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Why McDonald's and Coca-Cola Will Move the Dow Tomorrow

By Dan Caplinger – Jul 21, 2014 at 6:30AM

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Two big consumer stocks will weigh in with their recovery efforts tomorrow. Find out what to expect.

A number of Dow Jones Industrials (^DJI 0.41%) companies have reported earnings over the last week. This week, a host of additional index components will offer their looks at economic conditions, with consumer giants McDonald's (MCD 0.63%) and Coca-Cola (KO 1.64%) weighing in tomorrow with their respective results. Unlike many of their Dow peers, Coca-Cola and McDonald's have faced challenging conditions to their respective businesses, and investors will be anxious to see if the two companies can rebound and send their share prices higher.

Source: McDonald's.

Both McDonald's and Coca-Cola will report before the market opens on Tuesday morning. Coca-Cola has scheduled a conference call to discuss its results just as the bell rings at 9:30 a.m. EDT. McDonald's investor relations website didn't pre-announce the timing for the fast-food giant's conference call, which last quarter took place at 10 a.m. EDT.

For Coca-Cola, the second quarter is likely to produce another round of flat results for both revenue and earnings. Lately, different parts of Coca-Cola's business have shown two conflicting pictures of the beverage maker's opportunity. On one hand, sales of its traditional carbonated beverage lines have been sluggish, especially in well-established markets where concerns about the obesity epidemic have raised the specter of regulation and other potential business limitations. At the same time, sales of noncarbonated beverages such as juices, tea, and water have skyrocketed, and emerging markets seem particularly receptive to new products designed to impress consumers unfamiliar with Coca-Cola's offerings.

McDonald's could see slightly better growth from year-ago levels, although it too has had to deal with less than stellar news lately. A well-regarded industry report found that McDonald's hamburgers received the worst ratings of any fast-food company among surveyed customers, again raising questions about the efforts the Golden Arches has made to improve its menu offerings. Moreover, heavy competition from other fast-food rivals, as well as from related niches such as fast-casual restaurants and coffee shops, has threatened McDonald's efforts to reignite growth. Like Coca-Cola, McDonald's hopes to see strength from emerging markets, but even there, growth has been inconsistent as the company faces growing pains and currency headwinds.

McDonald's and Coca-Cola will move the Dow tomorrow, as investors want to see whether the consumer giants will find new ways to grow despite their past challenges. Given the strength of their brands worldwide, both Coca-Cola and McDonald's have the ability to recover from their recent woes. The question is whether they'll have the discipline to succeed in plotting the best course forward. If they do, then positive results could send the Dow Jones Industrials soaring tomorrow.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and McDonald's. The Motley Fool has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. 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.

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