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Sunday March 29, 2020



Disney Delivers Solid Earnings

The Walt Disney Company (DIS) released its quarterly earnings report on Wednesday, May 8. The entertainment giant reported better-than-expected earnings and revenue for the quarter.

Disney reported quarterly revenue of $14.92 billion. This is up from last year's second quarter revenue of $14.55 billion and above the $14.36 billion in revenue that Wall Street predicted.

"We're very pleased with our Q2 results and thrilled with the record-breaking success of Avengers: Endgame, which is now the second-highest grossing film of all time and will stream exclusively on Disney+ starting December 11th," said Disney CEO Robert A. Iger. "The positive response to our direct-to-consumer strategy has been gratifying, and the integration of the businesses we acquired from 21st Century Fox only increases our confidence in our ability to leverage decades of iconic storytelling and the powerful creative engines across the entire company to deliver an extraordinary value proposition to consumers."

The company announced earnings of $5.42 billion for the quarter, which was up from earnings of $2.94 billion one year ago. On an adjusted earnings per share basis, the company reported earnings of $1.61 per share, which was more than the $1.58 per share that analysts predicted.

The second quarter was a busy time for the media giant. Not only did Disney close its $71 billion acquisition of Fox entertainment, it unveiled its future streaming service, Disney+. Like Netflix, Disney+ subscribers will be able to stream movies, TV shows and documentaries ad-free or download them to watch later. The service will debut in November and will cost subscribers $6.99 a month or $69.99 per year.

The Walt Disney Company (DIS) shares closed at $134.05, up 1.2% for the week.

Lyft Reports Large Loss in Earnings

Lyft, Inc. (LYFT) announced quarterly earnings on Tuesday, May 8. The release was the ride-hailing company's first earnings report since its initial public offering in March.

Revenue for the first quarter reached $776.03 million. This is up from revenue of $397.18 million reported during the same quarter last year and above the $739.40 million in revenue that analysts expected.

"The first quarter was a strong start to an important year, our first as a public company," said Lyft Co-Founder and CEO Logan Green. "Our performance was driven by the increased demand for our network and multi-modal platform, as Active Riders grew 46% and revenue grew 95% percent year-over-year."

Lyft reported a loss in quarterly net earnings of $1.14 billion, compared to last year's earnings loss of $234.34 million. On an adjusted earnings per share basis, the company posted an earnings loss of $9.02 per share.

The company's net loss was largely due to stock-based compensation and additional expenses related to its initial public offering. Without these costs, the company's loss totaled $211.5 million. During a call with investors on Tuesday, Lyft CFO Brian Roberts remained optimistic about the company's profitability in future quarters stating, "We anticipate that 2019 will be our peak loss year."

Lyft, Inc. (LYFT) shares closed at $51.09, down 15.6% for the week.

Tyson Beats Earnings Estimates

Tyson Foods, Inc. (TSN) reported quarterly earnings on Monday, May 6. The food company reported revenue and earnings that were above Wall Street's estimates, causing shares to rise 2.6% following the report's release.

Tyson announced revenue of $10.44 billion for the second quarter. This is up from revenue of $9.77 billion reported in the same quarter last year and above the $10.23 billion in revenue that analysts expected.

"I'm pleased with our direction as we begin the back half of the year," said Tyson CEO Noel White. "The Prepared Foods segment produced its second consecutive quarter of record return on sales. Both the Beef and Pork segments were solid performers, while the Chicken segment is poised for improvement following what we believe are its margin lows for the year."

The company reported earnings of $426 million for the quarter, up from earnings of $315 million one year ago. On an adjusted earnings per share basis, the company posted earnings of $1.20 per share, surpassing analysts' earnings estimates of $1.12 per share.

In addition to its namesake brand of prepared foods, Tyson's brands include Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells and State Fair. The Springdale, Arkansas-based company plans to add a plant-based meat substitute to its line of products this year. During a call with investors on Monday, White explained that the plant-based product will be introduced this summer on a "fairly limited basis" and then on a larger scale in the fall.

Tyson Foods, Inc. (TSN) shares closed at $79.80, up 6.7% for the week.

The Dow started the week at 26,160 and closed at 25,942 on 5/10. The S&P 500 started the week at 2,909 and closed at 2,881. The NASDAQ started the week at 7,982 and closed at 7,917.

Trade Tensions Pressure Yields Lower

Yields on U.S. Treasury bonds edged lower as the week came to an end. Trade tensions coupled with lower-than-expected domestic inflation data quelled investors' risk appetites and increased demand for safe-haven government debt.

On Friday, the U.S. imposed higher tariffs on Chinese exports following failed trade talks in Washington. The tariffs on $200 billion of Chinese exports increased from 10% to 25%.

The trade news caused the Dow Jones Industrial Average to fall 320 points, continuing the week-long sell-off. By mid-morning on Friday, the Dow was down more than 900 points for the week, while the S&P 500 was down 3.7%.

The sell-off sent investors flocking toward less risky government debt, pressuring yields lower. The yield on the 10-year Treasury note fell 0.9 basis points to 2.444%, while the yield on the 30-year Treasury bond dipped 0.2 basis points to 2.873%.

"The muted overnight response to Trump's latest round of tariffs suggests the eventuality was fully priced in," Ian Lyngen, head of U.S. rate strategy at BMO Capital Markets. "The White House's 15% add-on to the present tariff structure has left us to ponder how that will translate into realized inflation during the balance of the year."

On Friday, the Labor Department revealed that the consumer price index rose 0.3% in April, falling short of the 0.4% economists predicted. The increase was due, in large part, to higher healthcare, gasoline and rent costs.

The 10-year Treasury note yield closed at 2.47% on 5/10, while the 30-year Treasury bond yield was 2.89%.

Mortgage Rates Dip Slightly

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, May 9. The report revealed that mortgage rates inched slightly lower this week.

The 30-year fixed rate mortgage averaged 4.10% this week, down from 4.14% last week. During this time last year, the 30-year fixed rate mortgage averaged 4.55%.

This week, the 15-year fixed rate mortgage averaged 3.57%, a decrease from last week when it averaged 3.60%. Last year at this time, the 15-year fixed rate mortgage averaged 4.01%.

"Investors wary of the current economic situation due to ongoing trade disputes resorted to the bond market, causing the 10-year treasury yield to decrease," said Sam Khater, Chief Economist at Freddie Mac. "A combination of low mortgage rates, a strong job market and modest wage growth should spur homebuyer interest and also serve as an incentive for homeowners looking to refinance this spring."

Based on published national averages, the money market account closed at 1.36% on 5/10. The one-year CD finished at 2.68%.

Published May 10, 2019

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