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Tuesday February 19, 2019



Pepsi Reports Flat Earnings

PepsiCo, Inc. (PEP) announced its quarterly earnings on Tuesday, February 13. The food and beverage company reported flat revenue in the fourth quarter.

PepsiCo reported quarterly revenue of $19.53 billion, exceeding analysts' estimates of $19.39 billion. At this time last year, revenue was $19.52 billion. For the full year, net revenue was $63.53 billion, a 1% increase year-over-year from $62.8 billion.

"We are pleased with our performance for the fourth quarter and full year 2017," said PepsiCo CEO Indra Nooyi. "We met or exceeded most of the financial goals we set out at the beginning of the year. We delivered these results in the midst of a dynamic retail environment and rapidly shifting consumer landscape."

PepsiCo reported a $710 million net loss for the quarter, or $0.50 loss per share. For the full year, the company reported $4.86 billion in net income, or $3.38 per share.

The company, which boasts a large product line including Gatorade, Lay's and Quaker Oats, in addition to its namesake Pepsi, has increased its focus on innovations in its core product lines to satiate consumers hunger for health conscious options. In the fourth quarter, the company launched Doritos flavored peanuts and snack mix options. PepsiCo also launched a new line of sparkling water drinks to meet increased consumer demand for sugar-free carbonated drinks.

PepsiCo, Inc. (PEP) shares ended the week at $11.06, relatively unchanged for the week.

Blue Apron Delivers Tepid Earnings

Blue Apron Holdings, Inc. (APRN) reported its fourth quarter and full-year earnings on Tuesday, February 13. The meal-kit delivery company reported a net loss for the full year and fourth quarter, despite an increase in full-year revenue.

The company posted revenue of $187.7 million for the quarter, down 13% from $215.9 million during the same time last year. For the full year, Blue Apron reported $881.2 million in revenue, up 11% from $795.4 million the previous year.

"We are methodically implementing operational improvements to drive our business and are encouraged by the progress we've made since last quarter, particularly in margin which contributed to improvement in our bottom-line performance," said Blue Apron Holdings CEO Brad Dickerson. "Our top priority remains continuing to drive operational efficiencies that will propel significant improvement in our net loss and adjusted [earnings before interest, taxes, depreciation and amortization] in 2018."

Blue Apron reported a net loss of $39.1 million for the quarter, or $0.20 per share. At this time last year, the company posted a net loss of $26.1 million, or $0.39 per share. For the full year, the company reported a net loss of $210 million, exceeding the net loss of $54.9 million during the prior year.

Blue Apron, the largest meal-kit company in the U.S., experienced a rocky start to its first year as a publicly traded company. The company experienced a decrease in customers and orders year-over-year, as it scaled back its marketing approach to focus on streamlining its operations. In January, Blue Apron launched meal-kit boxes that provided Whole30 meal ingredients to consumers to help kick off New Year's resolutions.

Blue Apron Holdings, Inc. (APRN) shares ended the week at $3.56, up 4.4% for the week.

Under Armour Beats Revenue Expectations

Under Armour, Inc. (UA) released its fourth quarter and full-year earnings report on Tuesday, February 13. The company reported increases in both quarterly and full-year sales and profits.

Revenue for the fourth quarter was $1.4 billion, up 5% from this time last year. Under Armour reported $5 billion in revenue for the full year, an increase of 3% year-over-year.

"After years of rapid growth and building a globally recognized brand, the dynamic landscape of 2017 was a catalyst for us to begin strategically transforming Under Armour into an operationally excellent company," said Under Armour Chairman and CEO Kevin Plank. "A year into this journey, our fourth quarter and full year results demonstrate that the tough decisions we're making are generating the stability necessary to create a more consistent and predictable path to deliver long-term value to our shareholders."

Under Armour reported a net loss of $88 million for the quarter, or $0.20 per share. For the full year, the company's net loss was $48 million, or $0.11 per share. Excluding a one-time charge related to tax reform, the adjusted net loss for the quarter was $1 million and full-year adjusted net income was $87 million.

The active-wear brand's stock soared 22% in the days following the release of the earnings report. Under Armour's direct-to-consumer sales increased 11% during the quarter, representing 42% of the company's revenue in the fourth quarter. The Baltimore -based company's international sales increased 47% in the fourth quarter, while domestic sales slipped 4%.

Under Armour, Inc. (UA) shares ended the week at $15.78, up 25% for the week.

The Dow started the week of 2/12 at 24,338 and closed at 25,219. The S&P 500 started the week at 2,637 and closed at 2,732. The NASDAQ started the week at 6,937 and closed at 7,239.

Treasury Yields Fluctuate

Yields on Treasury notes continued to rise this week. The 10-year yield pushed higher and closed above 2.90%, while the 2-year yield reached a 9 year high.

The benchmark 10-year Treasury note yield dipped early in the week to 2.83%, but reached a high of 2.94% in midday trading on Thursday. Yields on the 10-year Treasury note fluctuated in response to the latest inflation data release.

"I think inflation's back, at least in a moderate sense," said Kathy Jones, Chief Fixed Income Strategist at Charles Schwab. "Over the last 12 months, if you take the core CPI numbers they're up about 2%. That's healthy. . . Between the economic data, the inflation data and the supply coming to market, we may get through that 3% area."

The Department of Labor released its Consumer Price index (CPI) and Producer Price index (PPI) on Wednesday and Thursday, February 14 and 15, respectively. The data showed inflation in January increased at a faster pace than expected. The CPI rose 0.5% in January, exceeding the expected 0.3% increase, while the core PPI rose 2.5%, its largest gain since August 2014. The 1-year Treasury yield increased in response.

"Investors were looking for hard results that inflationary pressures had arrived and this is it, and now you see the market reacting accordingly," said Charlie Ripley, Senior Investment Strategist at Allianz Investment Management. "We've broken above the 2.85% on the 10-year yield. Our view is if we continue to see hard evidence of inflationary data, a 3.0% is probably in the cards and something we'll see in a short period of time."

Friday morning, the 10-year Treasury yield dipped to 2.85%, despite economic data showing growth in import prices and housing starts. January Housing starts increased 9.7%, reaching its highest level since October 2016.

The 10-year Treasury note yield finished the week of 2/12 at 2.88%, while the 30-year Treasury note yield was 3.14%.

Mortgage Rates Push Higher

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, February 15. Mortgage rates continued their upward trend this week.

The 30-year fixed rate mortgage averaged 4.38%. This is up from last week's average of 4.32%. During this time last year, the 30-year fixed rate mortgage was at 4.15%.

The 15-year fixed rate mortgage averaged 3.84% this week, up from 3.77% last week. Last year at this time, the 15-year fixed rate mortgage averaged 3.35%.

"Inflation measures were broad-based, cementing expectations that the Federal Reserve will go forward with monetary tightening later this year," said Len Kiefer, Deputy Chief Economist at Freddie Mac. "Following this news, the 10-year Treasury reached its highest level since January 2014, climbing above 2.90%. Mortgage rates have also surged. After jumping 10 basis points last week, the 30-year fixed-rate mortgage rose 6 basis points to 4.38%, its highest level since April 2014."

Based on published national averages, the money market account finished the week of 2/12 at 0.84%. The 1-year CD finished at 1.91%.

Published February 16, 2018
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