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Wednesday April 23, 2014



Nike 'Just Does It' with Quarterly and Annual Earnings

Nike Inc. (NKE), an international retailer of sports apparel and accessories, reported its fiscal 2013 annual and fourth quarter earnings on June 27. Nike's net income beat analysts' expectations, but the company's performance in China did not.

Nike reported total revenue of $6.70 billion for the quarter and $24.31 billion for the year. Both figures represent an increase from the previous year when the company reported revenue of $6.24 billion and $23.33 billion, respectively.

The company reported net income of $668 million for the quarter and $2.49 billion for the year. Quarterly net income was particularly impressive, representing a 22% increase from the same period last year when Nike reported net income of $549 million. Though this net income figure is impressive, it was largely the result of increased sales in the U.S. The company did not perform as well in China where Nike reported a 3% decrease in revenue for the year.

"Fiscal 2013 was a great year for NIKE, driven by our innovative products and the power of our brands," said Mark Parker, President and CEO of Nike, Inc. "And we're excited about what lies ahead. We have the best leadership team in the industry and a deep innovation pipeline. Both are aligned against our biggest opportunities to drive growth, manage risk and drive long-term shareholder value."

Nike, NASA, USAID and the Department of State joined together in 2010 to form LAUNCH. LAUNCH identifies and supports visionaries whose work contributes to a sustainable future and provides solutions to challenges faced by society. One LAUNCH innovator, astronaut Ron Garan, started Manna Energy Limited which has brought clean water to over 4.5 million people in Kenya using solar-powered water purification systems.

Nike, Inc. (NKE) shares ended the week at $63.68, up 5.1% from last week's close.

The Quarter Was Not Quite Smooth Sailing for Carnival

Carnival Corporation (CCL), the world's largest cruise line, reported its quarterly earnings on June 25. The company also announced that its CEO of 34 years would be stepping down in July. Although earnings per share beat analysts' expectations, the new leadership faces some public relations challenges in the months ahead.

Carnival reported quarterly revenue of $3.48 billion. This represents a slight decrease from the comparable quarter last year when the company reported revenue of $3.54 billion. In addition, the quarterly revenue figure is below analysts' expectations of $3.55 billion.

Carnival reported net income of $41 million, representing an increase from the same period last year when the company reported net income of $14 million.

"Our 90,000 global team members are dedicated to delivering an outstanding vacation experience to 10 million guests each year," said Micky Arison, Carnival Chairman and CEO. "The level of quality, variety and innovation available throughout our fleet has never been greater and our guests are reaping the benefits of truly exceptional vacation values. We are working to more broadly communicate that message through stepped up consumer and trade marketing efforts, as well as strengthened engagement of our travel agent partners. We believe these initiatives, combined with slower supply growth, will lead to increased yields."

After a challenging year in 2012, including the partial sinking of the Costa Concordia off the coast of Italy, the company is making some internal changes. Carnival must now convince the public that they provide the necessary safeguards to protect their passengers. On the heels of this tragedy, Carnival CEO of 34 years, Micky Arison, announced he is stepping down and will be succeeded by Arnold Donald who has been a member of Carnival's board of directors for 12 years.

Carnival Corporation (CCL) shares ended the week at $34.29, up 2.6% from last week's close.

General Mills Finds It Pays to Be Healthy

General Mills (GIS) reported its fiscal 2013 fourth quarter and annual earnings on June 26. Quarterly revenue beat analysts' expectations, but quarterly earnings per share fell short.

General Mills reported net sales of $4.41 billion for the quarter and $17.77 billion for the year. Annual net sales increased 6.7% from the same figure last year when the company reported net sales of $16.66 billion.

The company reported net income of $366.3 million, representing an increase of 12.6% from the same period last year when the company reported net income of $325.4 million. Quarterly earnings per share increased to $0.55 from $0.49 during the same period last year.

"Our 2013 results reflect good growth from established product lines and important contributions from new businesses added during the year," said Ken Powell, General Mills Chairman and CEO. "Each of our three operating segments posted profit growth. Our cash flow from operating activities rose 22%, and we returned nearly $1.9 billion in cash to shareholders through dividends and share repurchase activity. In addition, we exited the year with momentum that enabled us to finish 2013 a bit better than our original estimates."

Over the past 8 years the company has made a concerted effort to increase the nutritional value of its food by adding whole grains, fiber and calcium while decreasing calories, sugar, sodium and trans fat. This initiative has helped General Mills' bottom line by meeting the needs of today's more health conscious consumer.

General Mills (GIS) shares ended the week at $48.53, down 0.23% from last week's close.

The Dow started the week at 14,796 and closed at 14,910. The S&P 500 started the week at 1,589 and closed at 1,606. The NASDAQ started the week at 3,326 and closed at 3,403.

An Up and Down Week for Treasuries

Last week was another rollercoaster week for Treasuries. Prices rose during the middle of the week, while prices fell at the beginning and end of the week. This movement shows that many investors are uncertain about when the Federal Reserve will begin cutting back on its monthly bond purchases.

On June 19, Federal Reserve Chairman Ben Bernanke announced that the Federal Reserve would begin tapering its purchase of $85 million in bonds each month sometime this year. The initial shock of the announcement caused Treasury prices to fall as investors anticipated an imminent change in the Fed's monetary policy. The 10-year Treasury note rose to 2.67% in late Monday trading, the highest since August 2011.

However, investor confidence that tapering would be gradual built toward the middle of last week. This led to a rise in bond prices and a corresponding drop in yields on Wednesday and Thursday. The 10-year Treasury yield dropped to 2.46% in early Thursday trading.

On Friday, a comment by Richmond Fed Bank President Jeffrey Stein again caused investors to anticipate an imminent change in Fed policy. Stein's remarks hinted that he was looking at September as the month to make a decision about whether or not to start tapering bond purchases. As a result, during early Friday trading the 10-year Treasury note rose to 2.49%.

Ian Lyngen, a Government-Bond Strategist at CRT Capital Group LLC, had this to say about the uncertainty surrounding the Fed's policy, "While the Fed debate continues to be influenced by headlines from a variety of Fed speakers, the takeaway at this point is that we are in a largely data-dependent mode with more than a couple of months of inputs to come before its clear whether tapering will begin."

The 10-year Treasury note yield finished the week at 2.48% while the 30-year Treasury note yield finished the week at 3.5%.

Interest Rates Rise the Week After Fed's Announcement

Freddie Mac released its weekly Primary Mortgage Market Survey (PMMS) on June 27. The results show the largest weekly increase in average fixed mortgage rates in over 26 years after the Fed announcement last week.

The 30-year fixed rate mortgage averaged 4.46% this week. This represents an increase from last week when it averaged 3.93%. One year ago at this time, the 30-year fixed rate mortgage averaged 3.66%.

This week, the 15-year fixed rate mortgage averaged 3.5%. This represents an increase from last week when it averaged 3.04%. Last year at this time, the 15-year fixed rate mortgage averaged 2.94%.

"Following Fed Chief Bernanke's remarks on June 19th about the possible timing of reduced bond purchases, Treasury bond yields jumped over the week and mortgage rates followed," said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. "He [Bernanke] indicated that the Fed may moderate the pace of its buying later this year and end the purchases around the middle of 2014. Higher mortgage rates may dampen some housing market activity but the effect will be muted by the high level of buyer affordability, and home sales should remain strong."

The money market fund finished this week at 0.5%. The 1-year CD finished at 0.6%

Published June 28, 2013

Previous Articles

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Despite Good Results, Dollar General's Stock Stumbles

Is Tiffany & Co. a Diamond in the Rough?

Home Depot Reports Quarterly Results

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