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Tuesday January 27, 2015



Walt Disney Regains Its Financial Magic

The Walt Disney Company (DIS) reported its fiscal 2014 first quarter results on Wednesday, February 5. The company reported record earnings for the first quarter, a fact investors welcomed.

Disney reported revenue for the quarter of $12.31 billion. This number was in line with expectations and represented a 9% increase over the $11.34 billion reported during the comparable period last year.

Net income for the quarter was $1.84 billion or $1.03 per share. This figure was 33% higher than what was reported last year when net income was $1.38 billion or $0.77 per share.

Walt Disney Chairman and CEO Robert A. Iger had this to say about the quarterly results, "We had an incredibly strong first quarter, delivering a 32% increase in adjusted earnings per share and double-digit increases in operating income in all business segments. These results reflect the strength of our unprecedented portfolio of brands, a constant focus on creativity and innovation, and the continued success of our long-term strategy."

Disney's quarter impressed investors, especially its studio entertainment segment, which saw operating income increase 75% to $409 million. The studio results reflected the strong box office performance of Frozen and Thor: The Dark World during the quarter. Investors were encouraged to see the company's studio entertainment get back on track after the disastrous performance of The Lone Ranger during the summer of 2013. In addition, the company's future box office success looks bright as the company plans to release The Avengers 2 and more Star Wars movies over the next few years.

The Walt Disney Company (DIS) shares ended the week at $75.67.

Time Warner Posts Quarterly Results

Time Warner Inc. (TWX) reported its fourth quarter results on Wednesday, February 5. The company had a solid quarter but saw its net income fall 12% from the same period last year.

Time Warner reported revenue of $8.57 billion for the quarter. This was a 5% increase from the comparable period last year when revenue was $8.16 billion.

Net income for the quarter was $983 million, a 12% drop from the same period last year when net income was $1.11 billion. The drop was attributed to greater investments in programming and other costs.

"We had another very successful year in 2013, with Turner, Home Box Office and Warner Bros. all posting record profits while also investing for future growth," said Jeff Bewkes, Chairman and CEO of Time Warner. "HBO remains in a league of its own, once again receiving the most Primetime Emmy Awards of any network, while tying for the most Golden Globe Awards and recording its biggest gain in domestic subscribers in 17 years. Warner Bros. delivered its best year on record by any measure. Theatrically, it led both the domestic and international box office, and its films received an industry-leading 21 Academy Award nominations including Best Picture nominations for Gravity and Her."

While the company experienced significant revenue growth at its Warner Bros., HBO and Turner segments, it saw little growth at Time Inc., the company's publishing segment. During the earnings announcement the company reaffirmed its plans to spin off the Time Inc. segment by the end of its 2014 second quarter. Hopefully, this will offset the net income drag that the publishing segment has placed on the company's otherwise successful operations.

Time Warner Inc. (TWX) shares ended the week at $63.91.

Activision Blizzard Gets a High Score

Activision Blizzard, Inc. (ATVI), one of the world's leading gaming companies, announced its fourth quarter results. The company's results exceeded expectations and gave investors renewed confidence in the company.

Activision Blizzard reported revenue of $2.27 billion for the quarter, which was a decrease from the $2.6 billion reported during the same period last year. Revenue for the quarter exceeded expectations that it would be lower at $2.22 billion.

On a per share basis, the company earned $0.79, greater than expectations that earnings would be $0.72 per share. During the comparable period last year, Activision Blizzard earned $0.78 per share.

Activision Blizzard CEO Bobby Kotick had this to say about the quarter, "2013 was a transformational year for Activision Blizzard and for our industry. Our transaction with Vivendi returned us to independence and eliminated the challenges and constraints of being a controlled company. The continued success of our games delivered better-than-expected financial results, including stronger net revenues and earnings per share, and over $1.26 billion in operating cash flow."

Activision Blizzard had a strong quarter headlined by Call of Duty: Ghosts, which was the number one selling game on next-generation consoles. The company's ability to find great success during the quarter encouraged investors regarding Activision's product pipeline. CEO Bobby Kotick announced that the company has plans to release a number of games with franchise potential in 2014, including Destiny, a first-person action game from former Halo developer Bungie.

Activision Blizzard, Inc. (ATVI) shares ended the week at $19.64.

The Dow started the week of 2/3 at 15,698 and closed at 15,794 on 2/7. The S&P 500 started the week at 1,782 and closed at 1,797. The NASDAQ started the week at 4,105 and closed at 4,126.

Treasuries Rise as Jobs Report Disappoints

Treasuries rose on Friday, February 7 when the U.S. Labor Department released the jobs report for January that showed the economy adding fewer jobs than forecasted. Despite the disappointing jobs news, no analysts expect the Federal Reserve to reverse course on its decision to taper bond purchases in the future.

The January jobs report showed the U.S. economy added 113,000 jobs during the month, which was well below the forecasted 180,000 jobs. This was the second month in a row of disappointing jobs news following the addition of only 75,000 jobs in December. The December-January pace is concerning because employers need to add at least 150,000 jobs a month just to keep up with population growth. During 2013, U.S. employers added on average 182,170 jobs a month.

Many analysts and investors are understandably concerned by the latest jobs report. "That's a tough pill to swallow because the consensus view was that the U.S. economy was finally getting on a stronger path of growth. We've had two employment reports in a row which dispel that theory," said Gary Pollack, head of Fixed-Income Trading at Deutsche Bank AG's Private Wealth Management unit in New York.

The disappointing jobs numbers have also cast doubt on the Federal Reserve's decision to taper bond purchases this year. In early December the Federal Reserve finally announced plans to begin reducing bond purchases by $10 billion per month. However, the Fed's confidence in the U.S. economy has been shaken by the consecutive release of two weak jobs reports.

"The number is disappointing at a time in which the Fed is backed into a corner," said Guy Haselmann, an Interest-Rate Strategist at Bank of Nova Scotia in New York. "They will be unwilling to reverse a direction they just started. The taper is going to continue. The hurdle for not continuing the taper is exceptionally high."

The 10-year Treasury note yield finished the week of 2/3 at 2.68% while the 30-year Treasury note yield finished the week at 3.68%.

Interest Rates Decline on Housing Data

Freddie Mac released the results of its weekly Primary Mortgage Market Survey on Thursday, February 6. The results show average fixed mortgage rates falling this week after negative news concerning home sales in December was released.

This week, the 15-year fixed rate mortgage averaged 3.33%. This represents a decrease from last week when it averaged 3.40%. One year ago, the 15-year fixed rate mortgage averaged 2.77%.

The 30-year fixed rate mortgage averaged 4.23% this week, a decrease from last week when it averaged 4.32%. Last year at this time, the 30-year fixed rate mortgage averaged 3.53%.

Frank Nothaft, Vice President and Chief Economist at Freddie Mac commented on this week's change in rates: "Mortgage rates fell further this week following the release of weaker housing data. The pending home sales index fell 8.7% in December to its lowest level since October 2011. Fixed residential investment negatively contributed to GDP in the fourth quarter for the first time since the third quarter of 2010."

The money market fund finished the week of 2/3 at 0.4%. The 1-year CD finished at 0.7%.

Published February 7, 2014

Previous Articles

Apple Reports Record Quarterly Revenue

eBay Reports Strong Quarterly Earnings

Bank of America Regaining Strength

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