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Friday February 27, 2015

Finances

Finances
 

Intuit Grows Steadily

Intuit, Inc. (INTU), announced its latest quarterly earnings on Thursday, February 19. The company reported strong earnings and growth in QuickBooks Online subscribers.

The company reported quarterly revenue of $808 million. This represents an increase of 3.3% over the comparable period last year when the company reported revenue of $782 million.

"We delivered a strong quarter, exceeding our company financial targets across the board," said Brad Smith, Intuit's President and CEO. "Our Small Business online ecosystem momentum continues to build, with steady subscriber growth again this quarter. While we faced some initial challenges as a result of a change to our desktop product lineup, we took swift action in response to our customers' feedback. Beyond these challenges, we are inspired by the opportunities in front of us and we remain deeply committed to accelerating both customer and revenue growth across the company."

Intuit reported a net loss of $66 million for the quarter. This is a larger net loss than was reported during the same quarter last year when the company reported a net loss of $37 million.

Last month, Intuit stopped the filing of state tax returns through its TurboTax software after a number of fraudulent returns were filed using the software with stolen personal data. Despite this, Inuit reported a smaller loss and larger revenue than analysts expected this past quarter. As a result, the company's share price increased significantly after the earnings release.

Intuit, Inc. (INTU) shares ended the week at $96.72, up 7.4% for the week.

Wal-Mart Reports Strong Earnings


Wal-Mart Stores, Inc. (WMT) reported its latest quarterly earnings on Thursday, February 19. The company reported strong revenue and net income.

Wal-Mart reported revenue of $131.6 billion for the quarter. This represents an increase over the same period last year when the company reported revenue of $129.7 billion.

"Our investments started to enhance our customer experience during the fourth quarter across digital and physical, and we saw good sales in markets around the world," said David Cheesewright, Wal-Mart International President and CEO. "We have significant opportunities to grow, as our core capabilities continue rolling out to customers around the world, and we further expand mobile offerings and our fulfillment centers. Fiscal year 2016 will continue to be a building year, and we can expect sales to grow globally in the mid 20s."

The company reported quarterly net income of $5 billion. This represents an increase over the comparable period last year when the company reported net income of $4.4 billion.

Wal-Mart announced on February 19 that it will raise its minimum pay from $8.25 to $9, rising to $10 per hour for existing staff by next February. This wage hike will increase competition between retailers who want to hire new workers and put pressure on those retailers to follow suit.

Wal-Mart Stores, Inc. (WMT) shares ended the week at $84.30, down 1.3% for the week.

Hyatt Reports Mixed Results


Hyatt Hotels Corporation (H) reported its latest quarterly earnings on Wednesday, February 18. The company reported a decline in revenue but an increase in net income.

Hyatt reported revenue of $1.08 billion for the quarter. This represents a slight decrease from the same period last year when the company reported revenue of $1.09 billion.

"Looking ahead, we expect continued strength in most U.S. markets while international markets will continue to be challenged due to market-specific factors. Transient demand continues to be strong in most markets while our U.S. group pace for 2015 remains robust - up approximately 7%. These factors, along with limited new supply in most U.S. markets, give us the confidence that we are well positioned for strong and sustainable growth."

The company reported quarterly net income of $182 million. This represents a large increase over the same period last year when the company reported net income of $32 million.

Hyatt Hotels announced on February 14 that all of its hotels will now include free Wi-Fi for all guests in rooms and social spaces. The company said that this offer will include access on an unlimited number of mobile devices or laptops. The offer does not include access while in meeting rooms.

Hyatt Hotels Corporation (H) shares ended the week at $59.27, down 0.6% for the week.

The Dow started the week of 2/16 at 18,048 and closed at 18,140 on 2/20. The S&P 500 started the week at 2,096 and closed at 2,110. The NASDAQ started the week at 4,890 and closed at 4,956.
 

The Debt Restructuring Rollercoaster

U.S. Treasury bond prices rose and then fell this week as investors attempted to evaluate the health of the European economy. Greece in particular is under the spotlight as the Euro zone struggles to compromise regarding the best way to restructure Greek debt.

During the past 10 years, Greece borrowed large amounts of money from European banks and governments. When the world-wide financial crisis hit in 2008, the cost to borrow money from banks increased and Greece couldn't afford to repay its debts. So, in 2011, the Euro zone countries came together and lent Greece enough money to meet its obligations with the condition that the country increase taxes and cut spending. However, the austerity measures have not been popular with the Greek population.

Last month, the Greek people displayed their dissatisfaction with the status quo by electing Alexis Tsipras as Prime Minister. He ran on a platform of ending the austerity measures and rebuilding Greece. Euro zone leaders countered by suspending financial aid to Greece until the newly elected government accepted the austerity terms. This stalemate drew both parties to the negotiating table. The newly elected Greek Prime Minister is now in talks with Euro zone leaders to continue much needed financial aid under terms more acceptable to Greece's people.

The stakes are high. If Greece defaults on its debt, then Greece's creditors will lose the money they lent to Greece. Since the economies of the Euro zone are so tightly knit together, this would be disastrous for Greece and would cause widespread financial turmoil throughout the Euro zone. So, both parties have incentive to compromise.

The uncertain future of Greece and the Euro zone caused investors to flock to the safety of U.S. Government bonds. The 10-year Treasury note yield dropped five basis points in early Friday trading from 2.11% to 2.06%. "It is flight to quality," said Tom di Galoma, Head of Rates and Credit Trading at ED&F Man Capital Markets. "The markets are completely held hostage by the drama in restructuring Greek debt."

As of mid-day on Friday, February 20, Euro zone and Greek leaders had agreed to extend financial aid to Greece for four months. This news caused U.S. Treasury bond prices to fall and yields to rise.

The 10-year Treasury note yield finished the week of 2/16 at 2.13% while the 30-year Treasury note yield finished the week at 2.74%.
 

Interest Rates Rise

Freddie Mac reported the results of its weekly Primary Mortgage Market Survey (PMMS) on Thursday, February 19. The report showed average fixed mortgage rates inching higher this week after a strong employment report.

The 30-year fixed rate mortgage averaged 3.76% this week. This represents an increase from last week when it averaged 3.69%. One year ago at this time, the 30-year fixed rate mortgage averaged 4.33%.

This week, the 15-year fixed rate mortgage averaged 3.05%. This represents an increase from last week when it averaged 2.99%. One year ago at this time, the 15-year fixed rate mortgage averaged 3.35%.

"Mortgage rates rose for the second consecutive week as 10-year Treasury yields surged," said Len Kiefer, Deputy Chief Economist at Freddie Mac. "Housing starts declined 2% to a seasonally adjusted pace of 1.065 million units and housing permits dipped 0.7% in January. However, homebuilders remain confident about new home sales although slightly tempered from last month as the NAHB Housing Market Index slipped 2 points to 55 in February."

The money market fund finished the week of 2/16 at 0.4%. The 1-year CD finished at 0.7%.

Published February 20, 2015

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