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Wednesday July 30, 2014

Finances

Finances
 

Coca-Cola Reports Disappointing Earnings

The Coca-Cola Company (KO), the world's largest beverage company based on market value, reported its latest quarterly results on Tuesday, February 18. The company reported lower revenue and net income compared to last year.

The company reported quarterly revenue of $11.04 billion. This represents a decrease of 4% from the same period last year when the company reported revenue of $11.46 billion.

Coca-Cola reported net income of $1.71 billion, or $0.38 per share, for the quarter. This also represents a decrease from the comparable period last year when the company reported net income of $1.87 billion or $0.41 per share.

Muhtar Kent, Chairman and CEO of Coca-Cola, commented on the company's future. "As we work to restore momentum in our business during 2014, we see many reasons to believe we can accelerate our growth and achieve our 2020 Vision. We are committed to accelerating marketing investments in our brands, further advancing our innovation strategies and maximizing productivity and reinvestment for growth. All of us at The Coca-Cola Company remain resolute in our commitment to deliver results in line with our long-term growth model and 2020 Vision for sustainable value and success."

The board of directors and management team at Coca-Cola is currently in flux. It was just announced on Thursday, February 20 that three individuals would be leaving the company after serving the company for a combined total of 59 years. Board member Donald McHenry, board member Jacob Wallenberg and CFO Gary Fayard are all leaving the company. Kathy Waller will succeed Gary Fayard as CFO of The Coca-Cola Company.

The Coca-Cola Company (KO) shares ended the week of 02/17 at $37.19, down 2.1% for the week.

Wal-Mart Stays Consistent


Wal-Mart Stores, Inc. (WMT), the world's largest company based on sales, reported its fourth quarter and 2013 fiscal year results on Thursday, February 20. The company's sales and net income remained relatively stable compared to a year ago.

Wal-Mart reported quarterly and annual revenue of $128.79 billion and $476.29 billion, respectively. This represents a slight increase from the same periods last year when the company reported quarterly and annual revenues of $127.78 billion and 468.65 billion.

The company reported net income of $4.35 billion for the quarter and $15.92 billion for the year. This represents a decrease from the comparable periods last year when the company reported quarterly net income of $5.6 billion and annual net income of $16.96 billion.

"Our company grew net sales this year to reach more than $473 billion," said Doug McMillon, Wal-Mart Stores President and CEO. "Global eCommerce sales, including acquisitions, surpassed the $10 billion mark, a 30% increase over last year. We will continue to grow our global business by focusing on customers and serving them how they want to be served."

Wal-Mart is making a push to improve its market share in China. The company currently ranks as the country's third largest retailer. To improve sales Wal-Mart is changing its low-cost strategy to focus more on quality and safety. "If you went out and asked members or customers, 'what's your single biggest worry?' they'll tell you trust and authenticity," said Greg Foran, Wal-Mart China CEO. "Once you've got their trust, the next question they ask themselves is, 'How much is it?'"

Wal-Mart Stores, Inc. (WMT) shares ended the week of 2/17 at $72.12, down 3.14% for the week.

Tesla Charges Forward


Tesla Motors, Inc. (TSLA), an electric car company based in Silicon Valley, reported its fourth quarter and 2013 fiscal year results on Wednesday, February 19. The car company reported impressive revenue, but investors are skeptical regarding the car maker's future success.

Tesla reported revenue of $615.22 million for the quarter and $2.01 billion for the year. This represents a significant increase over the same periods last year when the company reported total revenue of $306.33 million for the quarter and $413.26 million for the year.

The company reported a quarterly net loss of $16.26 million and an annual net loss of $74.01 million. This represents a significant improvement from last year when the company reported a quarterly net loss of $89.93 million and an annual net loss of $396.21 million.

"Last quarter, we had record deliveries of 6,892 vehicles and exceeded our target automotive gross margin of 25%," said Elon Musk, Chairman and CEO of Tesla, in a letter to shareholders. "This capped a year in which we delivered 22,477 vehicles, resulting in over $2 billion in sales on a GAAP basis. For the year, Model S was the top selling vehicle in North America among comparably priced cars. Nonetheless, we believe there is room to improve in 2014 as we complete the Supercharger network and enable vehicle service almost anywhere in North America."

Despite reporting impressive revenue, investors are skeptical that Tesla can deliver solid results moving forward. One of the primary indicators that Tesla may be facing trouble is that U.S. deliveries of the Model S are falling. While Tesla delivered 5,150 vehicles in the U.S. during the second quarter of 2013, the company lowered its guidance to around 3,500 U.S. deliveries in the first quarter of 2014. At the same time, the guidance for European deliveries remains flat at 2,900 vehicles. Combine this with the fact that Tesla continues to report net losses and many investors are beginning to wonder whether the company can justify its current stock price.

Tesla Motors, Inc. (TSLA) shares ended the week of 2/17 at $209.60, up 2.12% for the week.

The Dow started the week of 2/17 at 16,154 and closed at 16,103 on 2/21. The S&P 500 started the week at 1,839 and closed at 1,836. The NASDAQ started the week at 4,254 and closed at 4,263.
 

Treasury Yields Fall Slightly

Bond prices rose and yields fell on Friday, February 21 after the release of economic data and minutes from the latest Federal Open Market Committee meeting. The 10-year U.S. Treasury yield fell from 2.78% to 2.76% in early Friday morning trading.

The National Association of Realtors released a report on Friday, February 21 showing that sales of previously owned U.S. homes fell to the lowest level in more than a year. Home purchases decreased 5.1% to a 4.62 million annual rate last month. This was 50,000 below the consensus forecast of 4.67 million.

Many analysts are wondering about the reason for the drop in home sales. Thomas Roth, Senior Treasury Trader at Mitsubishi UFJ Securities USA, Inc., commented on the National Association of Realtors report. "The market is trying to figure out where we are – the question still remains – was this a weather-induced slowdown or something more?" Christopher Sullivan, Chief Investment Officer at United Nations Federal Credit Union added, "The market could quite easily recalibrate itself to a better fundamental picture once we see data no longer distorted by unusual weather conditions."

In addition, many are interpreting the minutes of the latest Federal Reserve meeting to indicate that the Fed will continue to decrease its bond purchases. The minutes also indicate that a few officials believe that it might be appropriate to increase the federal funds rate relatively soon. This would have wide-reaching effects on the economy.

The full effect of inclement weather and changes in Fed policy likely will be unknown for many months. For now, investors must do their best to anticipate the impact of these events on the market.

The 10-year Treasury note yield finished the week of 2/17 at 2.73% while the 30-year Treasury note yield finished the week at 3.7%.
 

Interest Rates Inch Higher

Freddie Mac released the results of its weekly Primary Mortgage Market Survey (PMMS) on Thursday, February 20, 2014. The results show average fixed mortgage rates increasing for the second consecutive week.

The 30-year fixed rate mortgage averaged 4.33% this week. This is an increase from last week when it averaged 4.28%. One year ago at this time, the 30-year fixed rate mortgage averaged 3.56%.

This week, the 15-year fixed rate mortgage averaged 3.35%. This represents an increase from last week when it averaged 3.33%. Last year at this time, the 15-year fixed rate mortgage averaged 2.77%.

Frank Nothaft, Vice President and Chief Economist at Freddie Mac, commented on this week's survey results. "Mortgage rates crept up further following the uptick in the 10-year Treasury yield as minutes of the Federal Reserve's last meeting indicated little possibility of a pause in the central bank's reduction of bond purchases. Housing starts in January fell 16% to a seasonally adjusted annual rate of 888,000 units, below consensus forecast. Permits were at a seasonally adjusted annual rate of 937,000 in January, also below consensus."

The money market fund finished the week of 2/17 at 0.4%. The 1-year CD finished at 0.7%.

Published February 21, 2014


Previous Articles

PepsiCo's Quarter Fails to Impress

Walt Disney Regains Its Financial Magic

Apple Reports Record Quarterly Revenue

eBay Reports Strong Quarterly Earnings

Bank of America Regaining Strength

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