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Friday March 27, 2015

Finances

Finances
 

Nike Reports Impressive Earnings

Nike, Inc. (NKE), a sports apparel and equipment retailer, reported its latest quarterly earnings on Thursday, March 19. The company reported impressive earnings despite the impact of a stronger dollar.

Nike reported quarterly revenue of $7.46 billion. This represents an increase of 7% from the same period last year when the company reported revenue of $6.97 billion.

"Our strong third quarter results show that our growth strategies are working, even under challenging macroeconomic conditions," said Mark Parker, President and CEO of Nike. "Nike has the ability to deliver consistent shareholder value due to the strength of our brand, our relentless commitment to innovation and our powerful portfolio that allows us to invest in the opportunities with the highest potential for growth as well as manage risk."

The company reported net income of $791 million for the quarter. This represents an increase of 16% from the comparable period last year when Nike reported net income of $682 million.

Nike's earnings impressed investors. Net income came in above expectations even though a strong dollar weighed on sales and future orders during the holiday season. As a result, Nike's stock price rose to a high of $98.62 before closing Thursday trading at $98.32.

Nike, Inc. (NKE) shares ended the week at $101.98, up 6% for the week.

Adobe Launches Document Cloud


Adobe Systems Incorporated (ADBE), an international software company, reported its latest earnings on Tuesday, March 17. The company reported strong earnings and launched Adobe Document Cloud.

Adobe reported quarterly revenue of $1.11 billion. This represents an increase of 11% from the same period last year when the company reported revenue of $1 billion.

"Fiscal 2015 is off to strong start, and Q1 revenue and earnings are evidence of successful execution against our strategy," said Mark Garrett, Adobe Executive Vice President and CFO.

The company reported net income of $84.89 million for the quarter. This represents an increase of 80.43% from the same period last year when Adobe reported net income of $47.05 million.

On March 17, Adobe launched Adobe Document Cloud, a platform to manage critical documents at home, in the office and across devices. The service aims to address the waste and inefficiency associated with current document processes. With a subscription or one-time purchase users will be able to create, review, approve, e-sign and track documents on multiple devices.

Adobe Systems Incorporated (ADBE) shares ended the week at $77.36, down 1.09% for the week.

Williams-Sonoma Reports Strong Earnings


Williams-Sonoma, Inc. (WSM), a specialty retailer of home products, reported its latest quarterly and annual earnings on Wednesday, March 18. The company reported strong earnings, but is feeling the effects of a slowdown at west coast ports.

Williams-Sonoma reported quarterly revenue of $1.54 billion and annual revenue of $4.7 billion. These figures represent increases from the same quarterly and annual numbers last year when the company reported revenue of $1.46 billion for the quarter and $4.38 billion for the year.

"Our powerful brands and the competitive advantage provided by our multi-channel platform and entrepreneurial culture delivered another year of strong returns for our shareholders," said Laura Alber, President and CEO of Williams-Sonoma. "We are very pleased with our fourth quarter results despite the effects of the west coast port disruption. Unfortunately, we expect this disruption to continue and to have a more significant impact through the first half of 2015."

The company reported net income of $147.04 million for the quarter and $308.85 million for the year. Both numbers represent increases over the previous year when the company reported quarterly net income of $133.80 million and annual net income of $278.90 million.

Despite positive quarterly and annual results, the price of Williams-Sonoma stock dropped after the earnings report due to the fact that west coast "port disruptions" were likely to continue into 2015. These port disruptions began in the second half of 2014 after the contracts between the International Longshore and Warehouse Union (representing dockworkers) and the Pacific Maritime Association (representing terminal operators and shipping lines) expired on June 30, 2014. Since then, the two sides have been in negotiations. Work slowdowns began causing significant backlogs by the end of November 2014.

Williams-Sonoma, Inc. (WSM) shares ended the week at $78.70, down 5.43% for the week.

The Dow started the week of 3/16 at 17,751 and closed at 18,128 on 3/20. The S&P 500 started the week at 2,055 and closed at 2,108. The NASDAQ started the week at 4,897 and closed at 4,026.
 

The Fed Roller Coaster Continues

The Federal Open Market Committee (FOMC) decided to signal no action on interest rates and to downgrade US economic and inflation forecasts at their monthly meeting on Wednesday, March 18. After the meeting, bond prices fell only to rise on Thursday and fall again during Friday trading.

In a press release after Wednesday's meeting the FOMC said that "economic growth has moderated somewhat." While the labor market, household spending and business investment continues to improve, the housing recovery remains slow and export growth has weakened. In addition, inflation has dropped below the FOMC's 2% objective. The FOMC downgraded growth forecasts for 2015 as well as the personal consumption expenditure index from 1%-1.6% in December to 0.6%-0.8%.

This news caused investors to suspect the Fed will wait until later in the year to raise interest rates. "Not all are convinced that the Fed will raise rates, especially against the backdrop of low inflation and weaker economic numbers," said Kevin Giddis, Head of Fixed Income at Raymond James.

As a result, the 10-year Treasury note dropped from 2.11% on March 13 to 1.92% on March 18. On March 19 Treasury yields rose to 1.97% only to drop in early Friday trading to 1.94%.

The FOMC is trying to determine the best way to end four years of unconventional monetary policy. Low interest rates have provided years of easy access to capital, encouraging investment in infrastructure, new business and real estate. Currently the economy is experiencing a strong dollar, a booming stock market and low inflation. However, raising interest rates could reverse some of the effects of low interest rates, causing the economy go through a period of adjustment.

The 10-year Treasury note yield finished the week of 3/16 at 1.93% while the 30-year Treasury note yield finished the week at 2.50%.
 

Interest Rates Decline

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, March 19. The results show interest rates declining as spring approaches.

The 30-year fixed rate mortgage averaged 3.78% this week. This represents a decrease from last week when it averaged 3.86%. Last year at this time, the 30-year fixed rate mortgage averaged 4.32%.

This week, the 15-year fixed rate mortgage averaged 3.06%. This represents a decrease from last week when it averaged 3.10%. One year ago at this time, the 15-year fixed rate mortgage averaged 2.49%.

"The average 30-year fixed mortgage rate fell to 3.78% this week following mixed housing data," said Len Kiefer, Deputy Chief Economist at Freddie Mac. "Housing starts dropped 17% to a seasonally adjusted pace of 897,000 units, below market expectations. However, housing permits increased 3% in February. As we head into spring, homebuilders remain positive about home sales in the near future although the NAHB Housing Market Index dropped another 2 points in March."

The money market fund finished the week of 3/16 at 0.4%. The 1-year CD finished at 0.7%.

Published March 20, 2015

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