diff --git a/IPython/nbconvert/preprocessors/coalescestreams.py b/IPython/nbconvert/preprocessors/coalescestreams.py
index 3fa4379..a608211 100644
--- a/IPython/nbconvert/preprocessors/coalescestreams.py
+++ b/IPython/nbconvert/preprocessors/coalescestreams.py
@@ -66,7 +66,21 @@ def coalesce_streams(cell, resources, index):
             last.output_type == 'stream' and
             last.stream == output.stream
         ):
-            last.text += output.text
+            # Either append this output to the existing or replace the last line
+            # of the existing if a \r character is found.
+            if '\r' in output.text:
+                existing_lines = last.text.split('\n')
+                new_pieces = output.text.split('\r')
+                # If there is any text preceding the first occurance of '\r', it
+                # is appended as a new line to the lines.
+                if len(new_pieces[0]) > 0:
+                    existing_lines.append(new_pieces[0])
+                # The text following the last occurance of '\r' replaces the 
+                # last line of text in the output.
+                existing_lines[-1] = new_pieces[-1]
+                last.text = '\n'.join(existing_lines)
+            else:
+                last.text += output.text
         else:
             new_outputs.append(output)
             last = output