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Friday June 22, 2018



Nike Scores on Better-than-Expected Earnings

Nike, Inc. (NKE) announced its quarterly earnings on Thursday, June 29. The world's leading footwear maker surprised analysts with earnings and revenue in the fourth quarter that surpassed Wall Street's expectations.

Nike reported revenue of $8.68 billion in the fourth quarter, beating the $8.63 billion in revenue expected by analysts. Last year, revenue in the fourth quarter was $8.24 billion.

"[Nike] continues to create both near-term wins in today's dynamic environment and a lasting foundation for future growth," said Nike President and CEO Mark Parker. "Through our Consumer Direct Offense, we're putting even more firepower behind our greatest opportunities in Fiscal 2018. It will be a big year for [Nike] innovation and we'll bring those stories to life through deeper consumer connections in our key cities around the world."

The company's net income was $1.01 billion in the fourth quarter, up from $846 million one year ago. On an adjusted earnings per share basis, Nike reported profit of $0.60 per share, beating analysts' earnings predictions of $0.50 per share.

While Nike's sales in the U.S. were relatively flat year-over-year, the company saw growth overseas as sales in Western Europe jumped 3% while revenue in China soared 11%. During a conference call on Thursday, the company confirmed reports that it will be entering into a pilot deal with rival retailer Amazon to sell a limited number of products on Amazon's U.S. e-commerce platform. Parker stated on Thursday that they will begin by selling "a small product assortment across footwear, apparel and accessories" with the overall goal being to "elevate the consumer experience by better segmenting and differentiating all of [the company's] channels."

Nike, Inc. (NKE) shares ended the week at $59.00 on 6/30, up 10% for the week.

General Mills Reports Q4 Earnings

General Mills, Inc. (GIS) announced its fourth quarter earnings on Wednesday, June 28. While the food giant experienced a drop in sales for the quarter, the loss was not as large as expected, causing shares to rise 2.6% after the report's release.

General Mills reported quarterly revenue of $3.81 billion. This was a 3% decrease from last year's first quarter revenue of $3.93 billion, but better than the $3.75 billion in revenue expected by analysts.

"Our fourth quarter results finished in line with our expectations, with improved organic net sales trends in total and across three of our four operating segments," said General Mills CEO Jeff Harmening. "While we took important steps in fiscal 2017 to globalize our business structure, accelerate our cost-savings efforts, expand our margins, and drive growth in adjusted diluted EPS, our results on the topline fell well short of our standards. Our entire organization is moving with urgency in fiscal 2018 to meaningfully improve our net sales trends while keeping a sharp eye on our efficiency."

General Mills announced net earnings of $408.9 million, or $0.69 per share. This is up from $379.6 million, or $0.62 per share, that the company reported in the same quarter one year ago.

The maker of Cheerios, Yoplait, Haagen-Dazs and Progresso soup experienced a double-digit decrease in yogurt sales in the fourth quarter, which contributed to the drop in revenue year-over-year. Luckily, lower food prices and cost-cutting measures allowed the company to produce solid earnings despite the decline in sales. The company forecasts that sales will continue to fall by 1% to 2% in fiscal 2018.

General Mills, Inc. (GIS) shares ended the week at $55.40 on 6/30, down 1% for the week.

Walgreens Tops Earnings' Forecasts

Walgreens Boots Alliance, Inc. (WBA) reported quarterly earnings on Tuesday, June 16. The company reported better-than-expected revenue and announced new plans to purchase Rite Aid stores instead of moving forward with a merger of the two drugstore companies.

Walgreens announced revenue for the third quarter was $30.1 billion—topping the $29.7 billion in revenue that analysts predicted. Last year, revenue in the third quarter was $29.5 billion.

"Our results this quarter continued to meet our expectations as strategic partnerships brought more patients to our U.S. pharmacies," said Walgreens CEO Stephan Pessina. "This led to our highest reported quarterly retail prescription market share in the U.S. Our ongoing cost transformation program continues to bear fruit and we remain confident in the long term growth of our company."

Walgreens reported net income of $1.16 billion, up from last year's third quarter earnings of $1.10 billion. Earnings per share for the third quarter were $1.07, up from $1.01 per share a year ago.

On Thursday, Walgreens announced that it would no longer be moving forward with its $7.37 billion takeover of Rite Aid Corp. (RAD). Instead, Walgreens plans to spend $5.18 billion to buy 2,186 Rite Aid stores. The decision was made after struggling for more than a year and a half to receive approval of the merger from the U.S. Federal Trade Commission due to concerns that the takeover would drastically reduce competition in the drugstore market. Investors reacted positively to Walgreens' announcement on Thursday, causing Walgreens' shares to rise 5% in premarket trading.

Walgreens Boots Alliance, Inc. (WBA) shares ended the week at $78.31 on 6/30, up 2% for the week.

The Dow started the week of 6/26 at 21,435 and closed at 21,350 on 6/30. The S&P 500 started the week at 2,443 and closed at 2,423. The NASDAQ started the week at 6,293 and closed at 6,140.

Treasury Yields Rise

Treasury yields rose for the fourth consecutive day on Friday following statements from European officials that indicated a strengthening of Europe's economy. The global bond sell-off, coupled with better-than-expected U.S. economic data, caused benchmark Treasury yields to hit a six-week high on Thursday.

On Tuesday, a global bond sell-off ignited after comments made by President of the European Central Bank (ECB) Mario Draghi lead many investors to believe that the ECB is preparing to phase out its stimulus measures as the economy improves. However, later in the week, officials for the ECB expressed that Draghi's statements had been misinterpreted.

Despite clarification from the ECB, optimism concerning the European economy continued following remarks from the governor of the Bank of England, Mark Coney. Coney expressed that "removal of monetary stimulus is likely" and that the U.K. could see a rise in interest rates if the economy continues to recover.

Financial markets around the world responded to the chatter in Europe and U.S. Treasury bonds reacted accordingly. By Thursday, the yield on the 10-year Treasury note had jumped 14 basis points over the course of three days.

"What's going on in Europe is really what's driving us here," said Brian Daingerfield, a macro strategist at NatWest Markets. Benchmark U.S. Treasury yields hit a six-week high on Thursday.

Yields were also positively impacted by data a little closer to home on Thursday, which indicated the U.S. economy slowed less than what was anticipated in the first quarter thanks to increased consumer spending. The Commerce Department reported that consumer spending rose at a 1.1% pace, which was nearly double the 0.6% pace recorded last month.

The 10-year Treasury note yield finished the week of 6/26 at 2.30%, while the 30-year Treasury note yield was 2.84%.

30-Year Fixed Rate Hits 2017 Low

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, June 29. The report indicated that the 30-year fixed mortgage rate fell to its lowest point so far this year.

The 30-year fixed rate mortgage averaged 3.88% this week. This represents a decrease from last week when it averaged 3.90%. Last year at this time, the 30-year fixed rate mortgage averaged 3.48%.

This week, the 15-year fixed rate mortgage averaged 3.17%, unchanged from last week. The 15-year fixed rate mortgage averaged 2.78% one year ago.

"The 30-year mortgage rate fell 2 basis points to 3.88% this week," said Sean Becketti, Chief Economist at Freddie Mac. "However, the majority of our survey was conducted prior to Tuesday's sell-off in the bond market which drove Treasury yields higher. Mortgage rates may increase in next week's survey if Treasury yields continue to rise."

Based on published national averages, the money market account finished the week of 6/26 at 0.78%. The 1-year CD finished at 1.40%.

Published June 30, 2017
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