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Saturday December 4, 2021



Starbucks Reports First Quarter Earnings

Starbucks Corporation (SBUX) reported its quarterly financial results on Tuesday, January 26. The coffeehouse chain reported revenue that missed analysts' estimates.

The company reported first quarter net revenue of $6.75 billion, down 4.9% from $7.1 billion reported in the same quarter last year. Analysts expected revenue to reach $6.87 billion.

"I am very pleased with our start to fiscal 2021, with meaningful, sequential improvements in quarterly financial results despite ongoing business disruption from the pandemic," said Starbucks President and CEO Kevin Johnson. "Our results demonstrate the continued strength and relevance of our brand, the effectiveness of the actions we've taken to adapt to changes in consumer behavior and the steadfast commitment of our green apron partners to serve our customers and communities."

Starbucks' net income for the quarter fell 29.8% to $622 million. On an adjusted per share basis, earnings were $0.61. These earnings surpassed expectations of $0.55 per share, but nevertheless reflected a 22.8% decrease from $0.79 in the same quarter last year.

Starbucks opened 278 net new stores in the first quarter, generating 4% year-over-year unit growth. The company ended the quarter with 32,938 stores globally. Comparable sales for the quarter slid 5%, with a decrease of 19% in comparable transactions. The comparable sales and transactions decline was partially offset by a 17% increase in the average ticket. There were 21.8 million active loyalty program members in the first quarter, up 15% year-over-year.

Starbucks Corporation (SBUX) shares ended the week at $96.81, down 6.7% for the week.

Apple Reports Earnings

Apple Inc. (AAPL) released its latest earnings report on Wednesday, January 27. The company's revenue increased to a new all-time high for the quarter.

The company reported first quarter revenue of $111.4 billion for the quarter. This was up 21% from $91.8 billion in revenue at this time last year and exceeded analysts' expectations of $103.28 billion.

"This quarter for Apple wouldn't have been possible without the tireless and innovative work of every Apple team member worldwide," said Tim Cook, Apple's CEO. "We're gratified by the enthusiastic customer response to the unmatched line of cutting-edge products that we delivered across a historic holiday season."

Apple posted net income of $28.76 billion during the quarter. This beat the $22.24 billion in net income reported last year at this time.

The company's iPhones led the way, reaching net sales of $65.60 billion for the quarter. This was up from $55.96 billion in the same quarter last year. The Services category accounted for quarterly net sales of $15.76 billion, followed by Wearables, Home and Accessories at $12.97 billion. Apple's iPad category trailed with $8.44 billion in sales.

Apple Inc. (AAPL) shares ended the week at $131.96, down 7.8% for the week.

Tesla Reports Quarterly Earnings

Tesla, Inc. (TSLA) released its fourth quarter and full-year earnings report on Wednesday, January 27. The electric automotive company posted better-than-expected quarterly revenue.

Revenue came in at $10.74 billion for the quarter, up from $7.38 billion during the same quarter last year. This beat analysts' expected quarterly revenue of $10.4 billion. Revenue for the full year came in at $31.54 billion.

"This past year was transformative for Tesla," the company stated in its earnings release. "Despite unforeseen global challenges, we outpaced many trends seen elsewhere in the industry as we significantly increased volumes, profitability and cash generation."

The company posted net earnings of $270 million for the quarter. This was up from $105 million at this time last year. Full-year net income was $721 million.

Tesla noted in its earnings release that it would start production of its Model Y at new plants located in Texas and Germany. The Model Y is in production at its plants in California and China. The company fell short of its goal to deliver 500,000 vehicles in fiscal year 2020, delivering 499,550. The company produced 509,737 vehicles in the fiscal year.

Tesla, Inc. (TSLA) shares ended the week at $793.53, down 7.2% for the week.

The Dow started the week at 30,990 and closed at 29,983 on 1/29. The S&P 500 started the week at 3,852 and closed at 3,714. The NASDAQ started the week at 13,681 and closed at 13,071.

Treasury Yields On the Rise

U.S. Treasury yields rose following the Commerce Department's release of the fourth-quarter Gross Domestic Product (GDP). First-time unemployment claims reported were lower than expected.

On Thursday, the GDP for the U.S. was released, with annualized growth of 4% for the fourth quarter. Economists expected GDP growth of 4.3%. For the full year, GDP declined 3.5%, due to the COVID-19 pandemic's impact on the economy.

"Growth is likely to be very weak in the first quarter of 2021, below 1% annualized," said PNC's chief economist, Gus Faucher. "With record-high caseloads early in the year consumers have turned more cautious and states have re-imposed additional restrictions on economic activity, although in a more targeted fashion than in the early stages of the pandemic. But growth should pick up through the rest of 2021."

The yield on the 10-year Treasury note peaked on Thursday at 1.065% and continued climbing to 1.084% during morning trading on Friday. The 30-year Treasury bond yield reached a high of 1.837% on Thursday and was up to 1.846% on Friday morning trading.

On Thursday, the U.S. Department of Labor released its weekly unemployment numbers. First-time unemployment claims dipped to 847,000, falling below economists' expectations of 875,000. The previous week's numbers were revised up from 900,000 to 914,000.

"The level of initial claims is obviously still way too high, but we are only a few more months away from hopefully seeing a sharp drop as more service businesses reopen as we get vaccinated," said Peter Boockvar, CIO of Bleakley Advisory Group. "Likely also keeping it high is another round of generous federal benefits, as the extra $300 allows about 50% of people collecting claims to make more than what they were earning while working."

The 10-year Treasury note yield closed at 1.093% on 1/29, while the 30-year Treasury bond yield was 1.858%.

Mortgage Rates Decrease

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, January 28. The report showed a slight decline in rates from the prior week.

The 30-year fixed rate mortgage averaged 2.73% this week, down slightly from 2.77% last week. At this time last year, the 30-year fixed rate mortgage averaged 3.51%.

This week, the 15-year fixed rate mortgage averaged 2.20%, down from last week's average of 2.21%. Last year at this time, the 15-year fixed rate mortgage averaged 3.00%.

"As the market reacts to a new administration in Washington and COVID-19 driven economic malaise, mortgage rates continued to decrease this week, just slightly," said Freddie Mac's Chief Economist, Sam Khater. "Even as house prices increase at the fastest rate we've seen in years, competition to buy is strong given the low inventory that exists across the country. The fact that there are not enough homes to meet demand is going to be an ongoing issue for the foreseeable future."

Based on published national averages for the week of 1/25, the national savings rate was 0.05%. The one-year CD averaged 0.15%.

Published January 29, 2021
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