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Tuesday September 23, 2014

Finances

Finances
 

FedEx Reports Impressive Earnings

FedEx Corp. (FDX), a provider of transportation, e-commerce and other business services, reported its quarterly earnings on Wednesday, September 17. The company reported impressive earnings and announced that it will hire an additional 50,000 workers as the holiday season approaches.

The company reported quarterly revenue of $11.68 billion. This represents an increase of 6% over quarterly revenue reported in the same quarter last year of $11 billion.

“FedEx is off to an outstanding start in fiscal 2015, thanks to very strong performance at FedEx Ground, solid volume and revenue increases at FedEx Freight and healthy growth in U.S. domestic volume at FedEx Express,” said Frederick W. Smith, FedEx Corp. Chairman, President and CEO. “More customers are relying on FedEx because they appreciate the competitive advantages provided by our broad portfolio of solutions.”

The company reported net income of $606 million. This represents an increase of 24% from the same period last year when the company reported net income of $489 million.

Last month, a Ninth Circuit Court of Appeals panel ruled that some FedEx workers in California and Oregon were employees and not independent contractors. FedEx is appealing the ruling, but if the determination stands then the company could be liable for back-pay and tax obligations for the workers that qualify. The company has put aside an amount equal to the probable loss, but company officials explained that an exact amount is difficult to determine and so future earnings reports could be affected by an adverse determination.

FedEx Corp. (FDX) shares ended the week at $158.33, up 2.8% for the week.

General Mills’ Earnings Decline


General Mills, Inc. (GIS), manufacturer and marketer of consumer foods such as Count Chocula and Cinnamon Toast Crunch, reported its latest quarterly earnings on Wednesday, September 17. The company saw net income decline as Americans turn away from breakfast cereal.

The company reported net sales of $4.27 billion for the quarter. This represents a decrease of 2.4% from the same period last year when the company reported net sales of $4.37 billion.

“We made some important progress in the first quarter,” said Ken Powell, General Mills Chairman and CEO. “In U.S. retail, our Yoplait yogurt business returned to growth, with volume, sales, and market share gains. Several other key product lines including Big G cereals, grain bars, and fruit snacks achieved market share increases. Our Convenience Stores and Foodservice segment generated sales growth and an 18% operating profit increase. And our International business segment posted 17% constant-currency profit growth with good constant-currency sales gains, notably in Latin America and Europe.”

General Mills reported quarterly net income of $345.2 million. This represents a decrease of 24.8% from the same period last year when the company reported net income of $459.3 million.

A big trend that is affecting General Mills is the decline in popularity of breakfast cereal. Many Americans are choosing items with less sugar and more protein. As a result, General Mills reported that sales for its U.S. cereal business, including brands such as Cheerios, Lucky Charms and Wheaties, have dropped 9% year-over-year. Other cereal manufacturers such as Kellogg and Post Holdings also have seen sales declines in recent quarters.

General Mills, Inc. (GIS) shares ended the week at $51.28, down 3.0% for the week.

Pier 1 Imports Disappoints


Pier 1 Imports, Inc. (PIR), a home furnishings retailer, announced its latest quarterly earnings on Wednesday, September 17. The troubled retailer is struggling to find its place in a very difficult market.

The company reported quarterly net sales of $418.62 million. This represents an increase of 5.8% from the same period last year when the company reported net sales of $395.64 million.

“The pace of growth of e-Commerce sales remains high, with sales penetration nearing 10% this quarter,” said Alex W. Smith, President and CEO of Pier 1 Imports. “Our customers love our expanded assortments and the ability to shop however they choose. With the acceleration of investments in our ‘1 Pier 1’ omni-channel strategy, we expect this momentum to continue. These incremental investments are impacting our near-term financial performance as anticipated, as we rapidly evolve into our new business model.”

The company reported net income of $9.16 million for the quarter. This represents a decrease of 48.65% from the comparable period last year when the company reported net income of $17.83 million.

The significant decrease in net income along with slower than anticipated growth in revenue caused Pier 1 Imports’ stock to drop sharply after the earnings release. In addition, the company lowered its full year earnings outlook from between $1.14 to $1.22 to between $0.95 and $1.05.

Pier 1 Imports, Inc. (PIR) shares ended the week at $12.74, down 14.6% for the week.

The Dow started the week of 9/15 at 16,989, and closed at 17,280 on 9/19. The S&P 500 started the week at 1,986 and closed at 2,010. The NASDAQ started the week at 4,567 and closed at 4,580.
 

Spanish Treasury Yields and Tensions Fall

The decision of Scottish voters on Thursday to remain part of the United Kingdom has caused rising separatist tensions in other European countries to ease slightly. With a more certain future moving forward, bond prices rose and yields fell across Europe.

Spanish 10-year yields fell eight basis points to 2.2%. For Spain, the Scottish vote eased tension within the country that Catalonia will ultimately break away. The Catalan parliament votes September 19 on whether to defy the central government in Madrid and hold a non-binding referendum on Catalan independence on November 9. Unlike British Prime Minister David Cameron, who allowed a binding referendum to move forward, Spanish Prime Minister Mariano Rajoy has said that he has taken measures to prevent Catalans from holding even a non-binding referendum.

In addition to Spanish bonds, the prices of German, Austrian, Dutch, Italian and Irish bonds also rose while yields fell. The Irish bond dropped nine basis points to 1.75% while Italy’s 10-year yield dropped seven basis points to 2.37%. The German bund dropped four basis points to 1.04%. The Austrian rate dropped five basis points to 1.24% and the Dutch 10-year yield fell six basis points to 1.18%.

“Markets have rallied,” said John Stopford, Head of Fixed income at Investec Investment Management Ltd. The referendum result “lessens the messy consequences and what that might have meant for other separatist areas within Europe.”

The 10-year Treasury note yield finished the week of 9/15 at 2.59% while the 30-year Treasury note yield finished the week at 3.30%.
 

Interest Rates Rise

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, September 18. The results showed average fixed mortgage rates rising to their highest levels in over four months.

The 30-year fixed rate mortgage averaged 4.23% this week. This represents an increase from last week when it averaged 4.12%. One year ago at this time the 30-year fixed rate mortgage averaged 4.5%.

This week, the 15-year fixed rate mortgage averaged 3.37%. This represents an increase from last week when it averaged 3.26%. Last year, the 15-year fixed rate mortgage averaged 3.54%.

“Fixed rate mortgage rates rose this week following the increase in 10-year Treasury yields being partially fueled by market speculation the Federal Reserve might change its interest rate guidance,” said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. “Meanwhile, the Labor Department reported that its Consumer Price Index declined 0.2% in August reflecting declines in energy prices. Excluding food and energy, the CPI was unchanged.”

The money market fund finished the week of 9/15 at 0.4%. The 1-year CD finished at 0.7%.

Published September 19, 2014


Previous Articles

Barnes & Noble Turning the Page

H&R Block Increases Revenue

Williams-Sonoma’s Forecast Disappoints

Is HP Turning Around?

Macy’s Earnings Miss Expectations

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