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Saturday December 20, 2014

Finances

Finances
 

Scholastic Reports Strong Results

Scholastic Corporation (SCHL), a children's book publishing company, announced its latest quarterly earnings on Thursday, December 19. The company reported strong earnings despite increased expenses for the quarter.

Scholastic announced quarterly revenue of $623.2 million. This represents an increase of 1.6% over the same period last year when the company reported revenue of $613.5 million. However, overall revenue had to increase 19% on the year to offset a $13.4 million impairment charge accounted for this quarter. The charge is related to an acquisition made 10 years ago.

The company reported net income of $58.3 million. This is a slight decrease from last year when the company reported net income of $61.8 million. Scholastic reported earnings per share of $1.80.

Richard Robinson, President and CEO of Scholastic commented on the company's quarterly results. "Scholastic had a very strong second quarter, driven by profit improvement in each part of our children's book business and excellent educational technology program sales. Scholastic continues to be a critical source for books that support children's independent reading in school and at home. Our new collaborative marketing efforts in children's book clubs and fairs enable us to provide books to teachers, parents and children through our school channels in a more streamlined, profitable manner."

Scholastic is the publisher behind such recent successes as the Harry Potter series and the Hunger Games trilogy. They also publish favorites such as the Magic School Bus and Goosebumps series. The company has been working to increase digital readership this year. Scholastic finalized an agreement with Apple to provide Scholastic titles as eBooks, including the Hunger Games trilogy.

Scholastic Corporation (SCHL) shares ended the week at $33.76, up 6.97% for the week.

Pier 1 Imports' Earnings Impress


Pier 1 Imports, Inc. (PIR), a home furnishings retailer, reported its quarterly earnings on Thursday, December 19. The company reported strong sales and net income for the quarter.

Pier 1 announced quarterly revenue of $465.46 million. This represents an increase of 9.6% over the same period last year when the company reported revenue of $424.53 million.

The company reported net income of $26.76 million for the quarter. This represents an increase of 11.5% over the comparable quarter last year when the company reported net income of $23.69 million. Pier 1 announced earnings per share of $0.26.

"We're pleased to deliver solid third quarter financial results," said Alex W. Smith, President and CEO of Pier 1 Imports. "Our unique and special merchandise assortments created a well-positioned value offer that resonated with our customers. Our more overtly promotional marketing stance drove strong traffic, and our store and e-commerce teams delivered on conversion. In fact, this year marked a new, all-time sales record for both Black Friday and the full post-Thanksgiving weekend."

Pier 1 Imports survived the recession by focusing on making its merchandise unique. CEO Alex Smith hired more buyers to focus on finding distinct pieces for its retail locations. As a result, not all Pier 1 locations have the same merchandise. This has allowed Pier 1 to avoid competing with giants like Amazon and carve out a niche market. Consequently, Pier 1's stock price has increased over 6,000% since its near bankruptcy in late 2008.

Pier 1 Imports (PIR) shares ended the week at $23.11, up 1.94% for the week.

Walgreen Co. Reports Solid Earnings


Walgreen Co. (WAG), operator of a chain of drugstores, reported its quarterly earnings on Friday, December 20. The company announced impressive revenue and net income figures despite a difficult consumer spending environment.

Walgreen reported quarterly revenue of $18.33 billion. This represents an increase of 5.9% over the same period last year when the company reported revenue of $17.12 billion.

The company reported net income of $695 million or $0.72 per share. This represents an increase of 68.3% from the comparable quarter last year when the company reported net income of $413 million.

"Given the continued soft economy, we were generally satisfied with our top-line growth where we increased both traffic and sales for the quarter as well as our pharmacy market share," said Walgreen President and CEO Greg Wasson. "We will continue our sharp focus on expense management as we address the challenging environment, and we expect to realize the synergies from our strategic partnership consistent with our previously stated goal."

On December 9, Walgreen announced that it is now offering daily testing for cholesterol, blood glucose and body composition at more than 60 stores in Maryland. The tests are administered to those over 18 without an appointment. A person can have their cholesterol, blood glucose, body composition and blood pressure tested for $65. "Providing convenient, affordable access to health testing services is an important part of our commitment to disease prevention and chronic care management," said Jon Reitz, Market Pharmacy Director at Walgreen Co.

Walgreen Co. (WAG) shares ended the week at $57.43, down 3.15% for the week.

The Dow started the week of 12/23 at 16,225 and closed at 16,478 on 12/27. The S&P 500 started the week at 1,823 and closed at 1,841. The NASDAQ started the week at 4,136 and closed at 4,157.
 

Treasury Yields Rise on Economic Data

Treasury yields rose and prices fell this week as the market reacted to the economic news of the past two weeks. The 10-year Treasury yield rose to its highest level in over three months.

On December 18, the Fed announced that it will reduce its bond purchases to $75 billion next month. In addition, the U.S. Department of Labor announced that initial claims for jobless benefits declined 42,000 to 338,000 during the week ending December 21. Analysts' expected a decline of 35,000.

This economic data caused the 10-year Treasury yield to rise to 2.998%, its highest level since September 6, in early trading on Thursday, December 26. On September 6, the 10-year Treasury yield reached 3.005%, the highest level since July 2011.

One question for investors is how quickly the Federal Reserve will diminish its bond purchases over the next few months. Jim Vogel, Head of Agency-Debt Research at FTN Financial commented, "They are going to do the first couple of tapers and then see what happens. The data dependency will come probably starting at the April meeting. That's when they will have enough time to gauge reaction to tapering."

Another issue is how long the Federal Reserve will continue to keep the federal funds rate at its current level of between zero and 0.25%. At last week's meeting, the Federal Open Market Committee ("the Committee") stated that it will likely be appropriate to maintain the current range well past its initial 6.5% unemployment rate target. However, the Committee failed to give further guidance.

"They'll try to keep rates anchored as much as they can, but it will be difficult if data continues to come in strong," said Thomas Roth, Senior Treasury Trader at Mitsubishi UFJ Securities USA, Inc. "The risk is if the economy speeds up faster than people expect, the Fed won't want to, and won't be able to, keep rates where they are."

The 10-year Treasury note yield finished the week of 12/23 at 3.01% while the 30-year Treasury note yield finished the week at 3.94%.
 

Interest Rates Remain Largely Unchanged

Freddie Mac released the results of its weekly Primary Mortgage Market Survey (PMMS) on Thursday, December 26. The results show average fixed mortgage rates remaining largely unchanged to end the year.

The 30-year fixed rate mortgage averaged 4.48% this week. This represents a slight increase from last week when it averaged 4.47%. One year ago at this time, the 30-year fixed rate mortgage averaged 3.35%.

This week, the 15-year fixed rate mortgage averaged 3.52%.This represents a slight increase from last week when it averaged 3.51%. Last year at this time, the 15-year fixed rate mortgage averaged 2.65%.

"Mortgage rates were little changed this week following mixed economic reports," said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. "Real GDP was revised upwards to 4.1% growth in the third quarter of this year. However, existing-home sales dropped 4.3% to a seasonally adjusted annual rate of 4,900,000 in November. Also, new home sales fell 2.1% to a seasonally adjusted annual rate of 464,000."

The money market fund finished the week of 12/23 at 0.4%. The 1-year CD finished at 0.7%.

Published December 27, 2013


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