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Saturday December 3, 2016



Tyson Foods Reports Earnings, Replaces CEO

Tyson Foods, Inc. (TSN) released its latest earnings report on Monday, November 21. The company reported increased profits, but decreased sales.

Revenue for the quarter was $9.2 billion, down 12.8% from the same period last year. This was slightly behind Wall Street's estimate of $9.4 billion.

"Fiscal 2016 was our fourth consecutive year of record results. We produced record earnings per share, operating income and operating margin," said Tyson Foods CEO Donnie Smith. "We're growing where we want to grow by selling more branded, higher margin products. Sales volume was up in our Core 9 product lines at retail and our top tier products in foodservice."

The company reported net income of $392 million or $1.03 per share. This was up from the $259 million or $0.63 per share during the prior year's quarter.

Tyson, well known for its chicken processing, also operates brands such as Hillshire Farm, Jimmy Dean and Ball Park. The company is facing a period of transition as CEO Donnie Smith announced his resignation on Monday, effective at the end of this year. He will be replaced by company president Tom Hayes. Tyson's stock prices fell nearly 15% following the announcement.

Tyson Foods, Inc. (TSN) shares closed at $58.66 on Wednesday, down 12.9% for the week.

Deere's Stock Jumps on Better-than-Expected Profit

Deere & Co. (DE) announced its fourth quarter earnings on Wednesday, November 23. Despite the current global farming recession, Deere reported better-than-expected earnings and revenue for the quarter, causing shares to surge more than 10% in early morning trading.

The farm equipment company reported revenue of $6.52 billion in the fourth quarter, surpassing Wall Street's estimate of $5.83 billion. This was a 3% drop from last year's fourth quarter revenue of $6.72 billion.

"John Deere has completed another successful year in spite of continuing weakness in the global agricultural and construction equipment sectors," said Samuel R. Allen, Chairman and CEO. "The company in 2016 had one of its ten-best years in both sales and earnings, a noteworthy achievement in light of the difficult business climate."

Net income in the fourth quarter decreased to $285.3 million from $351.2 million a year ago. On an earnings per share basis, profit fell to $0.90 per share compared to $1.08 per share in the same quarter last year. However, this surpassed the $0.40 per share that analysts were expecting.

Farm equipment companies, including Deere, have struggled in the current economic environment as crop surpluses and weaker commodity prices have negatively impacted farm equipment sales. Deere has responded to the weakened agricultural market by cutting costs, including its most recent voluntary employee separation program, which Deere predicts will save nearly $75 million next year. In 2017, Deere predicts that equipment sales will be down 1% for the fiscal year.

Deere & Co. (DE) shares closed at $102.17 on Wednesday, up 10.7% for the week.

Jack in the Box Reports Quarterly Earnings

Jack in the Box Inc. (JACK) reported quarterly earnings on Monday, November 21. The fast food company announced an increase in both revenue and profits.

The company reported revenue of $398 million, which was in line with analysts' predictions for the quarter. At this time last year, the company reported revenue of $354 million.

"Operating earnings per share for the fourth quarter exceeded our expectations, due primarily to a reduction in G&A costs resulting from our restructuring initiatives, as well as lower impairment charges and a lower tax rate," said Jack in the Box CEO Lenny Comma. "We were pleased that Jack in the Box system same-store sales outperformed sluggish industry trends, and although sales and traffic growth at Qdoba were solid, margins were hampered by the impact of new restaurant openings."

Net earnings for the quarter were $32 million or $0.98 per share. This is up from the fourth quarter earnings last year of $23 million or $0.64 per share.

The company's namesake fast food chain reported that overall same-store sales increased 2% for the quarter. Qdoba Mexican Grill, the company's fast-casual chain, reported same-store sales growth of 0.8% during the quarter. This fell short of the company's expected 1% to 2% growth in same-store sales.

Jack in the Box Inc. (JACK) shares closed at $107.36 on Wednesday, up 5.6% for the week.

The Dow started the week of 11/21 at 18,899 and closed at 19,083 on Wednesday heading into the holiday weekend. The S&P started the week at 2,186 and closed at 2,205. The NASDAQ started the week at 5,337 and closed at 5,381.

Treasury Yields Continue Upward Climb

Government bond yields continued their rise during Thanksgiving week due to growing optimism for strong economic growth in 2017. Positive economic data released this week also lent further credence to the belief the Federal Reserve will raise interest rates in December.

The selloff in government bonds began after Donald Trump's presidential election victory. Investors believe Trump's plans to increase deficit spending, lower taxes and reduce regulation will boost U.S. economic growth. This has led investors to sell bonds and shift their capital into stocks. As bond prices fall, yields rise.

However, as government bond yields have risen, investors have once again found them attractive. The 10-year note yield actually fell during trading on Tuesday, November 23 to 2.32% from 2.34% on Monday. By Wednesday the 10-year note yield had regained and then exceeded that lost ground, rising to 2.37%.

Even without the expectations of increased economic growth resulting from Trump's policies, investors have reason to be optimistic. Weekly jobless claims were 251,000 for the week ended November 19. Claims have been below 300,000 for 90 straight weeks, a sign of a strong labor market.

Data also showed that consumer sentiment was higher in October than expected, coming in at 93.8 instead of the 91.6 estimate. A manufacturing index also revealed better-than-expected growth in October, increasing to 53.9 instead of the estimated 53.4.

The 10-year Treasury note yield had a closing yield on Wednesday, 11/23 of 2.32% while the 30-year Treasury note yield was 3.01%.

Mortgage Rates Rise Again

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Wednesday, November 23. Mortgage rates moved higher yet again heading into the holiday weekend.

The 30-year fixed rate mortgage averaged 4.03% this week, up from last week's average of 3.94%. During this time last year the 30-year fixed rate mortgage averaged 3.95%.

The 15-year fixed rate mortgage averaged 3.25% this week. This is up from last week when it averaged 3.14%. Last year at this time, the 15-year fixed rate mortgage averaged 3.18%.

"In a short week leading up to the Thanksgiving holiday, the 10-year Treasury yield rose 8 basis points," said Freddie Mac Chief Economist, Sean Becketti. "The 30-year mortgage rate followed suit, rising 9 basis points to 4.03%. This increase marks the first week since 2015 that mortgage rates have risen above 4%."

Based on published national averages, the money market account was at 0.55% heading into the holiday weekend. The 1-year CD was at 1.18%.

Published November 25, 2016

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