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Sunday March 24, 2019



Nike's Revenues Rise

Nike, Inc. (NKE) released its earnings report for the third quarter on Thursday, March 22. The company reported increased revenues.

Revenue for the quarter was $9.0 billion. This is an increase of 7% from revenue of $8.4 billion during the same quarter last year.

"NIKE's Consumer Direct Offense drove strong double-digit growth across our international geographies, led by Greater China," said Nike President and CEO Mark Parker. "As we close Q3, we now see a significant reversal of trend in North America, as momentum accelerates through the scaling of new innovation platforms and differentiated NIKE Consumer Experiences expand across the marketplace."

The company reported a net loss of $921 million for the quarter. Last year at this time, Nike reported net income of $1.14 billion.

Nike attributed the third quarter's net loss to a $2 billion tax expense related to the company's accumulated foreign earnings. The company's increase in revenue stemmed mainly from international sales, with the company's Greater China division posting a 24% increase for the quarter. Meanwhile, the company's sales in North America dropped 6%.

Nike, Inc. (NKE) shares ended the week of 3/19 at $64.62, down 1.6% for the week.

General Mills Reports Earnings

General Mills (GIS) reported its latest quarterly earnings on Wednesday, March 21. The maker of many of America's popular breakfast cereals reported increased sales and profits for the quarter.

The company had net sales of $3.9 billion during the quarter. This is an increase from $3.8 billion in sales from the same quarter last year.

"Our primary goal this year has been to strengthen our topline performance while maintaining our efficiency," said Jeff Harmening, Chairman and CEO of General Mills. "While I'm pleased that we're delivering on the first part of that goal, with strong consumer marketing, innovation and in-store execution leading to a second consecutive quarter of organic net sales growth, I'm disappointed in our results on the bottom line."

Net earnings were $941.4 million, or $1.64 per share. This a sharp increase from $357.8 million, or $0.62 per share during the previous year.

While the company's earnings met analysts' expectations for the quarter, the cereal maker expressed disappointment with its quarterly profits. General Mills pointed to increases in shipping, commodities and operating costs as major factors in its struggle to increase its bottom line. The company adjusted its guidance down for the full year from an expected increase of up to 4% to between 0 and 1%.

General Mills (GIS) shares ended the week at $44.20, down 12.3% for the week.

Darden Releases Strong Earnings

Darden Restaurants, Inc. (DRI) released its quarterly financial report on Thursday, March 22. The company reported a solid increase in profits over the prior year's quarter.

Darden, parent company of Olive Garden and LongHorn Steakhouse, reported $2.13 billion in sales for the quarter. This is up from $1.90 billion during the same quarter last year.

"Our solid performance this quarter is a result of our focus on executing our back-to-basics operating philosophy to deliver memorable guest experiences," said Darden Restaurants CEO Gene Lee. "Our strategy continues to work, creating an environment that allowed us to invest in our people and our business, strengthen our balance sheet and return nearly $100 million to shareholders during the quarter."

The company's net earnings totaled $217.8 million for the quarter. During the same quarter last year, net earnings were $165.6 million.

Darden reported a 2% increase in same-restaurant sales for the quarter. The Capital Grille led the way with 2.8% growth. The company's more well-established brands, Olive Garden and LongHorn Steakhouse, saw increased sales of 2.2% and 2% respectively. Darden's Cheddar's Scratch Kitchen brand saw a decline in same-restaurant sales of 2.2% for the quarter.

Darden Restaurants, Inc. (DRI) shares ended the week at $84.33, down 10.2% for the week.

The Dow started the week of 3/19 at 24,898 and closed at 23,533 on 3/23. The S&P 500 started the week at 2,741 and closed at 2,588. The NASDAQ started the week at 7,419 and closed at 6,993.

Treasury Yields Drop Amid Trade Tensions

U.S. Treasury bond yields fell this week following President Trump's announcement of impending tariffs on Chinese imports. The move comes just one day after yields rose in response to the Federal Reserve's latest rate hike.

On Thursday, President Trump signed a memorandum instructing U.S. Trade Representative Robert Lighthizer to prepare to implement tariffs on $60 billion worth of goods coming from China. This is the culmination of a series of statements made by the president expressing concern over the trade deficit between the two countries.

"We have a great relationship. They're helping us a lot in North Korea," said President Trump. "But we have a trade deficit, depending on the way you calculate, of $504 billion. Now, some people would say it's really $375 billion. Many different ways of looking at it, but any way you look at it, it is the largest deficit of any country in the history of the world."

The benchmark 10-year Treasury bond, which opened the day Thursday at 2.89%, dipped to 2.79% during trading on Thursday. Thursday's dip erased the previous day's gains, when the yield peaked at 2.94%.

Wednesday's rise in yields was due to the Federal Open Market Committee's (FOMC) move to increase the federal funds rate by 25 basis points to a range between 1.5% and 1.75%. The FOMC also maintained its forecast for three additional rate hikes during 2018.

The 10-year Treasury note yield finished the week of 3/19 at 2.83%, while the 30-year Treasury note yield was 3.08%.

Mortgage Rates Relatively Unchanged

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, March 22. The report showed little movement in mortgage rates for the week.

This week, the 30-year fixed rate mortgage averaged 4.45%, up from 4.44% last week. At this time last year, the 30-year fixed rate mortgage averaged 4.23%.

The 15-year fixed rate mortgage averaged 3.91% this week, up from 3.90%. During the same time last year, the 15-year fixed rate mortgage averaged 3.44%.

"The Federal Reserve raised interest rates today — a much-anticipated move that comes as both U.S. and global economic fundamentals continue to strengthen," said Len Kiefer, Deputy Chief Economist at Freddie Mac. "The Fed's decision to raise interest rates by a quarter of a percentage point puts the federal funds rate at its highest level since 2008."

Based on published national averages, the money market account finished the week of 3/19 at 1.0%. The 1-year CD finished at 2.03%.

Published March 23, 2018
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