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Monday August 3, 2015

Finances

Finances
 

Ford Reports Strong Earnings

Ford Motor Company (F) reported its latest quarterly earnings on Tuesday, July 28. The company reported solid earnings despite slow sales.

Ford reported revenue of $37.3 billion for the quarter. This represents a slight decrease compared to the same quarter last year when the company reported revenue of $37.4 billion.

"We delivered an outstanding second quarter, a great first half of 2015 and we are confident the second half of the year will be even stronger," said Mark Fields, President and CEO of Ford Motor Company. "The entire Ford team is focused on accelerating our One Ford plan, delivering product excellence and driving innovation in every part of our business."

The company reported quarterly net income of $1.9 billion. This represents a significant increase over the comparable period last year when Ford reported net income of $1.31 billion.

Total sales of F-Series models fell over 6% during the quarter. In addition, this week the Insurance Institute for Highway Safety released test scores for the new F-150 extended cab that gave the vehicle a "marginal" safety rating. Despite these setbacks, Ford reported solid net income for the quarter mostly because dealers were able to charge more for Ford's most popular models. The average transaction price on the nearly 180,000 F-Series models sold this past quarter was $3,000 higher than the same quarter last year. As a result, Ford's share price increased during this past week.

Ford Motor Company (F) shares ended the week at $14.83, up 3.3% for the week.

Time-Warner Misses Expectations


Time Warner Cable, Inc. (TWC) reported its latest quarterly earnings on Thursday, July 30. The report showed lower net income than analysts' expected, but also that the company added customers during the quarter.

The company reported revenue of $5.93 billion for the quarter. This represents an increase from the same period last year when Time-Warner reported revenue of $5.73 billion.

"We delivered very strong operational results in the second quarter, providing yet another clear indication that our plan is working," said Time-Warner Cable Chairman and CEO, Rob Marcus. "We achieved record Q2 subscriber results across nearly every category, setting us up for accelerating financial performance as we look forward to the next phase of our plan. We intend to use the time between the signing and closing of the Charter deal to further strengthen our operations."

Time-Warner reported quarterly net income of $463 million. This represents a decrease from the comparable period last year when the company reported net income of $499 million. Earnings per share came in at $1.62 for the quarter, compared to $1.77 last year. Analysts had expected earnings of $1.88 per share.

Despite its earnings miss, Time-Warner added subscribers during the quarter. The company added 66,000 customers, the first second quarter gain since 2008. Additionally, the company has agreed to be acquired by Charter Communications along with Bright House Networks for $67.1 billion. The deal is currently being scrutinized by antitrust regulators. Time-Warner hopes the deal will close by the end of this year.

Time Warner Cable, Inc. (TWC) shares ended the week at $190.01, up 0.24% for the week.

LinkedIn Reports Quarterly Earnings


LinkedIn Corporation (LNKD) reported its latest quarterly and annual earnings on Thursday, July 30. The company reported an impressive increase in revenue, but also a large loss for the quarter.

LinkedIn reported total revenue of $711.74 million for the quarter. This represents a significant increase over the same period last year when the company reported revenue of $533.88 million.

"LinkedIn continued to deliver increased member and customer value in the second quarter while delivering solid financial results," said Jeff Weiner, CEO of LinkedIn. "We continued to invest in our long-term strategic roadmap and began integrating the acquisition of lynda.com that closed during the quarter."

The company reported a quarterly net loss of $67.74 million. This represents a much larger loss than was reported during the comparable quarter last year when the company reported a loss of $1.03 million.

LinkedIn made several expensive moves this year. The company acquired lynda.com for $1.5 billion, reorganized its sales force and changed advertising methods. These moves added to this year's costs and contributed to the latest quarter's loss. The company acknowledges these moves will impact earnings through 2015, but believes it will be well positioned for 2016 and beyond.

LinkedIn Corporation (LNKD) shares ended the week at $203.26, down 8.6% for the week.

The Dow started the week of 7/27 at 17,562 and closed on 7/31 at 17,690. The S&P 500 started the week at 2,078 and ended at 2,104. The NASDAQ started the week at 5,056 and finished at 5,128.
 

Treasury Yields Rise and Fall

After an initial decline, Treasury bond yields rose steadily until the Federal Open Market Committee (FOMC) released the minutes from its latest meeting on Wednesday, July 29. Then, yields fell and prices rose. In addition, falling commodities prices as well as financial turmoil in Europe and China continue to put downward pressure on yields.

On Wednesday, investors and analysts studied the minutes of the FOMC's latest meeting and made predictions relating to when the Committee would decide to raise the federal funds rate from its current level between 0 and 0.25%. The rate has been at the current level since 2006.

Regarding the timing of a rate increase the minutes stated, "it will be appropriate to raise the target range for the federal funds rate when [the Committee] has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term."

This is the same language released after the Committee's meeting in June, except for the word "some" placed before "further improvement in the labor market." Many analysts saw the language as a sign the FOMC will wait until the end of the year to raise rates. However, some saw the change as a signal that the FOMC is close to raising rates and may do so even at its September meeting.

In addition to uncertainty over interest rates in the U.S., the Shanghai Composite Index fell 15% this month. This is its biggest monthly decline in six years. In Europe, Greece is still in talks with its creditors on a bailout package that will help the country meet its financial obligations. These events have boosted demand for safer assets causing Treasury prices to rise and yields to fall.

This week, the 10-year Treasury bond yield rose from 2.21% early in the week to a high of 2.32% on Wednesday. In the second half of the week, the 10-year Treasury yield fell to 2.20% in early Friday trading.

The 10-year Treasury note yield finished the week of 7/27 at 2.20% while the 30-year Treasury note yield finished the week at 2.93%.
 

Interest Rates Decline

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, July 30. The results showed average fixed mortgage rates falling as various economic reports were released this week.

This week, the 30-year fixed rate mortgage averaged 3.98%. This represents a decrease from last week when it averaged 4.04%. One year ago, the 30-year fixed rate mortgage averaged 4.12%.

The 15-year fixed rate mortgage averaged 3.17% this week. This represents a decrease from last week when it averaged 3.21%. Last year at this time, the 15-year fixed rate mortgage averaged 3.23%.

"Monday's 8% decline in Chinese stock prices triggered similar – though smaller – sell-offs in global equity markets," said Sean Becketti, Chief Economist at Freddie Mac. "The associated flight to quality drove U.S. Treasury yields down nearly 5 basis points. Accordingly, 30-year fixed rate mortgages fell 6 basis points to 3.98%. The mortgage rate has bounced between 3.98% and 4.09% since the first full week of June, falling a bit when events overseas take a turn for the worse and rising when the clouds appear ready to part. With no clear direction coming from the Fed this afternoon, we expect more of the same in coming weeks."

The money market fund finished the week of 7/27 at 0.3%. The 1-year CD finished at 0.6%.

Published July 31, 2015

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