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Sunday February 14, 2016



Coca-Cola Releases Quarterly Earnings

The Coca-Cola Company (KO) released its quarterly earnings on Tuesday, February 9. The Atlanta-based soft drink giant beat earnings estimates but was unable to match last year's numbers.

Revenue for the quarter was $10 billion, beating analyst expectations. The company reported revenue of $10.8 billion for the same quarter last year.

"In late 2014, we laid out a clear five-point plan to reinvigorate growth and increase profitability. In 2015, a transition year, we delivered on this plan despite an increasingly challenging global macroeconomic environment," said Muhtar Kent, CEO of The Coca-Cola Company. "Our fourth quarter performance was a testament to the action we took as the Company continued to deliver solid pricing and unit case volume growth, culminating in 4% organic revenue growth for the full year."

The company reported net income of $1.24 billion or $0.28 per share. This is up from $770 million or $0.17 per share during the same quarter last year.

The Coca-Cola Company continues to maneuver through a rough environment for soda companies. Many consumers are shifting away from sugary snacks and drinks and looking for healthier alternatives. In response, Coke has looked for ways to increase revenue and cut costs. It has seen growth in its non-carbonated product lines including a line of ultra-filtered milk, known as Fairlife. The company's effort to refranchise its North American bottlers over a period of several years should serve to cut costs.

The Coca-Cola Company (KO) shares ended the week at $43.11, up 2% for the week.

Walt Disney Company Reports Earnings

The Walt Disney Company (DIS) reported quarterly earnings on Tuesday, February 9. The company posted a strong profit for the quarter.

The entertainment company reported revenue of $15.2 billion for the quarter. This was an increase of 14% from the same quarter last year.

"Driven by the phenomenal success of Star Wars, we delivered the highest quarterly earnings in the history of our company, marking our 10th consecutive quarter of double-digit EPS growth," said Disney Chairman and CEO Robert A. Iger. "We're very pleased with our results, which continue to validate our strategic focus and investments in brands and franchises to drive long-term growth across the entire company."

Disney reported net income of $2.9 billion for the fourth quarter, up 32% from a year ago. The company posted net income of $2.2 billion during the same quarter last year.

The Walt Disney Company owes much of its quarterly success to the December release of the latest installment in the "Star Wars" series. The film's box office success has helped offset the company's struggles with its television division. ESPN, a major part of Disney's television offering, has seen a steady decrease in subscriptions as many consumers are moving away from traditional cable packages to online streaming services.

The Walt Disney Company (DIS) shares ended the week at $91.15, down 2% for the week.

Yelp Posts Quarterly Net Loss

Yelp, Inc. (YELP) released its quarterly results on Monday, February 8. The company reported higher revenue than last year but a net loss for the quarter.

The company reported revenue of $153.7 million. This is up 40% from the same quarter last year when revenue was $109 million.

"We are pleased with the progress we made on the key initiatives we set at the beginning of 2015," said Yelp CEO Jeremy Stoppelman. "We have evolved to a mobile-centric company and have successfully completed our transition to a performance-based advertising business."

Yelp sustained a net loss of $22.2 million or $0.29 per share. During the same period last year the company reported net income of $32.7 million or $0.42 per share.

Yelp is known for its mobile app, which helps users search for and review local restaurants and other businesses. The company relies heavily on local advertisements for revenue. With the company posting mixed results for the quarter, Yelp CFO Rob Krolik has announced his resignation. Going forward, the company will be looking for someone to step in and bring the income numbers into the black.

Yelp, Inc. (YELP) shares ended the week at $15.56, down 11% for the week.

The Dow started the week of 2/8 at 16,148 and closed at 15,974 on 2/12. The S&P 500 started the week at 1,873 and closed at 1,865. The NASDAQ started the week at 4,288 and closed at 4,338.

Treasury Yields Rise After Hitting 3-Year Low

After hitting their lowest return since September 2012 on Thursday, Treasury yields rose slightly on Friday, pushing prices lower. Despite the slight gain, the yields are still lingering around a one-year low.

The slight improvement came after a report indicated that January's retail sales rose slightly above analysts' expectations. The news caused some investors to shift gears—selling safer assets, like government bonds, in favor of riskier assets. As a result, the 10-year Treasury note gained 3.6 basis points following the news.

"I'm not at all surprised to see the Treasury market take a breather here after the torrid pace we've seen," said Christopher Keith, fixed income manager at Adviser Investments. Friday broke a six-day streak of declining yields.

The report indicated that U.S. retail sales rose by 0.2% in January, while December's sales were revised to show a 0.2% gain. Last month, reports incorrectly stated that December sale's experienced a 0.1% decline. The rise in sales is attributed to increased online shopping traffic, auto sales and grocery shopping.

"It relieves some of the unrelenting bad news versus expectations that has been the norm this year outside labor market indicators," said Jim Vogel, interest-rate strategist at FTN Financial.

However, despite the slight increase, analysts caution that investors should not expect yields to continue climbing higher. Due to negative interest rates in Europe and Japan, yields are expected to remain low as global investors seek out safe, secure returns.

In addition, Federal Reserve Chair Janet Yellen's comments have caused many investors to suppress their optimism. On Wednesday, Yellen testified to the House Financial Services Committee that she doesn't expect the central bank to cut interest rates any time soon. This course of action seems to be due in large part to the weakening overseas markets, as she noted that current financial conditions have become "less supportive of growth."

The 10-year Treasury note yield finished the week of 2/8 at 1.75% while the 30-year Treasury note yield was 2.60%.

Mortgage Rates Continue Slide

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, February 11. Interest rates have fallen for the sixth consecutive week.

The 30-year fixed rate mortgage averaged 3.65% for the week. This is a decrease from last week when it averaged 3.72%. Last year at this time, the 30-year fixed rate mortgage averaged 3.69%.

This week, the 15-year fixed rate mortgage averaged 2.95%. This is down from last week's average of 3.01%. The 15-year fixed rate mortgage averaged 2.99% during the same period last year.

"In a falling rate environment, mortgage rates often adjust more slowly than capital market rates, and the early-2016 flight-to-quality has run true to form," said Freddie Mac Chief Economist Sean Becketti. "The 30-year mortgage rate has dropped 36 basis points since the start of the year, while the yield on the 10-year Treasury has dropped 59 basis points over the same period. If Treasury yields were to hold at current levels, mortgage rates might well sink a little further before stabilizing."

The money market fund finished the week of 2/8 at 0.3%. The 1-year CD finished at 0.6%.

Published February 12, 2016
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