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Thursday October 1, 2020



PepsiCo's Earnings Pop

PepsiCo, Inc. (PEP) released its latest quarterly earnings report on Thursday, October 3. The company posted increased revenue for the quarter, but a drop in profits.

The beverage giant reported revenue of $17.19 billion. This was up from revenue of $16.49 billion at this time last year.

"We are pleased with our results for the third quarter," said PepsiCo Chairman and CEO Ramon Laguarta. "While adverse foreign exchange translation negatively impacted reported net revenue performance, organic revenue growth was 4.3% in the quarter."

PepsiCo reported net income of $2.10 billion for the quarter. This was down from $2.50 billion at this time last year.

The parent company of Lays, Tropicana, Quaker, Gatorade and Pepsi has updated its product offerings in recent years to accommodate changing consumer tastes. In mid-2018, PepsiCo released Gatorade Zero, a sugar-free variety of the popular sports drink. The company has also announced that it will focus on reducing its usage of newly-created plastic in its packaging in favor of recycled plastic.

PepsiCo, Inc. (PEP) shares ended the week at $140.28, up 3.1%.

Stitch Fix Delivers Earnings

Stitch Fix, Inc. (SFIX) reported its latest quarterly earnings on Tuesday, October 1. The company's profits exceeded analysts' expectations for the fourth quarter.

Revenue came in at $432.15 million, up from $318.30 million at the same time last year. This was slightly ahead of Wall Street's estimate of $432 million in revenue.

"For the full year, we grew net revenue 29% year over year to $1.6 billion and captured more of our large addressable client base by adding nearly half a million active clients in 2019," said Stitch Fix CEO Katrina Lake. "In addition, we consistently demonstrated our ability to deliver great client experiences, growing revenue per active client in every quarter of fiscal 2019, including 9% year over year in Q4. These gains are a testament to the strength of our data science capabilities."

The company posted earnings of $7.18 million, or $0.07 per share, down from $18.28 million, or $0.19 per share at this time last year. The earnings per share exceeded analysts' estimated earnings of $0.04 per share.

Following the company's earnings report, Stitch Fix shares fell 11%. Despite the fact that Stitch Fix outperformed analysts' expectations, investors appear to have been less-than-thrilled over the company's guidance. For the first quarter, Stitch Fix expects revenue growth between $438 million and $442 million.

Stitch Fix, Inc. (SFIX) shares ended the week at $19.61, up 5.4% for the week.

Bed Bath & Beyond Posts Losses

Bed Bath & Beyond Inc. (BBBY) posted its latest quarterly earnings results on Wednesday, October 2. The retailer reported net losses for the quarter and announced new store closures.

The company reported net sales of $2.72 billion. This was down from $2.94 billion in net sales at the same time last year.

"We are making good progress against our four key near-term priorities, including: (1) stabilizing sales and driving top-line growth; (2) resetting the cost structure; (3) reviewing and optimizing the Company's asset base, including the portfolio of retail banners; and (4) refining our organization structure," said Bed Bath and Beyond Interim CEO Mary A. Winston. "Our second quarter financial results reflect the relentless effort of our teams and our progress in driving the Company's transformation efforts to delight our customers, enhance our competitive position, improve our financial performance, and drive shareholder value."

Bed Bath & Beyond posted a net loss of $138.77 million. This was down from net earnings of $48.64 million at the same time last year.

The company announced this week the impending closure of 20 stores. This is in addition to the 40 stores the company announced it would close earlier this year. The list of locations that will be closing includes 40 Bed Bath & Beyond stores and 20 stores from the company's other brands. The closures represent a small fraction of the company's 1,500 locations.

Bed Bath & Beyond Inc. (BBBY) shares ended the week at $10.09, down 4.8% for the week.

The Dow started the week of 9/30 at 26,852 and closed at 26,574. The S&P 500 started the week at 2,967 and closed at 2,952. The NASDAQ started the week at 7,964 and closed at 7,982.

Unemployment Reaches 50-Year Low, Buoys Treasury Yields

Yields on U.S. Treasurys ticked upward on Friday in the wake of the latest jobs report. Yields had steadily declined earlier in the week, but changed course following the report's release.

On Friday, the U.S. Department of Labor released the Employment Situation Summary for September 2019. Total nonfarm payrolls increased by 136,000 in the month, falling slightly short of analysts' projected increase of 150,000.

"For the moment, the U.S. economy remains fairly strong and job gains continue," said Cailin Birch, Global Economist with The Economist Intelligence Unit. "However, economic growth, and therefore job creation, are showing signs of slowing."

During early trading on Friday, the benchmark 10-year Treasury note yield reached 1.554%, up from the day's opening yield of 1.536%. The 30-year Treasury bond yield was at 2.042% after opening at 2.035%.

Despite slower-than-expected job growth, the unemployment rate fell to 3.5%, its lowest point since December 1969. The total number of unemployed individuals fell to 5.8 million during the month.

"There's not a warning of a significant slowdown in the economy from these data," said Doug Duncan, Chief Economist at Fannie Mae. "Our view is that in order to maintain the level of unemployment stable we need to add somewhere between 100,000 and 120,000 jobs a month, so this certainly fits that."

The 10-year Treasury note yield closed at 1.52% on 10/4, while the 30-year Treasury bond yield was 2.01%.

Mortgage Rates Show Little Movement

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, October 3. Mortgage rates remained virtually unchanged from the prior week.

The 30-year fixed rate mortgage averaged 3.65% this week, up slightly from last week's average of 3.64%. At this time last year, the 30-year fixed rate mortgage averaged 4.71%.

This week, the 15-year fixed rate mortgage averaged 3.14%, a marginal decrease from last week's average of 3.16%. Last year at this time, the 15-year fixed rate mortgage averaged 4.15%.

"While mortgage rates generally held steady this week, overall mortgage demand remained very strong, rising over 50% from a year ago thanks to increases in both refinance and purchase mortgage applications," said Freddie Mac's Chief Economist, Sam Khater. "As economic growth decelerates, it is clear that low mortgage rates will continue to support the mortgage market and we expect that to persist for the remainder of the year."

Based on national averages, the savings rate was 0.73% on 10/4. The one-year CD finished at 1.29%.

Published October 4, 2019

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