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Sunday December 21, 2014

Finances

Finances
 

Nike Shares Fall On Slow Orders

Nike, Inc. (NKE), an international athletic apparel and equipment retailer, reported its latest quarterly results on Thursday, December 18. The company reported increases in both revenue and net income.

Nike reported revenue of $7.38 billion for the quarter. This represents an increase of 16.6% from the same period last year when the company reported revenue of $6.43 billion.

“Our strong second quarter results once again demonstrate NIKE is a growth company,” said Mark Parker, President and CEO of NIKE, Inc. “The power of our portfolio continues to unlock growth, as we keep a laser focus on our biggest opportunities. The breadth and depth of that portfolio has helped us consistently deliver strong results – quarter after quarter, year after year.”

The company reported quarterly net income of $655 million. This represents an increase of 22.7% from the comparable quarter last year when the company reported net income of $534 million. Earnings per share came in at $0.74 per share, compared with $0.59 per share during the same quarter one year ago.

Expectations are high when you are the world’s largest athletic apparel and equipment retailer. These high expectations were demonstrated this week. On Thursday, Nike reported significant year-over-year growth in revenue and net income as well as an 11% increase in third quarter sales orders. However, Nike’s stock slumped after the earnings announcement since the 11% increase in third quarter sales orders was the slowest growth pace in four quarters.

Nike, Inc. (NKE) shares ended the week at $94.84, down 1.65% for the week.

BlackBerry in Recovery Mode


BlackBerry Limited (BBRY), a mobile communications company, reported its latest quarterly earnings on Friday, December 19. The company may be on the road to recovery as long as it drives revenue growth by selling more mobile phones in the coming year.

BlackBerry announced revenue of $793 million for the latest quarter. This represents a decrease of 33.5% from the same period last year when the company reported quarterly revenue of $1.19 billion.

“We achieved a key milestone in our eight quarter plan with positive cash flow,” said Chairman and CEO John Chen. “We also attained another important milestone in the release of our new enterprise software products and devices. Our focus now turns to expanding our distribution and driving revenue growth.”

The company reported a net loss of $148 million. This represents a substantial improvement over the net loss of $4.4 billion reported during the comparable period last year. Net loss per share came in at $0.28, compared to $8.37 reported in the quarter one year ago.

The numbers show that while BlackBerry is recovering by cutting costs and focusing on its core competencies, it is struggling to generate revenue. The company decided not to try to compete with Apple and Samsung in the highly competitive consumer smartphone market. Instead it focused its energies on selling mobile devices and security software to the health-care, government and professional sectors. In furtherance of this strategy, BlackBerry announced on December 19 that it closed the acquisition of Germany’s Secusmart, an encryption technology developer.

BlackBerry Limited (BBRY) shares ended the week at $9.99, up 0.81% for the week.

FedEx Reports Strong Earnings


FedEx Corporation (FDX), a provider of transportation e-commerce and business services, reported its latest quarterly results on Wednesday, December 17. The company announced strong earnings.

The company reported revenue of $11.9 billion for the quarter. This represents an increase of 5% from the $11.4 billion reported during the comparable quarter last year.

“FedEx posted strong results and a higher operating margin in the second quarter, with continued growth in volumes and base yields in each of our transportation segments,” said Frederick W. Smith, FedEx Chairman, President and CEO. “We are in the final stages of this year’s peak shipping season, and I’d like to thank the more than 300,000 dedicated team members around the world for once again delivering outstanding service to our customers during the holidays.”

FedEx reported net income of $616 million. This represents an increase of 23% from the same period last year when the company reported net income of $500 million. Earnings per share came in at $2.14 per share, compared with $1.57 per share for the quarter one year ago.

FedEx has been attempting to expand its e-commerce solutions. On December 15 and 16 the company announced the acquisition of GENCO and Bongo International, respectively. GENCO is a third-party logistics provider with a comprehensive portfolio of supply chain services. Bongo is leader in providing end-to-end solutions that help retailers grow by reaching international consumers through the Internet.

FedEx Corporation (FDX) shares ended the week at $174.22, down $1.47% for the week.

The Dow started the week of 12/15 at 17,286 and closed at 17,805 on 12/19. The S&P 500 started the week at 2,005 and closed at 2,071. The NASDAQ started the week at 4,680 and closed at 4,765.
 

Bonds Rise with Fed Guidance

Bond yields fell and prices rose on December 19 after a significant rise in yields earlier in the week. This drop in yield came after the Federal Open Market Committee (FOMC) released a statement following their December meeting.

The FOMC met on December 16 and 17 to discuss Federal Reserve policy. Following the meeting the FOMC released a statement. Investors were wondering whether the FOMC would release more specific guidance as to when they might raise the federal funds rate. In past statements the FOMC stated that the rate would stay at its current level, between 0% and 0.25%, for a “considerable time.” In the statement released after the December meeting the FOMC said that it will “be patient in beginning to normalize the stance of monetary policy.” This led to speculation by investors everywhere about what “patience” means.

Some investors were cautious in interpreting the Fed’s statement. “Patience probably means the same thing as ‘considerable time’,” said Ray Remy, Head of Fixed-Income at Daiwa Capital Markets America, Inc. “Rate hikes are subject to the economy. We’re data dependent.” Other investors guessed at a specific time frame. “The Fed confirmed they are very determined to move in the summer time, or maybe as early as April,” said Scott Mather, Manager at Pimco Total Return Fund.

While the Federal Reserve has not given a specific time frame for the rate hike they have confirmed that the rates will increase at some point in the relatively near future. As a result the 10-year Treasury yield fell two basis points to 2.19%. This is after the yield had increased 17 basis points during the previous two days.

The 10-year Treasury note yield finished the week of 12/15 at 2.18% while the 30-year Treasury note yield finished the week at 2.77%.
 

Interest Rates Hit Lowest Level of 2014

Freddie Mac released the results of its Primary Mortgage Market Survey (PMMS) on Thursday, December 18. The results showed average fixed mortgage rates falling to their lowest levels in 2014.

The 30-year fixed rate mortgage averaged 3.80% this week. This represents a decrease from last week when it averaged 3.93%. One year ago at this time the 30-year fixed rate mortgage averaged 4.47%.

This week, the 15-year fixed rate mortgage averaged 3.09%. This represents a decrease from last week when it averaged 3.20%. Last year at this time the 15-year fixed rate mortgage averaged 3.52%.

“The 30-year fixed mortgage rate dropped to its lowest point of 2014 this week,” said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. “Mortgage rates fell along with 10-year Treasury yields, which closed at their lowest level since May 2013. November housing starts came in at a seasonally adjusted annual rate of 1.028 million starts, down 1.6% from an upwardly-revised October value. Housing starts for the calendar year will likely come in around 1 million, above the 2013 pace but lower than forecasters had expected at the start of 2014. Consumer prices declined more than expected in November, with CPI contracting 0.3%.”

The money market fund finished the week of 12/15 at 0.4%. The 1-year CD finished at 0.7%.

Published December 19, 2014

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