The Coke Consumer Indicator & J&J’s $5.5B Talc Settlement

**SPEAKER_1** (0:00)
Many employees can't afford a hefty medical bill that pops up out of the blue, but it happens. And employees who are financially stressed are, understandably, more likely to be distracted at work, costing their employers greatly in lost productivity. Luckily, Aflac plans help with out-of-pocket expenses not covered by health insurance, and can be offered at no direct cost to businesses. Learn more at aflac.com/brewmarkets. That's aflac.com/brewmarkets.

**Ann Berry** (0:25)
PayPal, the digital payments OG, reported its first earnings since rejecting a takeover bid to improve numbers make it a more expensive target. We have the latest. It's Tuesday, meaning it's Money Mover Day. So we welcome David Schassler, head of Multi-Asset Solutions at VanEck, to unpack his real asset ETF and where momentum's heading. And Coca-Cola, always Coca-Cola, an affordable indulgence, that's in quotes, that keeps consumers coming back, or a surprising signal about the US economy. For Tuesday, July 28th, it's Brew Markets Daily, and I'm Ann Berry.
More market details to come, but first, Coca-Cola. Yes, that's the titan of sodas, the Midas of Atlanta, the maker of enduring jingles, and sometimes considered an indicator of economic health. There are a couple of these kinds of indicators, by the way, that have always struck me as a bit quirky, just as a quick side note. They range from the mundane and little quoted, like the cardboard box index, which monitors the demand for corrugated boxes to gauge future retail goods movement and consumer demand. And then on the other end of the spectrum, there's the mildly amusing men's underwear index, which was followed by former Federal Reserve Chairman Alan Greenspan. Now, the premise there is that underwear sales are usually stable, as they're treated as an absolute basic necessity. But even then, when money gets tight, consumers will stretch the lifespan of their current wardrobe, especially when, like underwear, those clothes are hidden. Why men's underwear specifically is tracked, I don't know. But there it is. So back to Coca-Cola. The company reported another strong quarter today, beating Wall Street's expectations on both sales and profits and raising its full-year forecast. Revenue rose 7% to hit $13.4 billion. Global case volumes at true underlying demand climbed 5%.
And the company said that this was all fueled by strong international growth, as well as robust interest in a repackaged Coca-Cola zero zero line and a major boost for the trademark Coca-Cola and Powerade products from marketing campaigns during the FIFA World Cup.
But the headline, when you take a look at the press today, wasn't really the numbers. It was the fact that CEO Henrique Braun had some positive things to say about the US consumer. Somewhat surprisingly, Braun said that consumers remain resilient, that they are spending on Coca-Cola because they deem it quote, affordable indulgences. He said that in an interview today on CNBC. Well, Coca-Cola has leaned into that affordable indulgence narrative by offering more value options. That could be mini cans or lower price packages so that consumers can stick with the brand without having to stretch their budgets too far.
Well, this performance was an interesting counterpoint to that of Pepsi, which also beat expectations earlier this month. But Pepsi hit a very different tone, warning that North American consumers are pulling back, especially when it comes to snacks. Sales in its food business declined as shoppers looked for cheaper alternatives and healthier choices, forcing Pepsi to spend more on promotions and lower prices. So at the heart of all of this, at least my opinion is, really is brand loyalty. Coca-Cola's performance, to just one person's view, is less an indicator of true economic or even general consumer strength, and much more an indicator of its specific brand. Because even with stressed budgets, the Coca-Cola customer just will not buy a cheaper alternative. And that is the reason why the stock, that's Ticker KO., is up over 4% today, and why this unique brand is trading at an all-time high. We're going to keep on watching.
Well, moving on to some other headlines from the day's trading session. Kicking things off with one other bellwether, and that's UPS. Shares of the shipping giant down over 6%, despite the fact the company beat earnings estimates and raised its full year outlook.

**John Creteau** (4:27)
So what spooked Wall Street? Well, that outlook still raised underwhelmed investors looking for stronger signs of improvement as the courier scales back its partnership with Amazon. UPS announced last year it's moving away from lower-margin customers like Amazon and focusing on higher-value businesses like healthcare.

**Ann Berry** (4:44)
Well, UPS has been investing in a global coal chain network that can handle deliveries of GLP-1s and other temperature-sensitive medicines. In the latest quarter, those deliveries brought in $3 billion for the company, an increase of 7% year-over-year. Investors looking to see if UPS can deliver on its turnaround plan in the second half. Shares, though, nevertheless up 6% this year.