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Thursday August 28, 2014

Finances

Finances
 

Is HP Turning Around?

Hewlett-Packard Company (HPQ), a well-known technology company, reported its latest quarterly earnings on Wednesday, August 20. Despite the company’s healthy revenue this quarter, analysts warn that the company still has a lot of work to do in order to make it a good long-term investment.

HP reported quarterly revenue of $27.59 billion. This represents an increase from the same period last year when the company reported revenue of $27.23 billion.

“Overall, I’m very pleased with the progress we’ve made,” said Meg Whitman, Chairman, President and CEO of HP. “When I look at the way the business is performing, the pipeline of innovation and the daily feedback that I receive from our customers and partners, my confidence in the turnaround grows stronger.”

The company reported net income of $985 million for the quarter. This represents a decrease from the comparable quarter last year when the company reported net income of $1.39 billion. Earnings per share came in at $0.52 per share, down from the $0.71 per share reported a year ago.

In May of 2012, Meg Whitman instituted a restructuring initiative. The initiative will cut a total of 50,000 jobs and invest the funds saved back into the business. The purpose was to fuel innovation through investment and cut costs. The company is planning to invest heavily in infrastructure equipment for cloud-based services. The current market leader in this industry is Cisco Systems, Inc. (CSCO). Only time will tell whether HP’s restructuring effort will pay off for investors.

Hewlett-Packard Company (HPQ) shares ended the week at $36.84, up 3.7% for the week.

Intuit is on Cloud Nine


Intuit, Inc. (INTU), creator of software products such as QuickBooks and TurboTax, reported its fourth quarter and fiscal 2014 earnings on Thursday, August 21. The company’s impressive revenue figures were driven by an increase in subscribers to its online services.

Intuit reported fourth quarter revenue of $714 million and annual revenue of $4.51 billion. This represents an increase from last year when quarterly and annual revenue was $634 million and $4.17 billion, respectively.

“We closed fiscal 2014 on a strong note. Overall customer growth is accelerating, active use and attach rates are increasing, and global adoption is in full swing,” said Brad Smith, Intuit’s President and CEO. “We’ve reached an inflection point, as more new customers choose QuickBooks Online over QuickBooks Desktop, fueled by the success of our reimagined QuickBooks Online product experience.”

The company reported a net loss of $39 million for the quarter and net income of $858 million for the year. This compares somewhat unfavorably to last year when the company reported a $16 million loss during the fourth quarter and net income of $897 million.

Software companies such as Intuit have been under pressure to move their desktop products to the cloud. As a result, Intuit has cloud-based versions of its most popular software offerings, including Quicken, QuickBooks and TurboTax. During the past ten years Emergent Research and Intuit have teamed up to track trends in small businesses and just released a report entitled “Small Business Success in the Cloud.” This report details how small businesses can use cloud technology in innovative ways to increase efficiency and achieve long-term success.

Intuit, Inc. (INTU) shares ended the week at $83.57, down 0.8% for the week.

Target’s Earnings Disappoint


Target Corporation (TGT), a general merchandise store, reported its quarterly earnings on Thursday, August 21. The company is trying to rebound from a difficult year but released earnings that disappointed investors.

Target reported $17.41 billion in quarterly revenue. This represents a slight increase from the same period last year when the company reported revenue of $17.12 billion.

“While results from the quarter didn’t meet our expectations, we are seeing some early signs of progress as we work to improve results in the U.S. and Canada,” said John Mulligan, Executive Vice President and CFO of Target. “In the U.S., traffic trends continue to recover and monthly sales are improving, with July comparable sales up more than 1%. Better U.S. sales have continued into August, driven by early back to school results. In Canada, the team is making important changes to operations and the merchandise assortment with a focus on delivering improved results by this holiday season.”

The company reported net income of $234 million for the quarter. This represents a significant decrease from the comparable quarter last year when the company reported net income of $611 million. Earnings per share came in at $0.37 per share, down from $0.95 per share one year ago.

Target is dealing with the aftermath of a security breach where computer hackers stole the credit card information of up to 70 million customers. The company reported $148 million in costs associated with the breach this past quarter. In addition, the company has had a difficult rollout in Canada where it has launched 130 stores since 2013. Canadian operations lost $1 billion in 2013 and more losses are forecast for this year. Former CEO Gregg Steinhafel was replaced by Brian Cornell in July 2014. It will be interesting to see whether the new leadership will be able to help Target once again hit the mark.

Target Corporation (TGT) shares ended the week at $61.05, up nearly 5.2% for the week.

The Dow started the week of 8/18 at 16,664 and closed at 17,001 on 8/22. The S&P 500 started the week at 1,958 and closed at 1,988. The NASDAQ started the week at 4,491 and closed at 4,539.
 

Treasuries Fall as Rate Hike Seems Imminent

Treasuries fell and prices rose on Friday, August 22 after the Federal Open Market Committee (FOMC) released the minutes of its July meeting. The content of the minutes caused investors to speculate that the Federal Reserve may raise the federal funds rate within the next twelve months.

The July meeting minutes showed that there were quite a few members of the FOMC that said they may raise interest rates sooner than anticipated if the economic data showed movement toward the committee’s objectives more quickly than expected. “The front end is trying to reprice to the timing of the first Fed rate hike and is struggling to get a sense as to when that’s going to happen,” said Guy Haselmann, Interest-Rate Strategist at Bank of Nova Scotia in New York.

Yellen emphasized that while the labor market seems to be improving there are still labor resources that are going underutilized. Economic data this month showed that the economy added over 200,000 in July, the sixth consecutive month of such increases. However, while the jobs market is showing some consistency, growth is still slow.

After the release of the FOMC minutes, Bloomberg futures data showed that bond traders saw a 54% chance that the Fed would raise the federal funds rate by July 2015. This was an increase of 6% over the same measure on August 19, the day before the rates were released.

Trader sentiment caused the 10-year note yield to rise briefly to 2.44% before trading around 2.41%. The five-year note yield rose two basis points to 1.65%. The 30-year bond yield declined one basis point to 3.18%.

The 10-year Treasury note yield finished the week of 8/18 at 2.40% while the 30-year Treasury note yield finished the week at 3.16%.
 

Rates Drop to Lowest Level in 2014

Freddie Mac released the results of its latest Primary Mortgage Market Survey on Thursday, August 21. The results show average fixed mortgage rates falling to their lowest levels during 2014.

The 30-year fixed rate mortgage averaged 4.1% this week. This is down from last week when it averaged 4.12%. One year ago, the 30-year fixed rate mortgage averaged 4.58%

This week, the 15-year fixed rate mortgage averaged 3.23%. This is down from last week when it averaged 3.24%. Last year at this time, the 15-year fixed rate mortgage averaged 3.6%.

“Mortgage rates were down slightly this week, following the decline in 10-year Treasury yields,” said Frank Nothaft, Vice President and Chief Economist for Freddie Mac. “Meanwhile, housing starts in July jumped 15.7% to 1.093 million units after falling 4% a month earlier. Also, July’s consumer prices increased at a 0.1% seasonally adjusted pace, the slowest in five months.”

The money market fund finished the week of 8/18 at 0.4%. The 1-year CD finished at 0.7%.

Published August 22, 2014

Previous Articles

Macy’s Earnings Miss Expectations

Walt Disney’s Earnings Impress Investors

Tesla Delivers Mixed Quarterly Results

Netflix Reaches 50 Million Members

Yahoo Sees Earnings Decline

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