^DJI -3.57%) were up more than 65 points, albeit putting only a small dent in yesterday's 266-point drop. Broader markets saw similar gains of about half a percent.

The big winner among the 30 Dow stocks is Coca-Cola (KO -6.96%), which has spiked by more than 5% after releasing highly encouraging earnings. Although revenue dropped by 1%, overall sales volume posted a 4% gain, and the company's adjusted earnings-per-share figure beat estimates by a penny despite some adverse calendar effects in comparison with last year's quarter. Moreover, investors responded favorably to Coke's decision to sell off some of its U.S. distribution assets to its team of independent bottlers. Although long-term trends may reassert themselves at some point, Coke's news shows that counting the soft-drink giant out isn't a smart move.

Johnson & Johnson (JNJ -1.86%) has also gained ground, rising 1.7% following an upbeat earnings report of its own. The company topped estimates by $0.04 per share, as the company's prescription-drug and over-the-counter product lines performed well. J&J even managed to overcome currency headwinds to post revenue growth of 8.5%. The company still faces problems, including weakness in medical-device sales and increased exposure to products liability in the wake of recent product recalls, but the rebound in consumer medications like Tylenol shows that customers are willing to forgive J&J's past quality-control issues.

Outside the Dow, Delta Air Lines (DAL -3.46%) has soared 3.5%. The latest figures from the Bureau of Labor Statistics showed that its consumer price index for airline fares rose by 0.6% during the month of March, reversing a slight decline in February and marking the sixth month in the past seven that prices have risen. With a year-over-year increase of 3.8%, fares are helping Delta and its peers keep their profits up, especially in light of the added revenue that baggage fees have brought to the industry.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,490.07 (-3.57%) $-1,164.52
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$175.50 (-1.86%) $-3.32
The Coca-Cola Company Stock Quote
The Coca-Cola Company
KO
$61.20 (-6.96%) $-4.58
Delta Air Lines, Inc. Stock Quote
Delta Air Lines, Inc.
DAL
$39.31 (-3.46%) $-1.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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