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Friday August 23, 2019



Shutterfly Reports Earnings

Shutterfly, Inc. (SFLY) announced quarterly earnings on Tuesday, August 7. The image publishing service reported better-than-expected earnings, causing shares to jump as much as 9% after the report was released.

Revenue for the second quarter reached $443 million. This is up from revenue of $209 million reported during the same quarter last year and above the $438 million in revenue that analysts expected.

"With the closing of the Lifetouch acquisition, the second quarter of 2018 marks the beginning of a new stage of Shutterfly's growth," said Shutterfly President and CEO Christopher North. "Shutterfly now comprises three divisions: Shutterfly Consumer, Lifetouch, and Shutterfly Business Solutions. All three are large, profitable businesses that are the leaders in their respective industries, and all three have significant opportunities ahead of them."

Shutterfly reported net losses of $26.5 million, up from last year's second quarter loss of $22.8 million. The company posted losses of $0.80 per share, while on an adjusted earnings per share basis the company reported earnings of $0.38 per share.

Shutterfly is the leading online retailer and manufacturer of personalized products and services, including digital photo books, home décor and cards. In the second quarter, the company finalized its purchase of Lifetouch, the national leader in school pictures. The acquisition will allow Shutterfly to expand is inventory to school yearbooks and expand its clientele with each incoming school class. Shutterfly increased its full-year guidance to a range of $3.05 to $3.50 per share, with revenue of $1.97 to $2.30 billion.

Shutterfly, Inc. (SFLY) shares ended the week at $75.21, down 9.3% for the week.

Disney Posts Earnings Miss

The Walt Disney Company (DIS) released its latest quarterly earnings report on Tuesday, August 7. The entertainment giant reported increased revenue and profits for the quarter, but missed Wall Street's predictions.

The company reported $15.23 billion in revenue for the third quarter. This is a 7% increase from revenue of $14.24 billion during the same quarter last year, but fell short of the $15.34 billion in revenue that Wall Street expected.

"We're pleased with our results in the quarter, including a double-digit increase in earnings per share, and excited about the opportunities ahead for continued growth," said Disney Chairman and CEO Robert Iger. "Having earned the overwhelming support of shareholders, we are more enthusiastic about the 21st Century Fox acquisition than ever, and confident in our ability to fully leverage these assets along with our own incredible brands, franchises and businesses to drive significant value across the entire company."

Disney reported net income of $2.92 billion, or $1.87 per share for the quarter, missing the $1.95 per share that analysts predicted. This is up from $2.37 billion, or $1.58 per share, at this time last year.

Disney is moving forward with its acquisition of 21st Century Fox, Inc., pending global regulatory approval. In June, the transaction received regulatory approval from the U.S. Justice Department. The acquisition would give Disney 60% ownership in the streaming service Hulu.

The Walt Disney Company (DIS) shares ended the week at $112.69, down 1.7% for the week.

Hostess Brands Loses Shelf Space

Hostess Brands, Inc. (TWNK) reported quarterly earnings on Tuesday, August 7. The bakery company posted disappointing revenue and profits, sending shares sliding as much as 16% after the report's release.

Hostess announced revenue of $215.8 million for the second quarter. This is up from revenue of $203.2 million reported in the same quarter last year, but below the $221 million in revenue that Wall Street expected.

"During the second quarter I was pleased to continue to see overall point of sale and market share growth ahead of the [Sweet Baked Goods] category giving us confidence in our growth potential moving forward," said Hostess President and CEO Andy Callahan. "The overall growth was reduced by meaningful and larger than anticipated reductions in both promotional support and associated retail inventory from one of our largest retail partners. Additionally, the escalating inflationary pressures, including transportation and other supply chain costs, were more pronounced than we anticipated."

The company reported net earnings of $24.6 million, down from $28.2 million reported one year ago. On an adjusted earnings per share basis, the company reported profit of $0.14 per share, missing the $0.18 per share that analysts predicted.

Hostess attributed its growing market share to its core segment of Sweet Baked Goods. In the second quarter, the company introduced its Bakery Petites collection, which use no artificial colors, flavors or high fructose corn syrup. The segment grew 6.5% year-over-year, but was offset due to retail inventory reduction at one of its largest retail partners.

Hostess Brands, Inc. (TWNK) shares ended the week at $11.73, down 1.9% for the week.

The Dow started the week of 8/6 at 25,437 and closed at 25,313 on 8/10. The S&P 500 started the week at 2,840 and closed at 2,833. The NASDAQ started the week at 7,810 and closed at 7,839.

Treasury Yields Slip As Geopolitical Tensions Rise

U.S. Treasury bond yields dipped to two-week lows early in the week amid geopolitical tensions. Yields rose on strong job opening numbers but fell in response to newly announced tariffs.

On Monday, the U.S. announced re-imposed sanctions on Iran, effective midnight Tuesday. Yields fell to two-week lows, with the 10-year Treasury note falling to 2.921%, while the yield on the 30-year Treasury bond slipped to 3.064%.

"Near-term directional moves [of Treasury yields] in the markets continue to be dominated by headlines around trade and geopolitics," said senior investment strategist at Allianz Investment Management, Charlie Ripley. "Today is no different as headlines of escalating tensions between the U.S. and Iran have worked their [way through] the markets driving oil prices higher and putting additional pressure on interest rates."

Released Tuesday, the Job Openings and Labor Turnover Survey (JOLTS) revealed a record number of job openings. Following the survey's release, the yield on the 10-year Treasury note rose to a session high of 2.980%, while the yield on the 30-year Treasury bond jumped to 3.127%.

On Wednesday, following China's announcement of retaliatory tariffs, the 10-year Treasury yield slipped to 2.966%. The Chinese Ministry of Commerce announced 25% tariffs on $16 billion of goods from the U.S. On Friday, yields slipped further following the announcement that the U.S. would impose doubled tariffs on Turkish goods.

"Trade tensions have kind of kept Treasurys in a range for some time," said Ripley. "We also kind of expected more upward pressure on Treasury yields with the increased auction sizes, but it seems every time it seems to be met with demand. It's sort of a head-scratcher."

The 10-year Treasury note yield closed at 2.86% on 8/10 while the 30-year Treasury bond yield was 3.02%.

Mortgage Rates Dip

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, August 9. The report revealed that mortgage rates were lower than last week's averages.

The 30-year fixed rate mortgage averaged 4.52% this week, down from 4.55% last week. During this time last year, the 30-year fixed rate mortgage averaged 3.96%.

This week, the 15-year fixed rate mortgage averaged 3.99%, down from last week when it averaged 4.04%. Last year at this time, the 15-year fixed rate mortgage averaged 3.22%.

"The run-up in mortgage rates earlier this year represented not just a rise in risk-free borrowing costs, but for investors, the mortgage spread also rose back to more normal levels by about 20 basis points," said Sam Khater, Chief Economist at Freddie Mac. "What that means for buyers is good news. Mortgage rates may have a little more room to decline over the very short term."

Based on published national averages, the money market account closed at 1.14% on 8/10. The 1-year CD finished at 2.45%.

Published August 10, 2018
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