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Tuesday September 30, 2014



International Speedway Loses Speed

International Speedway Corporation (ISCA) reported its third quarter results on October 3. The company reported higher revenue but a significant net loss compared to the same period last year.

The company reported revenue of $117 million for the third quarter, a slight increase over the $115.9 million the company reported during the same period last year. Revenue for the quarter fell slightly below expectations that it would be $118.6 million.

The company also generated a net loss during the quarter of $7.9 million or $0.17 per share. The net loss was larger than the loss of $1 million or $0.02 per share reported during the comparable period last year.

International Speedway Chief Executive Officer, Lesa France Kennedy, had this to say about the quarterly results, "We remain encouraged with our quarter and year-to-date financial results; generating increased total revenue for the periods. Adjusting for comparable events, our attendance revenue, which has been our principal risk, was down less than one percent for the quarter delivering results within our range of expectations and showing further signs of stabilization in our business."

International Speedway owns 13 motorsports venues including the Daytona Motor Speedway and the Daytona 500. Despite the increased popularity of auto racing over the past few decades, the entire industry has been facing challenges resulting from a continually weak economy. Attendance has been down ever since the financial crisis of a few years ago. For International Speedway and its industry brethren, much of their future success may depend on revenue from television broadcast rights.

International Speedway Corporation (ISCA) shares ended the week at $31.57.

Walgreens' Earnings Impress Investors

Walgreens Co. (WAG) announced its fourth quarter results on October 1. The company reported strong figures during the quarter that boosted investors' confidence in the stock.

Walgreens reported sales of $17.94 billion during the quarter, a 5.1% increase from the same period last year. Revenue for the quarter barely missed analysts' expectations of $17.95 billion.

Net earnings for the quarter were $702 million or $0.73 per share. This was a 26.9% increase from the $553 million reported during the comparable period last year.

"We had a solid quarter across our entire business. We saw improvement in our daily living business resulting from the investments we made and enhanced execution," said Walgreens President and CEO, Greg Wasson. "We also saw continued strength in our pharmacy business as we increased our retail pharmacy market share for the fiscal year to 19.1%, and we continued to make great progress on controlling selling, general and administrative costs."

Investors saw Walgreens' fourth quarter results as evidence that the company's partnership with global drug distributor Alliance Boots is bearing fruit. Walgreens believed the partnership added $0.08 per share to the company's fourth quarter results. Investors hope to see the partnership provide a further boost going forward.

Walgreens Co. (WAG) shares ended the week at $55.79.

Constellation Brands Soars

Constellation Brands Inc. (STZ), a wine and beer beverage company, announced its second quarter results on October 3. The company reported strong revenue and net earnings figures, which caused the stock price to hit a 52-week high.

Constellation reported revenue for the quarter of $1.46 billion, a 109% increase from the same quarter last year. Although the revenue increase was impressive, it missed analysts' estimates of $1.53 billion in revenue.

Earnings per share for the quarter increased to $0.96 from the $0.71 reported during the comparable period last year. Constellation's earnings per share beat expectations of $0.89 per share by 7.9%.

"We began the quarter by closing the beer transaction and starting the process of integrating our newly acquired brewery into our operations. We are very pleased that the employees at the Nava brewery, along with the Crown team, are now fully part of the company," said Rob Sands, President and CEO.

In June, Constellation acquired the Corona and Negra Modela brands for $4.75 billion. The company realized a $1.6 billion gain during the quarter as a result of the acquisition. Constellation's stock price, which has already posted a gain of 74% during the year, reached a new 52-week high following its quarterly earnings report.

Constellation Brands Inc. (STZ) shares ended the week at $61.97.

The Dow started the week at 15,250 and closed at 15,073. The S&P 500 started the week at 1,687 and closed at 1,691. The NASDAQ started the week at 3,738 and closed at 3,808.

Treasuries Fall as Shutdown Continues

Treasuries fell Friday as the shutdown of the U.S. federal government began its fourth day. With no apparent resolution to the gridlock in sight, lawmakers continue to fight over how to solve the debt and spending impasse.

The federal government officially entered a partial shutdown on October 1 as lawmakers were unable to reach a deal on spending. Republicans have sought changes to the national healthcare law, a move that has been rebuffed by Democrats, who assert they won't negotiate over paying the country's bills.

Lawmakers must not only find a solution to funding the government, but also on raising the country's debt limit, which Treasury officials have indicated will be reached on October 17. The Treasury Department has warned that a default on the nation's debt will have catastrophic consequences. House Speaker John Boehner has called on Senate Democrats and the President to budge from their "no negotiation" stance and come to the bargaining table.

"If the debt ceiling gets taken hostage by politicians, you will see a much different reaction," said El-Erian of Pimco. "The market expects as we get closer to Oct. 17 some realism will start occurring on Capitol Hill and politicians will avoid what potentially could be quite catastrophic both for the U.S. and the global economy."

The U.S. Department of Labor delayed the release of the latest jobs report, which would have been announced today, citing the government shutdown as the reason. The Department indicated an alternative date for releasing the jobs report has not been set. Earlier in the week, other jobs data and employment trackers indicated the month of September would most likely be one of anemic job growth.

The 10-year Treasury note yield finished the week at 2.65% while the 30-year Treasury note yield finished the week at 3.73%.

Interest Rates Continue to Fall

Freddie Mac released the results of its weekly Primary Mortgage Market Survey (PMMS) on Thursday, October 3. Average fixed mortgage rates fell again this week as the government shut down and consumer confidence further declined.

The 15-year fixed rate mortgage averaged 3.29% this week, down from last week's average of 3.37%. Last year at this time, the 15-year fixed rate mortgage averaged 2.69%.

The 30-year fixed rate mortgage averaged 4.22% this week. This represents a decrease from last week when it averaged 4.32%. One year ago at this time, the 30-year fixed rate mortgage averaged 3.36%.

Frank Nothaft, Vice President and Chief Economist at Freddie Mac, commented on this week's rates, "With the onset of the federal government shutdown and declining consumer confidence, fixed mortgage rates fell for the third consecutive week. Consumer sentiment fell for the second month in a row in September to its lowest reading since April, according to the University of Michigan. Moreover, a recent Bloomberg survey of professional forecasters suggests that a partial federal shutdown lasting one week would shave 0.1 percentage points off of GDP growth in the fourth quarter and even more if the shutdown lasts longer."

The money market fund finished this week at 0.4%. The 1-year CD finished at 0.7%.

Published October 4, 2013

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