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Monday July 6, 2015



General Mills Continues to Struggle

General Mills, Inc. (GIS) announced its fourth quarter and annual results on Wednesday, July 1. The results showed that changing consumer preferences continue to plague the company.

The company reported that quarterly revenue was $4.3 billion while annual revenue declined 2% to $17.6 billion. Quarterly revenue was relatively unchanged from the same period last year but fell below estimates expecting $4.52 billion.

"General Mills fiscal 2015 operating performance was mixed," said General Mills Chairman and CEO Ken Powell. "We returned our U.S. yogurt business to growth, and our brands gained share in categories representing 65% of our U.S. Retail measured sales volume, but overall sales trends reflected the impact of changing consumer food preferences."

Earnings during the quarter fell to $186.8 million or $0.30 per share. During the same period last year earnings were $404.6 million or $0.65 per share. For the year earnings were $1.2 billion or $1.97 per share.

For the past few years General Mills' tale has been the same. Consumers increasingly prefer gluten free and high protein diets, hurting sales of cereals and other packaged foods. General Mills is looking for a way to find its footing in a changing marketplace. This past quarter underscored General Mills' challenges as revenue and earnings came in below expectations. Despite its recent struggles, the company's share price has risen 4.5% since the start of the year.

General Mills, Inc. (GIS) shares ended the week at $57.05, up 1% for the week.

Family Dollar Reports Earnings

Family Dollar Stores, Inc. (FDO) announced its third quarter results on Wednesday, July 1. The company reported mixed results in what may be its final earnings release before its merger with Dollar Tree.

The company reported that net sales during the quarter increased 2.6% to $2.73 billion. Comparable store sales for the quarter showed a smaller 0.7% increase.

Because of its pending merger with Dollar Tree, Family Dollar did not provide a press statement with its earning release. The company also did not hold a conference call to discuss its quarterly performance.

Family Dollar reported that net income for the quarter fell 1.5% to $79.9 million or $0.70 per share. Net income was impacted by a $4.7 million expense related to the company's upcoming merger.

Since the merger of Family Dollar with Dollar Tree was announced last year, the value of the deal has grown from $8.5 billion to $10 billion. Following the merger the companies will together operate over 13,000 stores generating $19 billion in annual sales. On the day of Family Dollar's earnings announcement, the merger was still awaiting FTC approval. The long wait ended on Thursday, July 2 when the FTC finally announced its approval of the deal.

Family Dollar, Inc. (FDO) shares ended the week at $79.35, relatively unchanged for the week.

ConAgra Foods Reports Quarterly Results

ConAgra Foods, Inc. (CAG), a packaged foods company of such brands as Hunt's and Orville Redenbacher, announced its fourth quarter results on Tuesday, June 30. The company's results were largely in line with expectations.

The company reported that revenue increased 3.7% during the quarter to $4.1 billion. This was only slightly below expectations that revenue would be $4.14 billion.

"With fiscal year 2015 now behind us, we are now pursuing a different plan to maximize value for our shareholders," said ConAgra Foods CEO Sean Connolly. "Our new plan will center on a more aggressive approach to driving margin improvement through SG&A reductions, supply chain efficiencies and other projects."

For the quarter ConAgra reported a profit of $209.2 million or $0.48 per share. This was significantly better than the $324.2 million loss the company reported during the comparable period last year.

As ConAgra CEO Sean Connolly mentioned, the company is looking to improve its margins. In one of its first steps in that direction the company announced plans to sell its Ralcorp private-label business. Since acquiring Ralcorp the company has taken more than $2 billion in write-downs. ConAgra plans to use the sale to help it better focus on its consumer brands.

ConAgra Foods, Inc. (CAG) shares ended the week at $44.56, up 3% for the week.

The Dow started the week of 6/29 at 17,937 and closed at 17,730 on 7/2. The S&P 500 started the week at 2,099 and closed at 2,077. The NASDAQ started the week at 5,021 and closed at 5,009.

Jobs Report Drives Treasury Yields Down

Treasury prices rose on Thursday, July 2 following the release of the June jobs report. The report reversed yield gains Treasuries had amassed the day before when factory and construction data provided a more optimistic picture of the U.S. economy.

The U.S. economy added 223,000 jobs during June, which was below estimates that 230,000 jobs would be added. The jobs gains for the prior two months were revised downward by 60,000 jobs. Jobless claims for the last week of June showed the number of people applying for unemployment benefits reached a 5-week high.

July's jobs report helped Treasuries maintain their up-and-down pattern for the year. Investors continue to monitor the health of the U.S. economy to get an idea of when the Federal Reserve will raise the benchmark interest rate.

"The [jobs] number keeps rate-hike expectations roughly balanced between September and December," said James Ong, a portfolio manager at Invesco. "The headline jobs number is good, but the flat wage growth indicates that the Fed's 2% inflation target is not likely to materialize anytime soon."

On Wednesday the 10-year Treasury yield rose 7 basis points after the release of upbeat factory and construction data. Some of those yield gains were wiped away on Thursday as the 10-year yield fell 3 basis points to 2.39%.

The 10-year Treasury note yield finished the week of 6/29 at 2.39% while the 30-year Treasury note yield finished the week at 3.19%.

Interest Rates Reach 2015 Highs

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, July 2. Interest rates rose this week heading into the July 4th holiday weekend.

The 30-year fixed rate mortgage averaged 4.08% this week. This was up from last week when it averaged 4.02%.

This week, the 15-year fixed rate mortgage averaged 3.24%. This number was up from last week when it averaged 3.21%.

"Overseas events are generating significant day-to-day volatility in interest rates," said Sean Becketti, Chief Economist at Freddie Mac. "Nonetheless, the week-to-week impact on most rates was modest -- the 30-year mortgage rate increased just 6 bps, to 4.08%. The MBA composite index of mortgage applications fell 4.7% in response to what is now three consecutive weeks of mortgage rates over 4%. Other measures, however, confirmed continued strength in housing -- pending home sales rose 0.9%, exceeding expectations, and the Case-Shiller house price index recorded another solid increase."

The money market fund finished the week of 6/29 at 0.3%. The 1-year CD finished at 0.6%.

Published July 3, 2015
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