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Monday September 22, 2014

Finances

Finances
 

eBay Reports Strong Quarterly Earnings

eBay Inc. (EBAY), a facilitator of online commerce, reported its fourth quarter and full year results on Wednesday, January 22. The company reported strong revenue in line with analysts' expectations.

eBay reported revenue of $4.53 billion for the most recent quarter and $16.05 billion for the year ending December 31, 2013. The company's annual revenue represents an increase of 14% over fiscal year 2012 when the company reported revenue of $14.07 billion.

The company also reported an increase in net income. eBay announced net income of $850 million for the quarter and $2.86 billion or $2.18 per share for the year.

CEO and President John Donahoe commented on eBay's quarterly and annual results. "We feel good about our performance and strong finish in the fourth quarter, with the holiday shopping season clearly showing how online, mobile and other omni-channel commerce capabilities are changing how consumers shop and pay. Mobile exceeded expectations for the year. Our total mobile commerce volume grew 88%, with eBay reaching $22 billion and PayPal hitting $27 billion in 2013. And mobile added more than 14 million customers. PayPal and eBay together create an incredibly strong global commerce ecosystem for consumers and merchants, and we continue to see tremendous growth opportunities ahead."

Billionaire investor Carl Icahn announced this week that he has acquired a 0.82% stake in eBay. He suggested that the company spin off PayPal, the fastest growing portion of the company. However, company CEO Donahoe responded by telling CNBC that PayPal and eBay are better together. "It's noteworthy that there has not been anyone else who has created another PayPal since PayPal was created. And that's because commerce and payments are converging into one thing. A payments network needs a commerce network like eBay." Unfortunately for Mr. Icahn, it looks like eBay and PayPal are staying together for now.

eBay Inc. (EBAY) shares ended the week of January 24, 2014 at $54.39, up 0.72% for the week.

Netflix Continues to Impress Investors


Netflix Inc. (NFLX), an internet television network provider, reported its quarterly earnings on Wednesday, January 22. The company continues to perform well and reported revenue and earnings per share well above estimates.

Netflix reported revenue of $1.18 billion for the quarter. This represents an increase from last year when the company reported revenue of $945.24 million. Also, this figure was above analysts' estimates that the company would report revenue of $1.17 billion.

The company reported quarterly net income of $48.42 million or $0.79 per share. This represents an increase from last year when the company reported net income of $7.9 million. Also, the earnings per share figure is well above analysts' projections that the company would earn $0.66 per share.

As part of their annual letter to shareholders CEO Reed Hastings and CFO David Wells made the following comments. "We ended 2013 with our best product ever and one substantially better than a year ago. Notably during Q4, we rolled out our new user interface for TV devices, a material step forward not only objectively in terms of engagement metrics, but in terms of press and public attention. This user interface is coupled with our new technology platform for TV devices, which has a smaller footprint and is higher performing, allowing us to reach lower powered devices and enabling future growth into new areas."

In addition to the impressive revenue and earnings per share figures, the company also increased its subscriber base by 2.33 million subscribers. Analysts were looking for a figure greater than 2 million. The content on Netflix continues to improve and Netflix continues to invest in original content. House of Cards and Orange is the New Black, Netflix original series, will both air a second season in 2014. In addition, Netflix will air "The Daredevil" in 2015, which is the first show resulting from a partnership between Netflix and Marvel TV.

Netflix Inc. (NFLX) shares ended the week of January 24, 2014 at $386.08, up 16.2% for the week.

Starbucks Reports Impressive Earnings


Starbucks Corporation (SBUX), a coffee roaster and international coffee retailer, reported its first quarter earnings on Thursday, January 23. The company reported earnings that beat analysts' expectations. However, the company also reported slowing growth that has caused some investors to be wary.

The company reported revenue of $4.24 billion for the quarter. This represents an increase of 11.8% from the comparable quarter last year when the company reported revenue of $3.79 billion.

The company reported quarterly net income of $540.7 million or $0.71 per share. This represents an increase of over 25% from last year when the company reported net income of $432.2 million. In addition, earnings per share beat analyst expectations by $0.02 per share.

"Holiday 2013 was the first in which many traditional brick and mortar retailers experienced in-store foot traffic give way to online shopping in a major way," said Howard Schultz, Chairman, President and CEO of Starbucks Coffee Company. "As our solid traffic growth and record Q1 results demonstrate, Starbucks unique combination of physical and digital assets positions us as one of the very few consumer brands with a national and global footprint to benefit from the seismic shift underway."

Some analysts are worried that Starbucks reported slower comparable store sales this quarter. The company reported a drop in comparable store sales of 4% compared to the same quarter last year. However, despite this disappointment the company is still growing. Starbucks operates more than 17,000 stores worldwide. The company just recently entered the Indian market in October 2012 and now operates 30 stores there. Its most recent store opened in Bangalore, India in late November 2013.

Starbucks Corporation (SBUX) shares ended the week of January 24, 2014 at $74.98, down 0.09 % for the week.

The Dow started the week of 1/20 at 16,459 and closed at 15,879 on 1/24. The S&P 500 started the week at 1,841 and closed at 1,790. The NASDAQ started the week at 4,223 and closed at 4,128.
 

Yields Fall on Emerging Markets Data

Treasury yields fell on Friday, January 24 as an economic report showed declining growth in some emerging markets. The report showed that a gauge of Chinese manufacturing showed contraction. Also, Argentina's peso fell the most in twelve years and Turkey's lira fell to a record low.

This data caused investors to flee emerging markets and enter the safe haven of U.S. government bonds. The U.S. 10-year yield fell to 2.7%, the lowest yield since late November 2013. After the initial reaction, the yield rose to 2.75% in early Friday trading.

"It's the international flight to quality," said Michael Franzese, Senior Vice President of Fixed-Income Trading at ED&F Man Capital Markets. "Emerging markets benefited from Fed stimulus because of dollars and people looking for yield because of the Fed crowding out investors in the U.S. Now, as the Fed signals it's leaving, you have panic set in."

The Federal Reserve announced in December 2013 that it would cut bond purchases in January 2014 by $10 billion. The Federal Open Market Committee meets next week. Some economists believe that the Fed will continue to cut its bond purchases by $10 billion increments over the next six months and end the quantitative easing program by December of 2014. If the Federal Reserve reduces its monthly bond purchases by $60 billion in the next six months then we will begin to see how much of the current economic recovery has been Fed policy and how much is real economic growth.

The 10-year Treasury note yield finished the week of 1/20 at 2.74% while the 30-year Treasury note yield finished the week at 3.65%.
 

Interest Rates Continue Slight Decline

Freddie Mac released the results of its weekly Primary Mortgage Market Survey (PMMS) on Thursday, January 23. The results show rates declining for a second consecutive week.

The 15-year fixed rate mortgage averaged 3.44% this week. This represents a slight decrease from last week when it averaged 3.45%. One year ago at this time the 15-year fixed rate mortgage averaged 2.71%.

This week, the 30-year fixed rate mortgage averaged 4.39%. This represents a decrease from last week when the rate averaged 4.41%. Last year the 30-year fixed rate mortgage averaged 3.42%.

"Mortgage rates were flat to down a little this week amid reports that inflation remains subdued," said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. "The Consumer Price Index was up to 0.3% in December after being unchanged in November. For the year as a whole, consumer prices rose just 1.5% in 2013."

The money market fund finished the week of 1/20 at 0.4%. The 1-year CD finished at 0.7%.

Published January 24, 2014


Previous Articles

Bank of America Regaining Strength

Family Dollar Reports Quarterly Earnings

More Milk Needed in General Mills' Bowl

Scholastic Reports Strong Results

Nike Reports Strong Earnings

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