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Thursday February 20, 2020



Delta Flies Above Earnings Estimates

Delta Air Lines, Inc. (DAL) released its quarterly earnings report on Wednesday, April 10. The airline announced record revenue for the first quarter and increased its earnings projections.

Delta reported quarterly revenue of $10.47 billion. This is up from last year's first quarter revenue of $9.97 billion and above the $10.42 billion in revenue that Wall Street predicted.

"Our March quarter performance demonstrates the power of our growing brand preference, our unmatched competitive advantages and most importantly the Delta people who are committed to providing the best travel experiences for our customers every day," said Delta CEO Ed Bastian. "With the momentum in our business and our American Express contract renewal, we have increased confidence in achieving our full-year plan of top-line growth, margin expansion and double-digit earnings growth."

The company announced earnings of $730 million for the quarter, which was up from earnings of $557 million one year ago. On an adjusted earnings per share basis, the company reported earnings of $0.96 per share, which was more than the $0.90 per share that analysts predicted.

On Wednesday, Delta announced that it expects to earn between $2.05 and $2.35 per share in the second quarter, surpassing analysts' average estimates of $2.14 per share. The company also expects to increase its flight capacity by 4% to 4.5% year-over-year. Delta's president, Glen Hauenstein, cited customer demand as the reason for the expected growth. He noted, "Demand for Delta's product has never been stronger, as evidenced by our 7.5% top line growth in the March quarter. This underpins our expectation that June quarter unit revenue should grow 1.5% to 3.5%, with sequential improvement in passenger unit revenue across all entities."

Delta Air Lines, Inc. (DAL) shares closed at $58.04, up 0.9% for the week.

Rite Aid's Shares Fall

Rite Aid Corporation (RAD) reported quarterly earnings on Thursday, April 11. The drug store chain reported revenue that fell below Wall Street's estimates, causing shares to fall more than 10% after the report's release.

Rite Aid announced revenue of $5.38 billion for the fourth quarter. This is down from revenue of $5.39 billion reported in the same quarter last year and below the $5.56 billion in revenue that analysts expected.

"Despite a mild flu season, we delivered our third consecutive quarter of same-store pharmacy sales and prescription count growth thanks to a record number of immunizations and other script growth initiatives," said Rite Aid CEO John Standley. "As we begin our new fiscal year, we'll look to build on this momentum as we continue transforming our business to better align with our new operational footprint and deliver greater value in the emerging value-based care marketplace."

The company reported an earnings loss of $272.98 million for the quarter, down from earnings of $767.07 million one year ago. On an adjusted earnings per share basis, the company posted an earnings loss of $0.01 per share, which was better than analysts' estimates of an earnings loss of $0.02 per share.

On Thursday, Rite Aid announced that it expects revenue of $21.5 billion to $21.9 billion for the full year, falling short of the $22.1 billion analysts were projecting. The company also announced that its board approved a 1-for-20 reverse stock split in order to reduce the number of outstanding shares and comply with the New York Stock Exchange's share price listing rules. Following the earnings release, the company's shares fell 10.3% to $0.51.

Rite Aid Corporation (RAD) shares closed at $.50, down 16% for the week.

Bed Bath and Beyond's Shares Tumble

Bed Bath & Beyond Inc. (BBBY) announced quarterly earnings on Wednesday, April 11. The home goods retailer saw shares fall more than 8% following the report's release.

Revenue for the fourth quarter reached $3.31 billion. This is down from revenue of $3.72 billion reported during the same quarter last year and below the $3.33 billion in revenue that analysts expected. For the full year, Bed Bath and Beyond's revenue totaled $12.03 billion, down from $12.35 billion in the previous year.

"During the fourth quarter and throughout fiscal 2018, we have been driving significant foundational change across our business," said Bed Bath and Beyond CEO Steven Temares. "The pace of our transformation accelerated during fiscal 2018 and we made measurable progress within each of our four focus areas of our plan. While this is a multiyear effort, our Board and management team are confident that the actions underway to drive our near-term and long-term financial targets will enable Bed Bath & Beyond to succeed and drive shareholder value."

Bed Bath & Beyond reported a loss in quarterly net earnings of $253.80 million, down from earnings of $194.04 million one year ago. On an adjusted earnings per share basis, the company posted earnings of $1.20 per share, surpassing the $1.10 per share that analysts predicted.

On Wednesday, the company announced that it expects to earn between $2.11 and $2.20 per share in fiscal 2019, exceeding analysts' estimates of $1.80 per share. Despite the positive earnings outlook, Bed Bath and Beyond's shares fell more than 8% on Wednesday as analysts focused on the retailer's 1.4% drop in comparable sales for the fourth quarter and increased competition from online retailers. The company hopes to combat declining sales by re-platforming its websites, improving its personalized marketing efforts and expanding customers' online experience.

Bed Bath & Beyond Inc. (BBBY) shares closed at $17.99, down 1.6% for the week.

The Dow started the week at 26,313 and closed at 26,412 on 4/12. The S&P 500 started the week at 2,888 and closed at 2,907. The NASDAQ started the week at 7,925 and closed at 7,984.

Yields Hit Three-Week Highs

Yields on U.S. Treasury bonds bounced back from mid-week lows following upbeat economic data from China released early Friday. The news increased investors' risk appetites and sent yields soaring to three-week highs.

On Friday, China released economic data showing that Chinese exports in March increased 14.2% year-over-year, surpassing the 8% increase economists expected. In February, exports were down 20.7% from a year ago.

Treasury yields jumped to three-month highs following the news. The yield on the 10-year Treasury note gained 3.8 basis points to 2.540%, while the yield on the 30-year Treasury bond climbed 2.4 basis points to 2.961%.

"Treasuries are on their back foot to close out the week, an unsurprising development given stronger-than-expected data out of both China...and the eurozone," wrote Jon Hill, interest-rate strategist at BMO Capital Markets.

Yields held on to their gains following the release of U.S. import data on Friday. The Labor Department reported that U.S. import prices increased for the third straight month in March.

The data indicated that import prices rose 0.6% in March, which was above the 0.4% increase that analysts expected. The Labor Department credited increased costs of fuel and industrial supplies for the monthly boost.

The 10-year Treasury note yield closed at 2.56% on 4/12, while the 30-year Treasury bond yield was 2.97%.

Mortgage Rates Move Higher

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, April 11. The report revealed that mortgage rates inched slightly higher this week.

The 30-year fixed rate mortgage averaged 4.12% this week, up from 4.08% last week. During this time last year, the 30-year fixed rate mortgage averaged 4.42%.

This week, the 15-year fixed rate mortgage averaged 3.60%, an increase from last week when it averaged 3.56%. Last year at this time, the 15-year fixed rate mortgage averaged 3.87%.

"Rates moved up slightly this week while mortgage applications decreased following last week's jump in rates — indicating borrower sensitivity to changing mortgage rates," said Sam Khater, Chief Economist at Freddie Mac. "Despite the recent rise, we expect mortgage rates to remain low, in line with the low 10-year treasury yields, boosting homebuyer demand in the next few months."

Based on published national averages, the money market account closed at 1.22% on 4/12. The one-year CD finished at 2.57%.

Published April 12, 2019
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