Saturday December 7, 2019
FedEx Delivers Major Losses
FedEx Corp. (FDX) released its quarterly and annual earnings report on Tuesday, June 25. The Memphis-based delivery service reported a 15% decline in earnings.
The corporation posted revenue of $17.81 billion for the quarter, up from $17.31 billion at the same time last year. For the full year, FedEx reported revenue of $69.7 billion, up from the previous year's total of $65.5 billion.
"Fiscal 2019 was a year of both challenge and change for FedEx," said FedEx CEO and chairman, Frederick W. Smith. "FedEx enters fiscal 2020 with a sharp focus on extending our lead as the premier global transportation and logistics company and on making the necessary investments today to capture the significant market opportunities we see for the future."
For the fourth quarter, FedEx reported a loss of $1.97 billion, down from a profit of $1.13 billion in the same quarter last year. Net income was $540 million for the year, a staggering drop from the $4.57 billion reported in the previous year.
FedEx signaled that the near future may bring continued lows as the corporation sues the U.S. government over new international trade regulations and seeks to reduce ties with Amazon. However, the company has also announced a new deal with Dollar General stores to add FedEx pickup and drop-off service at over 8,000 locations around the country by the year 2020. Analysts believe FedEx wants to make itself more accessible to other online retailers hoping to compete with Amazon and to distance itself from Amazon as the e-giant builds its own delivery service.
FedEx (FDX) shares closed at $164.19, virtually unchanged for the week.
General Mills Posts Mixed Earnings
General Mills, Inc. (GIS) announced quarterly and yearly earnings Wednesday, June 26. The company reported revenue increased, but this uptick was largely due to the acquisition of Blue Buffalo Pet Products.
General Mills reported quarterly net sales of $4.16 billion, up from $3.89 billion last year at this time. For the full year, the company reported net sales of $16.86 billion, up from $15.74 billion in 2018.
"I'm pleased to say that we executed well, successfully transitioned Blue Buffalo into our portfolio, and delivered our financial commitments in fiscal 2019," said Jeff Harmening, General Mills Chairman and CEO. "We'll look to improve our performance again in fiscal 2020, and we have plans in place to accelerate our organic sales growth while maintaining our strong margins and cash discipline."
The Minneapolis, Minnesota-based company reported net quarterly earnings of $570 million, up from $354 million reported in the same quarter last year. Full-year net earnings were reported at $1.75 billion, down from $2.13 billion reported in 2018.
General Mills sells more than 100 brands in over 100 countries. However, the 7% increase in revenue in the fourth quarter did not come from the company's consumer snack foods, but rather from the acquisition of Blue Buffalo Pet Products. General Mills reported a decline in its traditional U.S. snack business for the quarter. CEO Jeff Harmening acknowledged the decline, stating, "In fiscal 2020, our plans include continued strong innovation and investments in capabilities and brand building to accelerate our topline growth, efficiency initiatives to maintain our strong margins, and a disciplined focus on cash to further reduce our leverage."
General Mills, Inc. (GIS) shares closed at $54.00, down 2.7% for the week.
Micron Computes Stock Gain Despite Reported Profit Decrease
Micron Technology, Inc. (MU) reported quarterly earnings on Tuesday, June 25. The Idaho-based memory-chip maker's stock jumped 10% after the report was released, despite earnings and revenue losses.
The company announced net revenue of $4.79 billion. This is down from revenue of $7.80 billion reported in the same quarter last year.
"Micron's improved competitive position and strong execution helped us deliver solid results despite a challenging environment," said Sanjay Mehrotra, Micron Technology President and CEO. "While we are seeing early signs of demand improvement, we plan to reduce our capital expenditures in fiscal 2020 to help improve industry supply-demand balance."
Micron reported earnings for the quarter of $840 million, down from earnings of $3.82 billion one year ago. The company earned an adjusted $1.05 per share, beating analysts' expectations of $0.78 per share.
Micron is facing risks due to low prices for memory chips and uncertainty in trade negotiations with China. In the past two financial quarters, 13% of Micron's revenue came from Huawei, a Chinese telecommunications company. On May 15, the U.S. Commerce Department added Huawei to a list of companies banned from the sale of American technology. The ban came after the government expressed concerns that the telecommunications maker could be using its equipment to spy on other countries and companies for the Chinese government. However, stock in Micron jumped due to hopes of reaching a trade agreement with China and Micron's numbers beating Wall Street's expectations.
Micron Technology, Inc. (MU) shares ended at $38.59, up 16.2% for the week.
The Dow started the week at 26,728 and closed at 26,600 on 6/28. The S&P 500 started the week at 2,951 and closed at 2,942. The NASDAQ started the week at 8,041 and closed at 8,006.
Yields Rise along with Hopes of Trade Agreement
Treasury yields rose near week's end as traders anticipate the results of the upcoming G-20 Summit. Meetings between the leaders of the U.S. and China, the two largest economies in the world, are expected to address ongoing trade tensions.
President Trump and Chinese President, Xi Jinping are due to meet Saturday, June 30, at the Summit. The Chinese government is calling on the U.S. to lift sanctions against Huawei and other Chinese companies, while President Trump wants to decrease the trade deficit with China and has been using tariffs to reduce the $419.5 billion gap.
"Consensus expects can-kicking, but no rolling back of tariffs that are already in place," said Savita Subramanian, Head of US Equity and Quantitative Strategy at Bank of America Merrill Lynch. "With above-trend economic growth and the S&P 500 at an all-time high, there is no sense of urgency on the part of the US to reach an agreement."
Earlier in the week, yields rose briefly after Treasury Secretary Steven Mnuchin signaled that a deal would not be far off. "We were about 90% of the way there [with a deal] and I think there's a path to complete this," he stated. However, yields dipped again once investors realized Mnuchin was talking about past discussions in May and his hopes for the future talks.
Yields increase correspondingly as confidence in the stock market increases. Treasury yields help set rates on everything from mortgages to auto loans. As skittish investors look for safe havens during times of economic uncertainty, bond sales in recent months have been increasing with Treasury yields steadily decreasing.
The 10-year Treasury note yield closed at 2.00% on 6/28, while the 30-year Treasury bond yield was 2.53%.
Mortgage Rates Fall
Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, June 27. The report revealed a decrease in rates.
The 30-year fixed rate mortgage rate averaged 3.73%, down from 3.84% last week. At this time last year, the 30-year fixed rate mortgage averaged 4.55%.
This week, the 15-year fixed rate mortgage averaged 3.16%, down from 3.25% last week. Last year at this time, the 15-year fixed rate mortgage averaged 4.04%.
"While the industrial and trade related economic data continues to dominate the news, the drop in mortgage rates over the last two months is already being felt in the housing market," said Sam Khater, Freddie Mac's chief economist. "Through late June, home purchase applications improved by five percentage points compared to the previous month. In the near-term, we expect the housing market to continue to improve from both a sales and price perspective."
Based on published national averages, the money market account closed at 1.22% on 6/28. The one-year CD finished at 2.57%.
Published June 28, 2019
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