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Friday July 3, 2020



Adobe Reports Record Revenue

Adobe, Inc. (ADBE) released its quarterly earnings report on Tuesday, June 18. The software company reported record revenue and better-than-expected earnings for the quarter, causing shares to rise 4% following the report's release.

Adobe reported record quarterly revenue of $2.74 billion. This is up 25% from last year's second quarter revenue of $2.19 billion and above the $2.71 billion in revenue that Wall Street predicted.

"Adobe's continued momentum is being fueled by the explosion of creativity across the globe and the widespread business transformation agenda to deliver engaging customer experiences," said Adobe CEO Shantanu Narayen. "With an innovative technology platform, exciting product roadmap and strong ecosystem of partners, we are well positioned for the second half of FY19 and beyond."

The company announced earnings of $632.59 million for the quarter, which is down from earnings of $663.17 million one year ago. On an adjusted earnings per share basis, Adobe reported earnings of $1.83 per share, which was more than the $1.78 per share that analysts predicted.

Adobe's revenue boost was largely due to strong growth in its Digital Media business, which includes the company's Creative Cloud and Document Cloud products. In the second quarter, Adobe's digital media segment brought in $1.89 billion in revenue, up 22% year-over-year. The company's shares rose 4% following the earnings release and are up 22% so far this year.

Adobe, Inc. (ADBE) shares closed at $299.28, up 9% for the week.

Kroger Releases Earnings

The Kroger Co. (KR) announced quarterly earnings on Thursday, June 20. The supermarket chain's quarterly sales and earnings declined year-over-year.

Revenue for the first quarter reached $37.25 billion. This is down from revenue of $37.72 billion reported during the same quarter last year and below the $37.27 billion in revenue that analysts expected.

"Because the retail industry is constantly transforming, we proactively launched Restock Kroger to deliver for our customers and shareholders," said Kroger CEO Rodney McMullen. "The entire company is focused on redefining the grocery customer experience, improved upon by exciting partnerships that will create value."

Kroger reported quarterly net earnings of $772 million, compared to last year's earnings of $2.03 billion. On an adjusted earnings per share basis, the company posted earnings of $0.72 per share, one cent above the $0.71 per share that analysts predicted.

The supermarket company has been struggling to compete with big retailers like Walmart and Amazon, which have continued to draw in customers with low prices, online ordering and delivery options. In response, Kroger launched its three-year "Restock Kroger" program in October 2018 in an effort to "redefine the grocery customer experience." These efforts include building a high-tech automated warehouse and testing a new 30-minute grocery delivery service at two of its locations in the Cincinnati area.

The Kroger Co. (KR) shares closed at $22.27, down 8.5% for the week.

Oracle's Shares Rise on Upbeat Earnings

Oracle Corporation (ORCL) reported quarterly earnings on Wednesday, June 19. The company reported revenue and earnings that were above analysts' estimates, causing shares to jump more than 7% following the report's release.

Oracle announced revenue of $11.14 billion for the fourth quarter. This is up from revenue of $11.01 billion reported in the same quarter last year and above the $10.93 billion in revenue that analysts expected.

"Q4, our non-GAAP operating income grew 7% in constant currency–which drove EPS well above the high end of my guidance," said Oracle's co-CEO Safra Catz. "Our high-margin Fusion and NetSuite cloud applications businesses are growing rapidly, while we downsize our low-margin legacy hardware business. The net result of this shift away from commodity hardware to cloud applications was a Q4 non-GAAP operating margin of 47%, the highest we've seen in five years."

The company reported earnings of $3.74 billion for the quarter, up from earnings of $3.28 billion one year ago. On an adjusted earnings per share basis, Oracle posted earnings of $1.16 per share, topping analysts' earnings estimates of $1.07 per share.

Oracle's cloud application business led the way in the fourth quarter. The company's Cloud Services and License Support segment brought in $6.80 billion in sales, surpassing the $6.76 billion in revenue that analysts expected. Earlier this month, Oracle and Microsoft entered into a deal to link their cloud computing services, which will allow users to seamlessly move their workloads between the two cloud systems.

Oracle Corporation (ORCL) shares closed at $56.12, up 5.2% for the week.

The Dow started the week at 26,109 and closed at 26,719 on 6/21. The S&P 500 started the week at 2,890 and closed at 2,950. The NASDAQ started the week at 7,970 and closed at 8,032.

Yields Fall After Federal Reserve Meeting

Yields on U.S. Treasuries fell to two-and-a-half-year lows on Thursday following Wednesday's Federal Reserve meeting. While the Fed decided to hold interest rates steady, policymakers at the meeting signaled that an interest rate cut could happen as early as next month.

At Wednesday's meeting, the Federal Open Market Committee voted 9-1 to keep the benchmark rate in a target range of 2.25% to 2.5%. The Fed explained that its decision to leave interest rates unchanged for now and leave the door open the door to future rate cuts was impacted by muted inflation and escalating trade tensions between the U.S. and China.

"Overall, our policy discussion focused on the appropriate response to the uncertain environment," said Fed Chairman Jerome Powell. "Many participants now see the case for somewhat more accommodative policy has strengthened."

In reaction to the Fed's comments, the yield on the benchmark 10-year Treasury note fell to 1.974% overnight, before rebounding to 2.010% Thursday afternoon. The drop marked the first time the yield on the 10-year Treasury note has fallen below 2% since November 2017.

"Breaking below 2% signals that the markets have begun to price in a recession in the U.S.," said Danielle DiMartino Booth, former Federal Reserve advisor and CEO of Quill Intelligence. "Trade deal or not, Fed Chair Jerome Powell's hand will be forced by the data. It's also telling that the most hawkish house on the Street, Goldman Sachs, flipped their forecast from no rate changes this year to two cuts this year."

By Friday morning, the yield on the 10-year Treasury note was slightly higher, hovering around 2.06%, but was still on-track for a four-basis-point decline for the week. The rebound came after President Trump announced on Twitter that he called off a retaliatory strike on Iran for shooting down a U.S. drone.

The 10-year Treasury note yield closed at 2.07% on 6/21, while the 30-year Treasury bond yield was 2.59%.

Mortgage Rates Stabilize

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, June 20. The report revealed that mortgage rates are continuing to stabilize.

The 30-year fixed rate mortgage averaged 3.84% this week, up from 3.82% last week. During this time last year, the 30-year fixed rate mortgage averaged 4.57%.

This week, the 15-year fixed rate mortgage averaged 3.25%, a slight decrease from last week when it averaged 3.26%. Last year at this time, the 15-year fixed rate mortgage averaged 4.04%.

"While the continued drop in mortgage rates has paused, homebuyer demand has not," said Sam Khater, Chief Economist at Freddie Mac. "This is evident in increased purchase activity and loan amounts, indicating that homebuyers still have the willingness and capacity to purchase homes. Today's low rates, strong job market, solid wage growth and consumer confidence are typically important drivers of home sales."

Based on published national averages, the money market account closed at 1.22% on 6/21. The one-year CD finished at 2.57%.

Published June 21, 2019
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