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Wednesday August 12, 2020

Finances

Finances
 

PepsiCo Reports Earnings

PepsiCo, Inc. (PEP) released its latest quarterly earnings on Monday, July 13. Both revenue and profits fell year-over-year.

The company reported revenue of $15.95 billion. This was down from the $16.45 million reported during the same quarter last year.

“I’m very pleased with the way our organization has protected our associates and served the needs of our customers, consumers and communities throughout these incredibly difficult times,” said Ramon Laguarta, Chairman and CEO of PepsiCo. “Despite being faced with significant challenges and complexities as a result of the COVID-19 pandemic, our businesses performed relatively well during the quarter, with a notable level of resiliency in our global snacks and foods business.”

Net income for the quarter came in at $1.65 billion. This was down from $2.04 billion during the same time last year.

The company’s PepsiCo Beverages North America segment led the way with $4.97 billion in sales. This was a 7% drop from last year’s results. The Frito-Lay North America segment followed with sales of $4.27 billion. PepsiCo’s Europe and Latin America segments posted revenue of $2.73 billion and $1.57 billion, respectively.

PepsiCo, Inc. (PEP) shares ended the week at $134.66, down 1.5% for the week.

Delta Air Lines Posts Quarterly Results


Delta Air Lines (DAL) reported its quarterly earnings on Tuesday, July 14. The air carrier posted losses amid the continuing COVID-19 crisis.

The company’s revenue came in at $1.47 billion. This was down 88% from $12.53 billion during the same quarter last year.

“A $3.9 billion adjusted pre-tax loss for the June quarter on a more than $11 billion decline in revenue over last year, illustrates the truly staggering impact of the COVID-19 pandemic on our business,” said Delta CEO Ed Bastian. “In the face of this challenge, our people have acted quickly and decisively to protect our customers and our company, reducing our average daily cash burn by more than 70% since late March to $27 million in the month of June.”

Delta posted a net loss of $5.72 billion for the quarter. Last year at this time, the company reported net income of $1.43 billion.

The airline industry continues to grapple with the lack of travelers due to the ongoing coronavirus pandemic. Delta was among the companies receiving aid through the CARES Act’s Payroll Support Program (PSP). The company was awarded $5.4 billion in PSP aid in April. As of the end of the quarter Delta had received $4.9 billion of that amount, with an additional $544 million to be distributed in July.

Delta Air Lines (DAL) shares ended the week at $27.05, virtually unchanged for the week.

Wells Fargo Reports Earnings


Wells Fargo & Co. (WFC) released its second quarter earnings report on Tuesday, July 14. The long-standing banking institution reported its first quarterly loss since the Great Recession causing shares to fall 5% following the report’s release.

Wells Fargo reported revenue of $17.8 billion. This was down from $21.6 billion reported in the second quarter of 2019, and short of analysts’ expected revenue of $18.4 billion.

“We are extremely disappointed in both our second quarter results and our intent to reduce our dividend,” said Wells Fargo’s Chief Executive Officer, Charlie Scharf. “While the negative impact of the pandemic is unprecedented and many of our business drivers were negatively impacted, our franchise should perform better, and we will make changes to improve our performance regardless of the operating environment.”

Wells Fargo reported a quarterly net loss of $2.4 billion, or an adjusted loss of $0.66 per share. This compares to net income of $6.2 billion or $1.30 per share for the same quarter last year.

Wells Fargo announced that its third quarter common stock dividend is expected to be reduced from $0.51 per share to $0.10, subject to approval by the company’s Board of Directors expected at the end of July. Although disappointed in the decision to reduce dividends in the third quarter, Scharf added, “We are confident that this eventual economic improvement combined with our actions to increase our margins will support a higher dividend in the future.”

Wells Fargo & Co. (WFC) shares ended the week at $24.95, down 3.4% for the week.

The Dow started the week at 26,225 and closed at 26,672 on 7/17. The S&P started the week at 3,205 and closed at 3,225. The NASDAQ started the week at 10,730 and closed at 10,503.
 

U.S. Treasury Yields Fluctuate as Jobless Claims Remain High

Yields on U.S. Treasurys fell on Thursday following a report that jobless claims remain high. States continue to grapple with the threat of COVID-19, balancing public health and economic interests.

On Thursday, the U.S. Department of Labor reported 1.30 million initial unemployment claims. This was down slightly from the prior week’s revised number of 1.31 million claims.

“This recent slowdown in the economy is being driven by the economic uncertainty associated with the growing outbreaks rather than just the direct impact of the outbreaks themselves,” said Daniel Zhao, an economist with Glassdoor. “Uncertainty is hitting all players in the economy including businesses, workers and consumers.”

During early trading on Friday, the benchmark 10-year Treasury note yield was at 0.627%, up slightly from Thursday’s closing yield of 0.619%. The 30-year Treasury bond yield was at 1.321%, up from 1.312% on Thursday.

On Monday, California Governor Gavin Newsom reversed course on the state’s reopening plan, ordering many types of businesses to close indoor operations. In response to rising coronavirus case numbers, the governor ordered the statewide closure of dine-in restaurants, bars, movie theaters and museums, among other things. In addition, several counties were required to close fitness centers, houses of worship, nonessential office spaces, personal care services, hair salons and barber shops.

“We’ve made this point on multiple occasions, and that is that we’re moving back into a modification mode of our original stay-at-home order, but doing so utilizing what we’ve commonly referred to as a dimmer switch, not an on-and-off switch,” said Governor Newsom. “The point of a dimmer switch was to make the point that as data and trendlines, as the experience of reopening in different parts of the state and people beginning to mix in different parts of the state begin to manifest, different conditions would present themselves.”

The 10-year Treasury note yield closed at 0.63% on 7/17, while the 30-year Treasury bond yield was 1.33%.
 

Thirty Year Mortgage Rates Drops Below 3%

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, July 16. The report showed mortgage rates continue to fall.

The 30-year fixed rate mortgage averaged 2.98% this week, down from 3.03% last week. Last year at this time, the 30-year fixed rate mortgage averaged 3.81%.

This week, the 15-year fixed rate mortgage averaged 2.48%, down from last week’s average of 2.51%. During the same time last year, the 15-year fixed rate mortgage averaged 3.23%.

“Mortgage rates fell below 3% for the first time in 50 years. The drop has led to increased homebuyer demand and, these low rates have been capitalized into asset prices in support of the financial markets,” said Freddie Mac’s Chief Economist Sam Khater. “However, the countervailing force for the economy has been the rise in new virus cases which has caused the economic recovery to stagnate, and this economic pause puts many temporary layoffs at risk of ossifying into permanent job losses.”

Based on published national averages, the savings rate was 0.06% for the week of 7/13. The one-year CD averaged 0.23%.

Published July 17, 2020

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