📉 Monday's selloff might be just the start

Coke goes back to 2019 | J&J fumbles an easy pass |

Hi Reader, here's what you need to know for July 22nd in 3:13 minutes.

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Today's big stories

  1. Coca-Cola posted better-than-expected quarterly earnings thanks to the world's reopening economies
  2. If Monday's stock market selloff got you feeling anxious, there are a few ways to settle your portfolio's jitters – Read Now
  3. Johnson & Johnson reported better-than-expected quarterly earnings, and it’s expecting its vaccine to make big money this year

Spin The Bottle

Spin The Bottle

What’s Going On Here?

Coca-Cola is done playing coy about what a catch it is: the drinks giant posted quarterly earnings that came in ahead of expectations on Wednesday.

What Does This Mean?

Wherever there’s a social hotspot – a restaurant, a theater, a stadium – there’s sure to be a tap with “Coca-Cola” emblazoned on it. So with plenty of spots getting well and truly hot again last quarter, the drinks giant’s organic revenue growth – excluding the effects of currency swings and acquisitions – climbed an expectation-busting 37% compared to the same time last year. That strong growth means Coke’s quarterly revenue has now overtaken pre-pandemic levels, and its outlook for the rest of the year looks like it’ll continue that trend: the drinks maker is now expecting to grow organic revenue and profit by up to 14% this year – up from roughly 9% and 10% respectively.

Why Should I Care?

For markets: Coke’s prices are right.
Investors sent Coke’s shares up on Wednesday, but the company’s better-than-expected results mightn’t be the only reason investors have taken a fancy to the stock. With the specter of inflation looming, they’ve been on the lookout for companies that can easily offset the rising costs of raw materials by nudging up their own product prices. And since “consumer staples” sell things that shoppers tend to buy no matter what, they fit the bill exactly. Case in point: Coke said on Wednesday that its prices will have risen as much as 3% between 2019 and 2021.

Zooming out: Pepsi had a good run.
Arch-rival Pepsi reported better-than-expected results of its own last week, but its 13% organic revenue growth was almost two-thirds lower than Coke’s (tweet this). The company, after all, has a big snacks business and sells more of its drinks in grocery stores than Coke does. Both of those benefit much more from a world in limbo, as well as from the crushing existential despair that might push someone to drink a Pepsi in the first place.

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2. Analyst Take

How To Settle Your Nerves After Monday’s Selloff

What’s Going On Here?

It’s been a year of remarkably benign conditions for US stocks, which have gone without a peak-to-trough drawdown of more than 5%.

But Monday’s sudden drop of 1.6% – its biggest in two months – was a bracing reminder that stocks aren’t guaranteed to keep going up.

In fact, a quick look back through history shows how rare such stability is.

So if Monday’s pullback has snapped you out of your rose-colored stock market gaze, you might want to start thinking about a few ways you can fight back.

That’s today’s Insight: the best ways to strengthen your portfolio in case stock markets turn.

Read or listen to the Insight here

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No More Tears

No More Tears

What’s Going On Here?

Dry your eyes, Johnson & Johnson: the pharmaceutical giant announced better-than-expected quarterly earnings on Wednesday.

What Does This Mean?

Both Johnson & Johnson’s (J&J’s) revenue and profit beat investors’ expectations, rising 27% and 73% respectively from the same time last year. More than half that revenue growth came from a strong rebound in the company’s medical devices unit, which took a thumping last year as the pandemic forced hospitals to postpone surgeries.

J&J’s pharmaceutical segment – the biggest of its businesses – should be getting a boost too: the pharma giant said it was expecting $2.5 billion in sales from its single-shot vaccine in 2021. That’d be a remarkably strong finish to the year given that the vaccine only generated $164 million last quarter, but the company’s gone all in on the estimate: it upped its growth outlook for both its total revenue and profit this year.

Why Should I Care?

For markets: Repeat after us: cancer bad.
Curing coronavirus is both ethically responsible and commercially shrewd, sure, but J&J would do well to remember that giving people cancer isn’t: the company recently had to recall its sunscreens after they were found to be contaminated with a carcinogen. And the last thing J&J needs is another fine, with the company already expected to reach an agreement to pay $5 billion to different US states over its role in the opioid crisis.

The bigger picture: Delta’s your captain now.
J&J’s anticipated $2.5 billion in sales is a drop in the ocean compared to how much Pfizer and Moderna’s shots – which are in much wider use – are expected to make. And even that revenue stream could be derailed if US production troubles keep hobbling the vaccine’s rollout, or if the highly contagious delta variant – now dominant in many countries around the world – ends up reducing the shot’s effectiveness, as plenty of experts are worried it’ll do.

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💬 Quote of the day

“If you think you can do a thing or think you can’t do a thing, you’re right.”

– Henry Ford (an American industrialist and business magnate)
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🤔 Q&A · RE: Direct To Investors

Q: “Why can’t companies pocket the cash from shares sold in a direct listing? Who gets the money if not the company?”

– Eric in Massachusetts, USA

A: “The main reason is that direct listings work differently to initial public offerings (IPOs). In an IPO, companies sell investors new shares to raise cash. A direct listing, however, puts existing shares onto the stock market. That means investors with previously owned shares can sell them to get cash from new investors, but that the company itself doesn’t raise any money – though that might change in the future.”

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👟 How To Invest In Sneakers And Streetwear: 1pm UK time, July 22nd
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