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Monday November 28, 2022



Starbucks Reports First Quarter Earnings

Starbucks Corporation (SBUX) reported its quarterly financial results on Tuesday, February 1. The coffeehouse chain reported revenue that exceeded analysts' estimates.

The company reported first quarter net revenue of $8.1 billion, up 19% from $6.8 billion reported in the same quarter last year. Analysts expected revenue to reach $7.9 billion.

"This holiday quarter delivered strong revenue growth highlighted by incredible customer demand for Starbucks," said Starbucks CEO, Kevin Johnson. "As we enter the third year of this pandemic, our stores continue to play an important role as a community gathering place that offers safe, familiar and convenient experiences for our customers."

Starbucks' net income for the quarter grew to $815.9 million. On an adjusted per share basis, earnings were $0.69. This was up from $622.2 million or $0.53 per adjusted share in the same quarter last year.

Starbucks opened 484 new stores in the first quarter, generating 4% year-over-year unit growth. The company ended the quarter with 34,317 stores globally. Revenue and net income growth was aided by comparable sales for the quarter, increasing 13% with a 10% uptick in comparable transactions. There were 26.4 million active loyalty program members in the first quarter, up 21% year-over-year.

Starbucks Corporation (SBUX) shares ended the week at $95.00, down 2.1% for the week.

PayPal Reports Fourth Quarter Earnings

PayPal Holdings Inc. (PYPL) released its fourth quarter and full year earnings report on Tuesday, February 1. The tech company's stock fell more than 25% following the release of the report and guidance for 2022.

The company reported fourth quarter net revenue of $6.9 billion, a 13% increase from $6.1 billion in revenue during the same quarter last year. This exceeded analysts' expectations of $6.8 billion. Full year net revenue came in at $25.4 billion, a 17% increase from $21.5 billion in 2020.

"2021 was one of the strongest years in PayPal's history," said PayPal CEO, Dan Schulman. "We reached $1.25 trillion in TPV and launched more products and experiences than ever before. The future is moving in our direction, and we are investing in our consumer and merchant capabilities to seize the opportunity in front of us."

PayPal's net income for the quarter fell to $801 million or $0.68 per adjusted share. This is down from the $1.6 billion or $1.32 per adjusted share in net income during the same quarter this time last year.

PayPal added 9.8 million net new accounts (NNAs) during the quarter, bringing total active accounts to 426 million, up 13%. Payment transactions increased 21% during the quarter to a total of 5.4 billion payment transactions. The company's guidance for 2022 caused the company's stock to drop as the company expects revenue to be negatively affected by rising inflation driving down consumer spending and supply chain issues impacting payment transactions.

PayPal Holdings, Inc. (PYPL) shared ended the week at $126.08, down 23.3% for the week.

General Motors Reports Earnings

General Motors Company (GM) reported quarterly and full-year earnings on Tuesday, February 1. The automaker's stock rose more than 2% following the release of the report.

General Motors announced revenue of $33.58 billion for the quarter, falling short of analysts' projected revenue of $34.01 billion. This was down from $37.51 billion for the same time last year. For the full year, the company reported revenue of $127 billion.

"GM's 2020 performance was remarkable by any measure, and even more so in a year when a global pandemic caused companies around the world – including GM – to temporarily suspend manufacturing operations to keep employees safe," said General Motors CEO, Mary Barra. "Our dealers also took extraordinary steps to protect our customers, such as providing seamless online shopping, purchasing and delivery solutions."

General Motors reported quarterly net income of $1.74 billion, or $1.35 per adjusted share. This was down from $2.84 billion, or $1.93 per adjusted share during the same quarter last year. For the full year, the company's net income was $10.01 billion.

General Motors announced that the company had recently opened Factory Zero in Detroit and Hamtramck, Michigan. These are the first plants solely dedicated to Ultium products such as the company's GMC Hummer EV. Ultium is a new battery-electric platform that is expected to reduce battery costs compared to the current Chevy Bolt technology. The company revealed it will be investing $7 billion for expansion of battery cells and EV assembly capacity in the United States.

General Motors Company (GM) shares ended the week at $51.29, up 1.5% for the week.

The Dow started the week of 1/31 at 34,691 and closed at 35,090 on 2/4. The S&P 500 started the week at 4,432 and closed at 4,501. The NASDAQ started the week at 13,812 and closed at 14,098.

Treasury Yields Climb

U.S. Treasury yields rose throughout the week after unemployment levels returned better than expected. Yields continued to grow on Friday as new job numbers for January surpassed expected job growth.

On Friday, the U.S. Department of Labor announced that the economy added 476,000 jobs in January, far exceeding analysts' expectations of 150,000. This also exceeded the 199,000 jobs added by the economy in December.

"There's all kinds of good news that suggests people are getting back to normal," said chief market strategist for MetLife Investment Management, Drew Matus. "In the big picture, it's a very encouraging report. People returning to the workforce is what you wanted to see, and the gains were pretty widespread across different groups. The most important thing is people want to get back to work, and they're trying to get back to work."

The benchmark 10-year Treasury note yield opened the week of 01/31 at 1.771% and traded as high as 1.849% on Thursday. The 30-year Treasury bond yield opened the week at 2.075% and traded as high as 2.186% on Thursday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment insurance totaled 238,000. This was better than market estimates of 245,000 and was an improvement from the prior week's 260,000.

"We'll be eager to see the extent to which labor force participation improves as we receive an update on workers' willingness to reengage in the jobs market at this point in the pandemic," said BMO's head of U.S. rates, Ian Lyngen. "The realities of omicron and the spike in Covid cases seen in January obviously run as a counterforce to any reopening optimism that might otherwise have emerged with the new year – at least for the time being."

The 10-year Treasury note yield closed at 1.91% on 2/4, while the 30-year Treasury bond yield was 2.21%.

Mortgage Rates Remain Unchanged

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, February 3. Mortgage interest rates remained relatively unchanged this week from the prior week.

This week, the 30-year fixed rate mortgage averaged 3.55%, unchanged from last week's average. Last year at this time, the 30-year fixed rate mortgage averaged 2.73%.

The 15-year fixed rate mortgage averaged 2.77% this week, down from 2.80% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.21%.

"The economy lost some momentum in January, leaving mortgage rates unchanged from last week and relatively flat for the third consecutive week," said Freddie Mac's Chief Economist, Sam Khater. "This stagnation reflects the economic impact of the Omicron variant of COVID-19, which we believe will subside in the coming months. As economic recovery continues going into the spring and summer, mortgage rates are expected to resume their upward trajectory. In the meantime, recent data suggests that homebuyer demand continues to be elevated as supply remains low, driving higher home prices."

Based on published national averages, the savings rate was 0.06% as of 1/18. The one-year CD averaged 0.13%.

Published February 4, 2022
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