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Sunday July 31, 2016

Finances

Finances
 

Panera Cooks Up Strong Earnings

Panera Bread Company (PNRA) announced its second quarter results on Tuesday, July 26. The bakery-café company reported increased revenue and diluted earnings per share for the quarter.

The company reported that revenue during the quarter rose 3% to $698.9 million. This beat the consensus estimate of $696 million.

"Our strong Q2 results reinforce the fact that our strategy is working and our initiatives are performing," said Ron Shaich, Panera Chairman and CEO. "Panera is becoming a better competitive alternative with expanded runways for growth. At a time when other restaurant companies are feeling the impact of a slowing consumer environment, we are maintaining our momentum."

Panera's diluted earnings per share rose 11% to $1.78. This beat analyst estimates of $1.74 per share.

Digging deeper into Panera's numbers, there was further good news. Company-owned comparable store sales rose 4.2% and are up 6.6% on a two-year basis. Panera also raised its financial guidance, expecting earnings per share of $6.60 to $6.70 compared to Wall Street estimates of $6.68. So far this year, Panera's share price has risen 11.2%.

Panera Bread Company (PNRA) shares ended the week at $219.32, up 1.3% for the week.

3M Posts Second Quarter Earnings


3M (MMM) announced its second quarter earnings on Tuesday, July 26. The St. Paul-based company delivered results that mostly matched pre-release expectations.

The company reported that net sales during the quarter were $7.66 billion, slightly lower than the $7.68 billion reported during the comparable period last year. Estimates were for net sales of $7.71 billion.

"Building on a solid first quarter performance, our team controlled the controllable and posted another quarter of strong earnings and expanded margins," said 3M's Chairman, President and CEO Inge G. Thulin. "Our execution of the 3M playbook is enabling us to deliver premium returns today while also building for the future, which includes making good progress on business transformation and investing approximately 10% of our sales into R&D and capital expenditures in the quarter."

3M reported earnings per share of $2.08, an improvement over $2.02 per share reported during the same period last year. This also edged out estimates of $2.07 per share.

The release showed 3M's electronics and energy division continues to struggle. After posting a 14% sales drop in the first quarter, electronics and energy sales fell 10%, making it the worst performing division of the company. Electronics drove the decline, falling 14%. For a stock that has outperformed the market so far this year, 3M's modest second quarter caused the company's shares to fall after the earnings release.

3M (MMM) shares ended the week at $178.36, down 1% for the week.

Twitter's Growth Continues to Decline


Twitter, Inc. (TWTR) announced its second quarter results on Tuesday, July 26. The social media company delivered its eighth straight quarter of declining growth.

The company reported that quarterly revenue was up 20% to $602 million. This fell below expectations for $608 million and was lower than the previous quarter's 36% growth.

"We are confident in our product roadmap, and we are seeing the direct benefit of our recent product changes in increased engagement and usage," said Twitter CEO Jack Dorsey. "We remain focused on improving our service to make it fast, simple and easy to use, like the ability to watch live-streaming video events unfold and the commentary around them."

Twitter reported a net loss of $107 million or $0.15 per share. This was slightly better than an expected loss of $0.17 per share.

Although Twitter reported revenue growth of 20% during the quarter, it was the company's eighth straight quarter of declining growth. Compounding the company's problems is slowing user growth with only 3 million net new users during the quarter, up just 1% from the first quarter. Many analysts continue to question whether Twitter makes sense as an independent public company or whether it should follow the example of companies such as LinkedIn, which was acquired by Microsoft in mid-June.

Twitter, Inc. (TWTR) shares ended the week at $16.64, down 9.7% for the week.

The Dow started the week of 7/25 at 18,554 and closed at 18,432 on 7/29. The S&P 500 started the week at 2,174 and closed at 2,174. The NASDAQ started the week at 5,097 and closed at 5,162.
 

Treasury Yields Fall on Disappointing GDP Growth

Treasury bond yields fell to a two-week low during the week of July 25 following the release of a disappointing GDP report. The report coincided with other news indicating the pace of U.S. economic growth remains weak.

According to Friday's GDP report from the Bureau of Economic Analysis, the U.S. economy expanded at a 1.2% rate during the second quarter, significantly below the 2.6% estimate. Compounding the news was a revised first quarter growth rate, which fell from 1.1% to 0.8%.

Declining business investment was a major contributor to the disappointing economic growth, which fell 3.2% during the quarter, the largest drop since 2009. The final report for consumer sentiment in July also fell, going to 90 from 93.5 in June, lower than the estimated 90.4.

The GDP report followed the Federal Reserve's July 27 policy meeting in which the Fed stated the labor market is "strengthening" and that economic indicators pointed to positive growth. At the time, this gave analysts and the markets increased confidence in an interest rate hike by year's end.

"The disappointing 1.2% annualized gain in second-quarter GDP growth, combined with the downward revisions to gains in the preceding two quarters, make a September interest rate hike much less likely," said Steve Murphy, U.S. economist at Capital Economics.

Prior to the GDP report release on Friday, the markets were predicting a 47% chance that the Fed would raise rates before the end of the year. Those odds fell to 34% following the release.

The 10-year Treasury note yield finished the week of 7/25 at 1.46%, while the 30-year Treasury note yield was 2.18%.
 

Mortgage Rates Continue Upward Trend

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, July 28. The report revealed interest rates continuing to trend upward, though they remain near record lows.

The 30-year fixed rate mortgage averaged 3.48% this week. This represents an increase from last week when it averaged 3.45%. Last year at this time, the 30-year fixed rate mortgage averaged 3.98%.

This week, the 15-year fixed rate mortgage averaged 2.78%. This was up from last week when it averaged 2.75%. The 15-year fixed rate mortgage averaged 3.17% one year ago.

"The 10-year Treasury yield remained flat this week in anticipation of the Fed's July policy meeting. Mortgage rates, on the other hand, rose another 3 basis points to 3.48%," said Sean Becketti, Chief Economist at Freddie Mac. Nonetheless, home sales continue to benefit from the persistently low mortgage rates with June's new home sales coming in at an annualized rate of 592,000 homes -- its fastest pace since 2008."

Based on published national averages, the money market account finished the week of 7/25 at 0.50%. The 1-year CD finished at 1.13%.

Published July 29, 2016
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