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Wednesday October 17, 2018



JPMorgan's Earnings Rise

JPMorgan Chase & Co. (JPM) announced quarterly earnings on Thursday, October 12. The bank reported increased revenue and better-than-expected earnings for the third quarter.

JPMorgan reported quarterly revenue of $26.20 billion. This was an increase from last year's third quarter revenue of $25.51 billion and more than the $25.23 billion in revenue that Wall Street expected.

"JPMorgan Chase delivered solid results in a competitive environment this quarter with steady core growth across the platform," said JPMorgan CEO Jamie Dimon. "And for the first time, the Firm led the nation in total U.S. deposits, as consumers and businesses continue to view us as their partner of choice."

The company announced adjusted earnings of $1.76 per share. This was up from earnings of $1.58 per share in the same quarter one year ago and exceeded the $1.65 per share expected by analysts.

JPMorgan, which recently surpassed Bank of America to become the largest bank deposit holder in the U.S., has seen its stock rise more that 11% since the start of the year. The growth in the third quarter is being attributed to ordinary banking operations, with profits from its consumer and business banking unit rising 16% year-over-year. The bank's corporate and investment unit did not fare as well due to a drop in bond and stock trading revenue, which lead to a 13% profit decrease in JPMorgan's corporate and investment unit.

JPMorgan Chase & Co. (JPM) shares ended the week at $95.88, down 1.1% for the week.

Delta's Revenue Weathers the Storm

Delta Air Lines (DAL) released its latest quarterly earnings report on Wednesday, October 11. Despite taking an earning's hit from Hurricane Irma in September, the airline company managed to report a revenue boost that was above Wall Street's estimates.

Revenue for the third quarter reached $11.06 billion. This is up from $10.48 billion reported during the same quarter last year and is slightly higher than the $11.03 billion that analysts predicted.

"While we faced a number of challenges this quarter, including multiple hurricanes and an earthquake in Mexico, I am proud of how Delta people responded and still delivered an outstanding performance this quarter," said Delta CEO Ed Bastian. "Having just completed the busiest summer travel season in our history, we have good momentum, a determined team and a solid pipeline of initiatives to grow earnings and margins."

The company reported net income for the quarter was $1.18 billion, or $1.64 per share. This was down from $1.26 billion, or $1.69 per share, during the prior year's quarter.

Delta, the second leading U.S. air carrier by passenger traffic, was forced to cancel more than 2,000 flights when Hurricane Irma hit the U.S., causing the company to lose more than $120 million in income. Despite the earnings hit, the company was still able to report increased revenue in the third quarter, which caused shares to rise 1.7% following the report's release. Delta stated on Wednesday that it expects to see increased passenger revenue during the upcoming holiday travel season but cautioned that higher fuel prices could impact operating margins in the fourth quarter.

Delta Air Lines (DAL) shares ended the week at $53.95, up 3.6% for the week.

Domino's Delivers Earnings

Domino's Pizza, Inc. (DPZ) reported quarterly earnings on Thursday, October 12. The pizza delivery company reported increased revenue and profit but weaker than expected same-store sales for the third quarter.

Domino's announced revenue for the quarter was $643.64 million, which was more than analysts' projected revenue of $627.35 million. Last year at this time, the company reported revenue of $566.68 million.

"The third quarter was an excellent example of us simply continuing to do what we do best: executing on our long-term strategy, relying upon our strong fundamentals and aligning with our outstanding U.S. and international operators to turn in another quarter of phenomenal results," said Domino's CEO J. Patrick Doyle. "The momentum behind this business continues to amaze me, proving once again that our domestic and international franchisees are second to none."

Domino's reported net income of $56.37 million, or $1.18 per share. Last year in the third quarter, the company's net income was $47.23 million, or $0.96 per share.

The pizza delivery company operates 14,400 stores worldwide and, in the third quarter, Domino's saw same-store sales increased 8.4% in the U.S. and 5.1% internationally. This growth was softer than last year's same-store sales growth of 13.8% domestically and 6.6% internationally. As a result of the weaker-than-expected growth, shares fell 5% after the report's release.

Domino's Pizza, Inc. (DPZ) shares ended the week at $192.95, down 6.2% for the week.

The Dow started the week of 10/9 at 22,780 and closed at 22,873 on 10/13. The S&P 500 started the week at 2,551 and closed at 2,553. The NASDAQ started the week at 6,597 and closed at 6,606.

Yields Drop After Inflation Data Disappoints

Treasury prices dropped to two-week lows on Friday after a report from the Labor Department indicated weaker-than-expected inflation numbers. This came one day after the Treasury Department's bond auction, which put pressure on long-term yields due to increased investor demand.

On Friday, the Labor Department released the latest consumer price index (CPI) report. While consumer prices recorded their largest increase in eight months, the underlying inflation numbers disappointed investors and led many analysts to call into question the feasibility of a December rate hike from the Federal Open Market Committee (FOMC).

"We are increasingly concerned that the FOMC's insistence on pushing toward a December rate hike risks a policy-error," wrote Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. "All else being equal, we would have expected the storm impact to have driven prices marginally higher if anything, so this weakness is particularly notable."

The report indicated that CPI inflation rose 0.5% in September compared to the 0.6% that was predicted. After the report was released, the benchmark 10-year Treasury yield fell to 2.29% compared to 2.23% the previous day. The drop marked the weakest yield for the 10-year Treasury note since September 8.

"There is really no fig leaf to cover up this notion that inflation is weak, and it's weak in a very broad sense," said Aaron Kohli, an interest rate strategist at BMO Capital Markets in New York. "The Fed has pointed to inflation bouncing back, and there is no data to support that at the moment."

On Thursday, the Treasury Department auctioned $12 billion in 30-year bonds. The bid-to-cover ratio, which signifies the proportion of buyers to the amount of available bonds, was 2.53—the highest it has been since September 2015. The above-average demand pushed yields lower on Thursday, slipping to 2.85% compared to 2.88% the day before.

"It went well," said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. "There was demand out the curve, after the recent selloff rates have stabilized."

The 10-year Treasury note yield finished the week of 10/9 at 2.28%, while the 30-year Treasury note yield was 2.81%.

Mortgage Rates Get a Boost

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, October 12. The report revealed that the 15 and 30-year fixed mortgage rates increased, with the 30-year fixed mortgage rate posting its largest week-over-week increase since July.

The 30-year fixed rate mortgage averaged 3.91% this week. This represents an increase from last week when it averaged 3.85%. Last year at this time, the 30-year fixed rate mortgage averaged 3.47%.

This week, the 15-year fixed rate mortgage averaged 3.21%. This was higher than last week's average of 3.15%. The 15-year fixed rate mortgage averaged 2.76% one year ago.

"The 30-year mortgage rate increased for a second consecutive week, jumping 6 basis points to 3.91%," said Sean Becketti, Chief Economist at Freddie Mac. "The 10-year Treasury yield also rose, climbing 4 basis points this week."

Based on published national averages, the money market account finished the week of 10/9 at 0.72%. The 1-year CD finished at 1.48%.

Published October 13, 2017
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