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Wednesday September 30, 2020

Finances

Finances
 

Walmart Reports Earnings

Walmart Inc. (WMT) released its second quarter earnings report on Tuesday, August 18. The American retail corporation's shares were down 1% following the report's release, after previously reaching an all-time high on Monday, August 17.

The company posted quarterly revenue of $137.7 billion, up 5.6% from $130.4 billion reported during the same quarter last year. This exceeded analysts' expectations of $135.6 billion.

"I want to give a big thank you to our associates for their tireless efforts during these unprecedented times," said Doug McMillon, President and CEO of Walmart. "We also appreciate the trust and confidence of our customers. We remain focused on serving them well now and expanding our set of global capabilities to serve them well in the future."

For the quarter, Walmart reported net income of $6.5 billion or $2.27 per share. This was an increase from net income of $3.6 billion or $1.26 per share reported in the same quarter last year.

Despite the difficulties of the COVID-19 pandemic, the company exceeded second quarter expectations. This was largely led by a 97% increase in online sales with many consumers shifting to e-commerce. Walmart currently offers online grocery pickup services at 3,450 stores and same-day delivery at 2,730 locations. The company plans to launch Walmart+, a membership service that includes same-day delivery of groceries and other merchandise sold by Walmart. Many of the finer details of the service are unknown and executives have not revealed more information. Consistent with the first quarter, Walmart continues to withhold any future guidance for the rest of the year.

Walmart Inc. (WMT) shares closed at $131.65, down 2% for the week.

Home Depot Posts Earnings


The Home Depot, Inc. (HD) released its second quarter earnings report on Tuesday, August 18. Despite a large increase in sales for the quarter, shares virtually held steady following the report's release.

Home Depot posted quarterly revenue of $38.05 billion, up 23.4% from $30.84 billion reported in the same quarter last year. The reported revenue exceeded analysts' expectations of $34.53 billion.

"The investments we have made across the business have significantly increased our agility, allowing us to respond quickly to changes while continuing to promote a safe operating environment," said Craig Menear, CEO and President of Home Depot. "We remain focused on continuing the momentum of our One Home Depot investment strategy that we believe will position us for continued growth over the long-term, while at the same time maintaining flexibility to navigate the demands of the current environment. Through it all, we will continue to lead with our values by doing the right thing and taking care of our people."

The company reported net income for the second quarter of $4.33 billion or $4.02 per share, up from $3.48 billion or $3.17 per share reported during the same quarter last year. The quarterly net income was up 24.5% year over year and exceeded analysts' expected earnings of $3.71 per share.

While the pandemic has increased sales among do-it-yourself consumers and professionals, Home Depot continues to experience increased costs. The company spent $480 million in additional compensation for its employees, down from $640 million of additional employee compensation in the previous quarter. $110 million was used for additional safety costs for its employees, such as protective masks. However, the increased costs due to the pandemic were offset by a large increase in sales for the quarter. Home Depot suspended its future guidance in May.

The Home Depot, Inc. (HD) shares ended at $283.19, down 0.4% for the week.

Target Reports Earnings


Target Corp. (TGT) released its second quarter earnings report on Wednesday, August 19. The company's shares increased as much as 12% following the report's release.

Target reported quarterly revenue of $23.0 billion, a 24.3% increase from $18.4 billion reported in the same quarter last year. This exceeded analysts' expectation of $20.1 billion in revenue.

"Our second quarter comparable sales growth of 24.3% is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model," said Brian Cornell, CEO of Target. "Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9% and stores enabling more than three-quarters of Target's digital sales, which rose nearly 200%. We remain steadfast in our focus on investing in a safe and convenient shopping experience for our guests, and their trust has resulted in market share gains of $5 billion in the first six months of the year."

The company reported net income of $1.7 billion or $3.38 per share, an 80.3% increase from $938 million or $1.82 per share reported in the same quarter last year. This exceeded analysts' expectations of $1.62 per share.

The company's growth was felt in all sectors and was the strongest Target has ever recorded. Comparable store sales increased 10.9%. Comparable digital sales grew 195%, which accounted for 13.4% of comparable sales growth. Same-day services grew by 273%, representing approximately 6% of comparable sales growth. All five of Target's merchandise categories saw an increase in sales—electronics, home and beauty, food, beverage and apparel. The electronics category saw the largest increase at 70% as consumers purchased home-office items and video games. Target did not offer any future guidance due to the pandemic and uncertainty surrounding back-to-school shopping.

Target Corp. (TGT) shares ended at $153.64, up 11% for the week.

The Dow started the week at 27,970 and closed at 27,930 on 8/21. The S&P 500 started the week at 3,381 and closed at 3,397. The NASDAQ started the week at 11,083 and closed at 11,312.
 

Treasury Yields Remain Low

Yields on U.S. Treasurys remained steady at record lows this week. The continued low yields resulted from policymakers declining to employ a yield curve control strategy and unemployment numbers rising back above one million.

On Wednesday, minutes from the Federal Open Market Committee's (FOMC) July meeting explained that the FOMC did not see the benefits of instituting a yield curve control. The yield curve control strategy involves using bond purchases to target yields, which keeps yields from increasing and stunting the economy. The FOMC reasoned that yield caps would likely only provide modest benefits with potential associated costs.

"The reality is that the described lack of urgency to deploy [yield-curve control] is better categorized as 'not-as-uber-dovish-as-hoped,'" said Jon Hill, interest-rate strategist at BMO Capital Markets. "Indeed it's hard to characterize any move by the Fed right now as not highly accommodative."

As a result, the benchmark 10-year Treasury note yield rose 0.6 basis point to 0.674%. The 30-year Treasury note yield rose 1.6 basis points to 1.414%.

On Thursday, following the most recent Labor Department report on unemployment, Treasury yields fell once again. The August 15 unemployment report showed jobless claims at 1.106 million, an increase from the August 8 report of 963,000 new claims. Economists' predicted 923,000 new claims. Continuing claims declined by 636,000 to 14.844 million in the week ending August 8—continuing claims data is delayed by one week.

"The data this month is obviously in the midst of UI benefits that were not extended and hopefully the decline in continuing claims reflected people getting jobs without the extra $600 rather than just falling off the rolls," said Peter Boockvar, chief investment officer at the Bleakely Advisory Group. "One has to wonder whether some reclosing had an impact on claims but we also have to see in coming weeks what, if any, impact there will be with many schools not reopening and going virtual instead."

Following the Labor Department's unemployment report, the 10-year Treasury note fell to 0.644%. The 30-year Treasury bond slipped to 1.376%.

The 10-year Treasury note yield closed at 0.637% on 8/21, while the 30-year Treasury bond yield was 1.347%.
 

Mortgage Rates Rise Slightly

Freddie Mac released its Primary Mortgage Market Survey on Thursday, August 20. The report showed a slight increase in rates.

The 30-year fixed-rate mortgage averaged 2.99%, up from 2.96% last week. At this time last year, the 30-year fixed-rate mortgage averaged 3.55%.

This week, the 15-year fixed-rate mortgage averaged 2.54%, up from last week's average of 2.46%. Last year, the 15-year fixed-rate mortgage averaged 3.03%.

"Purchase housing demand continues to accelerate, ultimately providing support to an economy that otherwise has stagnated," said Sam Khater, Freddie Mac's Chief Economist. "The surge in sales led to a rapid increase in the demand for remodeling and home furnishings as consumers look to renovate while adjusting to home life during COVID."

Based on published national averages, the national average savings rate was 0.06% for the week of 8/17. The one-year CD averaged 0.21%.

Published August 21, 2020

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