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Sunday April 19, 2015

Finances

Finances
 

Intel Reports Flat Earnings

Intel Corporation (INTC), manufacturer and distributor of digital technology platforms, reported its latest quarterly results on Tuesday, April 14. The company reported revenue that disappointed investors due in part to a drop in revenue generated by its personal computer segment.

The company reported revenue of $12.8 billion for the quarter. This is the same revenue as Intel reported during the comparable quarter last year.

"Year-over-year revenues were flat, with double-digit revenue growth in the data center, IoT and memory businesses offsetting lower than expected demand for business desktop PCs," said Intel CEO Brian Krzanich. "These results reinforce the importance of continuing to execute our growth strategy."

Intel reported quarterly net income of $2 billion or $0.41 per share. This represents a slight increase from the $1.9 billion in net income the company reported during the same quarter last year.

Intel is adjusting to a shift in the market for personal desktop computers. As businesses become increasingly mobile, the demand for traditional desktop computers continues to fall. As a result, demand for Intel's PC chips is also decreasing. However, Intel sees the rise of cloud computing and the Internet of Things as new streams of revenue that could replace the revenue generated by its PC segment. Intel reported double digit growth in both segments.

Intel Corporation (INTC) shares ended the week at $32.47, up 2.07% for the week.

Johnson & Johnson Disappoints


Johnson & Johnson (JNJ), manufacturer and seller of health care products, announced its latest quarterly earnings on Tuesday, April 14. Johnson & Johnson reported disappointing earnings due to the current strength of the dollar.

The company reported quarterly revenue of $17.4 billion. This represents a decrease from the comparable quarter last year when Johnson & Johnson reported revenue of $18.1 billion.

"The company delivered strong underlying growth in the first quarter driven by new products and the strength of the core business. Of note is the continued robust growth of the Pharmaceutical business and the solid performance of our Consumer brands," said Alex Gorsky, Chairman and CEO of Johnson & Johnson. "I am proud of our global teams who focus every day on delivering innovative solutions to address evolving health care needs."

Johnson & Johnson reported net income of $4.3 billion, or $1.53 per share, for the quarter. This represents a decrease from the same period last year when the company reported net income of $4.7 billion or $1.64 per share.

The drop in Johnson & Johnson's year-over-year earnings is mostly due to the strength of the U.S. dollar. Since Johnson & Johnson is a multinational company, it must adjust earnings for currency exchange rates. Since the dollar is strong compared to other currencies, this adjustment takes its toll on the bottom line. Excluding the currency impact, Johnson & Johnson's revenue grew by 3.1% on an operational basis.

Johnson & Johnson (JNJ) shares ended the week at $99.58, down 1.97% for the week.

Netflix Continues to Grow


Netflix, Inc. (NFLX), an Internet television network, reported its latest quarterly earnings on Wednesday, April 15. The company reported an increase in both U.S. and international subscribers that beat expectations.

Netflix reported quarterly revenue of $1.02 billion. This represents a decrease from the revenue reported during the comparable quarter last year when revenue was $1.27 billion.

In a letter to shareholders, CEO Reed Hastings and CFO David Wells said, "We added a record 4.9 million new members globally in Q1, against our forecast of 4.1 million and prior year of 4 million, bringing our total global streaming membership to 62.3 million. In the US, we gained 2.3 million new members, well above our expectations of 1.8 million due to both acquiring and retaining more members than forecast. Internationally we added 2.6 million members versus a forecast of 2.25 million due to stronger growth than expected across a number of markets."

The company reported net income of $2.69 million. This represents a decrease from the same period last year when the company reported net income of $53.11 million. Earnings per share came in at $0.05 per share.

Netflix has made international expansion a priority. This entrance into new territories has increased the company's costs. However, the most recent membership numbers show that this investment is paying off. Netflix added 2.6 million international members, above its forecast. Investors noticed and Netflix's stock price rose significantly following its earnings announcement.

Netflix, Inc. (NFLX) shares ended the week at $571.55, up 21.43% for the week.

The Dow started the week of 4/13 at 18,052 and closed at 17,826 on 4/17. The S&P 500 started the week at 2,102 and closed at 2,081. The NASDAQ started the week at 5,002 and closed at 4,932.
 

Bond Yields Fall after CPI Report

Treasury yields fell and prices rose after the U.S. Labor Department released a report on consumer spending on Friday, April 17. The combination of uncertainty regarding inflation and soft economic data has caused investors to speculate that the Federal Reserve will not raise interest rates as early as June.

The U.S. Labor Department announced on Friday that the Consumer Price Index rose a seasonally adjusted 0.2% in March compared to February. The Federal Reserve has said that it wants to see inflation near 2% before it will begin raising interest rates. The Fed's primary gauge of inflation is the personal consumption expenditure index. That index has not risen above 1% since November 2014. The CPI report released Friday suggests that inflation is beginning to stabilize, giving the Federal Reserve the impetus to raise rates.

The CPI report suggesting stabilizing inflation and perhaps a rate increase caused investors to purchase U.S. Treasury bonds. Bond prices rose and yields fell in early Friday trading to 1.898% for the 10-year Treasury note and 2.584% for the 30-year Treasury note.

While stabilizing inflation suggests that the Federal Reserve may raise interest rates. Other economic data released this week suggested that the Federal Reserve may wait to raise rates. For example, the March employment report showed a slowdown in hiring. In addition, reports showed only moderate spending at retail establishments, a drop in industrial output, a strong dollar that is hurting U.S. exports and a drop in home-building.

"Data available for the first quarter of this year have been notably weak," said Dennis Lockhart, President of the Federal Reserve Bank of Atlanta. "That is giving rise to heightened uncertainty about the track the economy is on."

Many analysts believe that the economy will rebound in the second quarter of 2015. If that happens we may see the Federal Reserve raise rates before the end of the year.

The 10-year Treasury note yield finished the week of 4/13 at 1.85% while the 30-year Treasury note yield finished the week at 2.50%.
 

Interest Rates Remain Steady

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, April 16. The results showed average fixed mortgage rates remaining largely unchanged for the week ending April 17.

This week, the 30-year fixed rate mortgage averaged 3.67%. This represents a slight increase from last week when it averaged 3.66%. One year ago, the 30-year fixed rate mortgage averaged 4.27%.

The 15-year fixed rate mortgage averaged 2.94% this week. This is up from last week when it averaged 2.93%. Last year at this time, the 15-year fixed rate mortgage averaged 3.33%.

"Mortgage rates were little changed following a light week of economic reports and remaining low at the spring home buying season," said Len Kiefer, Deputy Chief Economist at Freddie Mac. "Of the few releases, the advance estimate of retail sales rebounded 0.9% in March though slightly below market expectations. Meanwhile, the National Association of Home Builders/Wells Fargo Housing Market Index jumped 4 points to 56 in April, suggesting home builders are optimistic and the housing market will continue to strengthen in 2015."

The money market fund finished the week of 4/13 at 0.4%. The 1-year CD finished at 0.7%.

Published April 17, 2015
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