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Friday March 23, 2018



Nike's Profits Soar

Nike, Inc. (NKE) reported its latest quarterly earnings on Tuesday, March 21. The athletic wear company's profits beat Wall Street expectations, but its revenue fell short.

Revenue for the quarter was $8.4 billion, up 5% from $8.0 billion during the prior year's quarter. This was slightly below the $8.5 billion analysts expected.

"The power of Nike's diverse, global portfolio delivered another solid quarter of growth and profitability," said Nike Chairman, President and CEO Mark Parker. "To expand our leadership and ignite Nike's next phase of growth, we're delivering a relentless flow of innovation through performance and style, increasing speed throughout the business and creating more direct connections with consumers leveraging digital and membership."

Nike reported net income of $1.1 billion, up 20% from $950 million during the same quarter last year. On an earnings per share basis, profit rose to $0.68 compared to $0.55 a year ago.

The Beaverton, Oregon-based company achieved a substantial increase in profits for the quarter despite lower-than-expected revenue. This was due, in part, to a drop in selling and administrative expenses, which fell 3% from the prior year's quarter. Nike's futures orders, or expected sales to retailers within six months, are down 4%. The company's ever-expanding focus on its Direct-to-Consumer segment, however, saw 13% growth on a constant currency basis.

Nike, Inc. (NKE) shares ended the week at $56.36, down 2.8% for the week.

FedEx Reports Earnings

FedEx Corp. (FDX) released its quarterly earnings report on Tuesday, March 21. The company reported increased profits and revenue.

The company reported revenue of $15 billion for the quarter. During the same quarter last year, FedEx reported revenue of $12.7 billion.

"Our worldwide FedEx team delivered an outstanding peak season. Even with our highest volumes ever, we achieved record service levels," said FedEx Chairman and CEO Frederick W. Smith. "We are confident our strategic investments to expand our global scope and portfolio of solutions position FedEx for greater long-term profitable growth as we adapt to meet the evolving needs of our customers."

Net income for the quarter was $562 million, or $2.07 per share. This is up from $507 million, or $1.84 per share during the same time last year.

The global delivery giant announced this week that its subsidiary, FedEx Express, would begin operating a new flight between Liege, Belgium and Memphis, Tennessee in the coming weeks. FedEx announced the acquisition of European delivery service TNT Express in May of last year. The company expects the new flight route to benefit TNT customers shipping items to North American destinations.

FedEx Corp. (FDX) shares ended the week at $188.12, down 3.5% for the week.

General Mills Sales Continue Decline

General Mills (GIS) released its quarterly earnings on Tuesday, March 21. Profits came in above analysts' expectations, while revenue fell short.

The company reported net sales of $3.8 billion during the quarter. This is down 5% from $4.0 billion during the same quarter last year.

"Our third quarter results finished in line with our expectations and keep us on track to deliver the guidance we updated last month," said Ken Powell, Chairman and CEO of General Mills. "Our net sales declined due primarily to gaps in pricing and promotional activity in key U.S. businesses. Our cost savings efforts helped us expand our adjusted operating margin and drive growth in adjusted diluted EPS."

Net earnings attributable to General Mills were $357.8 million for the year. This is down from $361.7 million in the prior year's quarter.

With its latest earnings report, General Mills has now posted seven consecutive quarters of decreasing sales. The company's North America Retail segment saw a 7% decline in sales to $2.5 billion, which the company attributed mainly to poor sales of baking and yogurt products. Sales in the company's Europe and Australia segment dropped 3% for the quarter, while the Asia and Latin American segment remained unchanged.

General Mills (GIS) shares ended the week at $59.16, down 2.6% for the week.

The Dow started the week of 3/20 at 20,916 and closed at 20,597 on 3/24. The S&P 500 started the week at 2,378 and closed at 2,344. The NASDAQ started the week at 5,899 and closed at 5,829 for the week.

Treasury Bonds Fall as Healthcare Vote Nears

U.S. Treasury bond yields fell steadily to begin the week, but reversed course on Thursday. Investors appeared cautious as the House of Representatives prepared to vote on a healthcare bill that would repeal and replace the Affordable Care Act (ACA).

The House was scheduled to vote on the healthcare bill on Thursday, which was the seventh anniversary of the ACA. The vote was postponed, however, as uncertainty arose over whether there were enough votes to pass the measure. While the Republicans have been relatively unified on the call to repeal and replace the ACA, GOP lawmakers have competing visions as to how best to accomplish that goal.

The 10-year Treasury note yield, which peaked at 2.51% on Monday, bottomed out at 2.38% on Wednesday, as the scheduled vote neared. By Thursday afternoon, the yield had risen to 2.44%.

"This is the first real test of the Trump presidency, to see if it's really a presidency that can effect change," said Philip Blancato, CEO at Landenburg Thalmann Asset Management. "The concern is if it doesn't get passed, none of his legislative agenda will go through."

Regardless of the outcome of the healthcare bill, the President appears ready to move on to other matters. With other pressing agenda items such as tax reform on the horizon, changes to the healthcare law appear headed for the back burner.

"He doesn't want to spend the time for the next two, four, six, eight months, whatever it would take," said Mick Mulvaney, Director of the Office of Management and Budget. "That's what it would take if you let the House go about its own business."

The 10-year Treasury note yield finished the week of 3/20 at 2.40%, while the 30-year Treasury note yield was 3.00%.

Mortgage Rates Reverse Course

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, March 23. Mortgage rates fell this week after two straight weeks of increases.

The 30-year fixed rate mortgage averaged 4.23% for the week, down from 4.30% last week. At this time last year, the 30-year fixed rate mortgage averaged 3.71%.

The 15-year fixed rate mortgage averaged 3.44% this week, down from 3.5% last week. During this time last year, the 15-year fixed rate mortgage averaged 2.96%.

"The 10-year Treasury yield fell about 10 basis points this week. The 30-year mortgage rate moved with Treasury yields and dropped 7 basis points to 4.23%," said Sean Becketti, Chief Economist at Freddie Mac. "This marks the greatest week-over-week decline for the 30-year mortgage rate in over two months, a stark contrast from last week's jump following the FOMC announcement."

Based on published national averages, the money market account finished the week of 3/20 at 0.68%. The 1-year CD finished at 1.26%.

Published March 24, 2017
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