Big-time earning reports earlier this week, but for the most part, we have seen very little movement. In this piece, I am looking at the top reports from Tuesday, with my takeaways, as I look for stocks to buy and to add to My CAPS picks.
Does Diagnostics Really Matter?
For a company with revenue of $68.5 billion, this growth is simply incredible, and it was led by global pharmaceutical sales growth. With the stock trading at 15.61 times earnings, I see no reason why investors would think it is too expensive. Therefore, I can’t find a reason why the stock would not be trading significantly higher.
Moreover, the initial headlines for the quarter indicate that weakness, or a lack of stock strength, might be in response to a struggling medical device business. However, it grew 9.6% in the quarter. Therefore, with Johnson & Johnson (NYSE:JNJ) growing significantly faster than peers Pfizer Inc. (NYSE:PFE), Eli Lilly & Co. (NYSE:LLY), etc. I think it is a clear buy!
Blame it on the Weather?
The Coca-Cola Company (NYSE:KO) traded lower by 2% after its report, and rightfully so. Not only did revenue miss expectations, but Europe’s unit case volume was lower by 4% year-over-year.
The Coca-Cola Company (NYSE:KO) has faced increased competition from beverage makers who have turned their focus to healthier alternatives, including flavored water. Rather than The Coca-Cola Company (NYSE:KO) admitting to this problem, the company blamed the weak quarter on weather! Since when does weather prevent people from drinking liquids?
Overall, I view The Coca-Cola Company (NYSE:KO)’s quarter as highly problematic. They have remained the top player in the beverage industry for decades, and it appears as though new players in the field are beginning to steal its share. Thus, I wouldn’t buy.
A Massive Beat, But a Lower Stock
In my opinion, Goldman Sachs Group Inc (NYSE:GS) produced the most impressive quarter of the day. Not only did they beat on the top-line, but with an EPS of $3.7, they beat earning expectations by $0.89, as earnings nearly doubled.
Of the company’s $8.61 billion in revenue, it saw investment banking revenue increase 29% to $1.55 billion; its underwriting revenue increased 45% to $1.07 billion; and trading revenue increased 12% year-over-year to $2.46 billion.
Sure, there are a lot of concerns regarding future regulations and private equity/security segments. However, those concerns surrounding rates are just speculative, and I have no problem celebrating Goldman Sachs Group Inc (NYSE:GS) for a job well done. Therefore, the value lost on Tuesday’s trading day, I view as opportunity, and I am buying on the weakness.
Final Thoughts
If either Johnson & Johnson (NYSE:JNJ) or Goldman Sachs Group Inc (NYSE:GS) would have traded higher after earnings, no one would be mentioning medical device weakness and the possibility of tightened financial policy. However, this is how the market works, and we assume that the market is always right in post-earning reactions.
In my book, I teach investors how to capitalize on these inaccuracies, and how to capitalize on the value they often present. In the case of J&J and Goldman Sachs Group Inc (NYSE:GS), I think value is present, and I am adding both to my Motley Fool CAPS.
The article Are These 3 Stocks a Buy After Earnings? originally appeared on Fool.com.
Brian Nichols has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Goldman Sachs, and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Brian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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