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Tuesday October 27, 2020



FedEx Earnings Fall Short

FedEx Corp. (FDX) released its quarterly earnings for the second quarter on Tuesday, December 17. The company posted revenue and net income that fell short of Wall Street’s expectations.

Revenue came in at $17.3 billion for the quarter, down from $17.8 billion at this time last year. This fell short of analysts’ expected quarterly revenue of $17.7 billion.

“Fiscal 2020 is a year of continued significant challenges and changes for FedEx, particularly in the quarter just ended due to the compressed shipping season,” said FedEx CEO Frederick W. Smith. “We have significantly enhanced our e-commerce capabilities with strategic initiatives including year-round seven-day FedEx Ground delivery, enhanced large package capabilities and the insourcing of FedEx SmartPost packages. These changes have been well-received by the marketplace as reflected in our record volumes this peak season.”

The company posted net income of $560 million for the quarter, or $2.51 per share, down from $935 million, or $4.03 per share, during the prior year’s quarter. Experts predicted earnings per share of $2.78 for the quarter.

The company, which is currently in the midst of its busy season, recently parted ways with Amazon. While for many years FedEx delivered packages for the online retailer, Amazon’s recent implementation of its own in-house package delivery service signaled the beginning of the end of the companies’ working relationship. FedEx Ground and express shipments for Amazon ended in the summer of 2019 while Amazon discontinued its relationship with FedEx for third-party seller deliveries in mid-December.

FedEx (FDX) shares ended the week at $148.12, down 11.3% for the week.

Scholastic Reports Earnings

Scholastic Corporation (SCHL) posted its latest earnings on Thursday, December 19. The publishing company reported strong earnings for the quarter.

The company’s revenue for the second quarter was $597.2 million. This was down from $604.7 million in earnings at this time last year.

“In the second quarter, Scholastic continued to stand out as the world's leading children's book publisher and distributor, at a time when the category is viewed as the most stable part of the market, with our new titles and series performing at the top of bestsellers' lists,” said Scholastic Chairman and CEO Richard Robinson. “Trade revenues grew 8% despite difficult comparisons with last year. Book fairs increased revenues in a more competitive environment in this important back-to-school period.”

Net income came in at $71.0 million for the quarter. Last year at this time, the company posted net income of $71.6 million.

Scholastic Corporation, well-known for its school book fairs, announced a 2% quarterly increase in revenue in its book fair segment, reaching $224.1 million. This partially offset a 15% drop in revenue for Scholastic’s Book Clubs, which fell to $85.9 million in revenue. For the full year, Scholastic expects $1.69 billion in revenue.

Scholastic Corporation (SCHL) shares ended the week at $39.44, relatively unchanged for the week.

Herman Miller Post Earnings Report

Herman Miller, Inc. (MLHR) reported its second quarter earnings on Wednesday, December 18. The office furniture maker’s sales increased, yet share prices fell.

The company reported net sales of $674.2 million. This was up 3.3% from $652.6 million in net sales at the same time last year.

“In the face of an uncertain global economic and geopolitical environment, we delivered adjusted earnings per share at the upper end of the guidance range that we established at the start of the quarter,” stated Andi Owen, President and CEO of Herman Miller. “Second quarter sales were impacted by lower than anticipated order levels, which reflected the uneven demand patterns we're seeing across the broader industry and the natural variability in a project-driven business.”

Herman Miller posted net income of $78.6 million for the quarter. This is an increase from $39.3 million at this time last year.

Despite strong earnings numbers for the quarter, the office-furniture maker’s shares fell nearly 14% following the release of the report. In its report, the company set its third quarter net sales expectation at a range between $672 million and $692 million. Herman Miller also announced that its expected earnings per share for the third quarter would be between $0.68 per share and $0.72 per share.

Herman Miller, Inc. (MLHR) shares ended the week at $43.87, up 6.0% for the week.

The Dow started the week at 28,192 and closed at 28,455 on 12/20. The S&P 500 started the week at 3,184 and closed at 3,221. The NASDAQ started the week at 8,791 and closed at 8,925.

Progress on Trade Agreements Boosts Yields

Yields on U.S. Treasurys rose this week as the markets reacted to progress toward congressional approval of a new North American trade agreement. The House of Representatives’ approval of the agreement follows last week’s announcement of a separate trade deal with China.

On Thursday, the House of Representatives passed the United States-Mexico-Canada Agreement (USMCA). The agreement, which is the successor to the North American Free Trade Agreement (NAFTA), will be advanced to the Senate, and, if it is approved, is expected to be signed by the president.

“While no deal is perfect, USMCA’s updated rules on digital trade, non-tariff barriers, and services promise real benefits to American businesses and consumers,” said U.S. Chamber of Commerce CEO Thomas J. Donohue. “USMCA is a welcome gift this holiday season, leveling the playing field for trade in North America and helping U.S. companies compete in our top two export markets.”

The benchmark 10-year U.S. Treasury note yield opened the week at 1.827% and rose to 1.916% during early trading on Friday. The 30-year U.S. Treasury bond began the week at 2.255% and jumped to 2.346% on Friday.

Congress’ progress toward approval of the North American trade agreement comes as leaders of the U.S and China await formal signing of the phase one deal between the two countries. On Friday, China’s President Xi Jinping struck a positive tone in reference to the agreement.

“The first-phase economic and trade agreement reached between the U.S. and China is a good thing for the U.S., China, and the entire world,” said President Xi. “Both the U.S. and Chinese markets and the world have responded very positively to this.”

The 10-year Treasury note yield closed at 1.92% on 12/20, while the 30-year Treasury bond yield was 2.35%.

Mortgage Rates Unchanged

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, December 19. Mortgage rates held steady from the previous week.

The 30-year fixed rate mortgage averaged 3.73% this week, unchanged from last week. During the same week last year, the 30-year fixed rate mortgage averaged 4.62%.

This week the 15-year fixed rate mortgage averaged 3.19%, also unchanged from the prior week. Last year at this time, the 15-year fixed rate mortgage averaged 4.07%.

“The economy continued to pick up momentum with a solid increase in residential construction, improvement in industrial output in our nation’s factories and a rise in job openings,” said Freddie Mac’s Chief Economist, Sam Khater. “While the economy is in a sweet spot, improvements in housing market sales volumes will be modest heading into next year simply due to the lack of available inventory.”

Based on published national averages, the savings rate was 0.09% for the week of December 16. The one-year CD finished at 0.49%.

Published December 20, 2019

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