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Monday July 22, 2019



Facebook's Shares Plummet

Facebook, Inc. (FB) released its quarterly earnings report on Wednesday, July 25. The social media company missed expectations on revenue and daily active users, causing shares to tumble in what was the largest single day drop in market capitalization in U.S. history.

Facebook reported quarterly revenue of $13.23 billion. This is up from last year's second quarter revenue of $9.16 billion but was below the $13.36 billion that Wall Street predicted.

"Our community and business continue to grow quickly," said Facebook CEO Mark Zuckerberg. "We are committed to investing to keep people safe and secure and to keep building meaningful new ways to help people connect."

The company announced quarterly profit of $5.12 billion, up from earnings of $3.89 billion one year ago. Facebook reported adjusted quarterly earnings of $1.74 per share, topping the $1.72 per share that analysts predicted. The company also announced that there were 1.47 billion global daily active Facebook users in the second quarter, which was less than the 1.49 billion that analysts expected.

Shares of Facebook plummeted more than 20% following the company's call with investors on Wednesday. During the call, Facebook executives told investors that it expects revenue growth rates to decline in the second half of the year. This news, coupled with the company's revenue miss and fewer-than-expected daily active users in the second quarter, sent shares tumbling and caused the company to lose nearly $120 billion in market value by the end of the day on Wednesday.

Facebook, Inc. (FB) shares ended the week at $174.89, down 16.9% for the week.

Alphabet Rises on Upbeat Earnings

Alphabet Inc. (GOOGL) reported quarterly earnings on Monday, July 23. The parent company of Google posted better-than-expected revenue and earnings, thanks in large part to a 23.9% boost in advertising revenue.

Alphabet announced revenue of $32.66 billion for the second quarter. This is up from revenue of $26.01 billion reported in the same quarter last year and above the $32.17 billion in revenue that Wall Street expected.

"We delivered another quarter of very strong performance, with revenues of $32.7 billion, up 26% versus the second quarter of 2017 and 23% on a constant currency basis," said Alphabet CFO Ruth Porat. "Our investments are driving great experiences for users, strong results for advertisers and new business opportunities for Google and Alphabet."

The company reported net earnings of $8.27 billion, up from $6.26 billion reported one year ago. On an adjusted earnings per share basis, the company reported profit of $11.75 per share, surpassing the $9.59 per share that analysts predicted.

Alphabet's advertising revenue reached $28.09 billion in the second quarter, up 23.9% from $22.67 billion one year ago. The company's other revenues segment brought in $4.43 billion in the quarter, a 36.7% jump from revenue of $3.24 billion reported in the second quarter last year. The better-than-expected results pushed shares up more than 5% after the report's release.

Alphabet Inc. (GOOGL) shares ended the week at $1,252.89, up 4.8% for the week.

Coca-Cola Surpasses Earnings Estimates

Coca-Cola Co. (KO) announced quarterly earnings on Wednesday, July 25. The beverage company surpassed sales and earnings estimates in the second quarter as consumers reached for more of the company's sugar-free and diet soda offerings.

Revenue for the second quarter reached $8.93 billion. This is down 8% from revenue of $9.70 billion reported during the same quarter last year and above the $8.54 billion in revenue that analysts expected.

"We're encouraged with our performance year-to-date as we continue our evolution as a consumer-centric, total beverage company," said Coca-Cola CEO James Quincey. "We have the right strategies in place and remain focused on achieving our full year guidance."

Coca-Cola reported net earnings of $2.32 billion, up from last year's second quarter earnings of $1.37 billion. On an adjusted earnings per share basis, the company posted profit of $0.61 per share, surpassing the $0.60 per share Wall Street expected.

In response to consumer demand for healthier beverages, Coca-Cola recently revamped its sugar-free and diet beverages by launching new Diet Coke flavors, debuting slimmer cans and introducing Coca-Cola Stevia No Sugar in New Zealand. In the second quarter, the company experienced a 5% increase in organic revenue, with Coke Zero, Diet Coke and sparkling water leading the way. Coca-Cola reaffirmed its earnings guidance for 2018 and says it anticipates a 4% growth in organic revenue and a 9% increase in adjusted earnings.

Coca-Cola Co. (KO) shares ended the week at $46.21, up 2.1% for the week.

The Dow started the week of 7/23 at 25,037 and closed at 25,452 on 7/27. The S&P 500 started the week at 2,799 and closed at 2,819. The NASDAQ started the week at 7,807 and closed at 7,737.

GDP Rises, Pushing Treasury Yields Lower

Yields on U.S. Treasury bonds edged lower on Friday after climbing earlier in the week. The dip was a reaction to the latest GDP report released by the U.S. Department of Commerce on Friday, July 27.

Friday's report showed a 4.1% increase in GDP for the second quarter of 2018. The rise was a sharp increase from the first quarter's 2.2% GDP growth.

"We're on track to hit the highest annual growth rate in over 13 years," said President Donald Trump. "And I will say this right now and I will say it strongly, as the deals come in one by one, we're going to go a lot higher than these numbers, and these are great numbers."

During early trading on Friday, the benchmark 10-year Treasury note yield was at 2.962% after closing at 2.977% on Thursday. The 30-year Treasury bond yield was at 3.087%.

Friday's solid GDP report follows news earlier in the week of a productive meeting between President Trump and European Commission President Jean-Claude Juncker. The pair met on Wednesday at the White House and have reportedly struck a deal to ease trade tensions between the U.S. and Europe.

"We had a long negotiation session yesterday," said Treasury Secretary Steve Mnuchin on Thursday. "We concluded an outline of an agreement, and now we'll turn this into a real agreement."

The 10-year Treasury note yield closed at 2.96% on 7/27, while the 30-year Treasury bond yield was 3.09%.

Mortgage Rates Rise

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, July 26. The report revealed that mortgage rates were slightly higher than last week's averages.

The 30-year fixed rate mortgage averaged 4.53% this week, up from 4.52% last week. During this time last year, the 30-year fixed rate mortgage averaged 4.03%.

This week, the 15-year fixed rate mortgage averaged 4.02%, up from last week when it averaged 3.99%. Last year at this time, the 15-year fixed rate mortgage averaged 3.29%.

"The 10-year Treasury yield continues to hover along the same narrow range, as increased global trade tensions are causing investors to take a cautious approach," said Sam Khater, Chief Economist at Freddie Mac. "This in turn has kept borrowing costs at bay, which is certainly welcoming news for those looking to buy a home before the summer ends."

Based on published national averages, the money market account closed at 1.25% on 7/27. The 1-year CD finished at 2.43%.

Published July 27, 2018
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