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Sunday June 25, 2017



Adobe Reports Strong Earnings

Adobe Systems Incorporated (ADBE) released its latest quarterly earnings on Tuesday, June 20. The technology company reported increases in revenue and profits.

Revenue for the quarter was $1.77 billion. This was an increase of 21% from the same period last year, when the company reported revenue of $1.39 billion.

"Digital transformation continues to be the burning agenda for creative professionals, enterprises, governments and educational institutions," said Adobe CEO Santanu Narayen. "Adobe is the go-to company for creating world-class digital customer journeys from design to delivery to measurement and monetization."

Adobe reported net income of $374.4 million or $0.75 per share. During the same quarter last year the company's net income was $244 million, or $0.48 per share.

Adobe, maker of popular software applications such as Acrobat, Photoshop, Flash and InDesign, continues its transition into the realm of cloud-based software. Following a trend in the world of software, the company has shifted its focus in recent years from individual packaged software to its Creative Cloud and Document Cloud subscription services. The monthly or annual fees associated with cloud-based services generally provide a more steady revenue stream than individual software licenses.

Adobe Systems Incorporated (ADBE) shares ended the week at $145.41, up 4.8% for the week.

FedEx Releases Quarterly and Full Year Results

FedEx Corp. (FDX) reported quarterly and full-year earnings on Tuesday, June 20. The company reported increased revenue and net income.

The global package delivery company reported revenue of $15.7 billion for the quarter, up from $13 billion during the same quarter last year. For the full year, FedEx had $60.3 billion in revenue, up from $50.4 billion for the prior year.

"Strong fourth quarter results completed a record fiscal 2017," said FedEx Corp. Chairman and CEO Frederick W. Smith. "We enter fiscal 2018 confident FedEx Corp. will continue to deliver outstanding value and opportunities for shareholders, customers and team members for years to come."

Net income for the quarter was $1.02 billion or $3.75 per share. At this time last year, the company reported a net loss of $70 million, or $0.26 per share. The company's full-year net income was $3 billion.

The company's strong quarterly performance can be attributed in part to its FedEx Express segment, which posted a 12% operating margin during the quarter. FedEx Express is the company's business unit that focuses on time-sensitive deliveries. TNT Express, which was acquired in May of 2016 and is a subset of the company's FedEx Express segment, posted a 1.4% operating margin for the quarter. For the full year, FedEx Express reported an operating margin of 9.8%.

FedEx Corp. (FDX) shares ended the week at $215.35, up 2% for the week.

La-Z-Boy Profits Rise

La-Z-Boy Incorporated (LZB) released its quarterly and full-year earnings report on Tuesday, June 20. The company's profits increased despite a dip in sales.

The furniture company reported sales of $412.7 million this quarter, down from $417 one year ago. Full-year sales were $1.52 billion, down slightly from $1.53 billion during the previous year.

"We delivered a strong finish to fiscal 2017 with our earnings performance demonstrating the increasing traction and momentum of our ongoing strategic initiatives and results of our ability to leverage operating platform efficiencies," said La-Z-Boy CEO Kurt L. Darrow. "In fiscal 2017, we increased our gross margin, recorded our highest consolidated operating margin in more than a decade, and generated $146.2 million in cash from operating activities."

La-Z-Boy reported net income of $27.9 million for the quarter, up from $22.7 million during the same quarter last year. Net income for the full year was $85.9 million, up from $79.3 million for the prior year.

The company attributed its strong profits to increased customer interest in premium products. CEO Kurt Darrow noted that there was a noticeable increase in the sales of items with a high profit margin for the quarter. In addition, the company's La-Z-Boy Furniture Galleries saw a 2.4% increase in same-store written sales this quarter.

La-Z-Boy Incorporated (LZB) shares ended the week at $32.30, up 19.2% for the week.

The Dow started the week of 6/19 at 21,445 and closed at 21,395 on 6/23. The S&P 500 started the week at 2,443 and closed at 2,438. The NASDAQ started the week at 6,197 and closed at 6,265.

Treasury Yields Remain Low

U.S. Treasury bond yields fell again this week, despite last week's rate increase by the Federal Reserve. Concern over the lower-than-expected inflation and uncertainty over the fate of the Affordable Care Act may have many investors reluctant to move to riskier investments.

Last week's Fed rate hike was counterbalanced by slower than anticipated inflation numbers. The benchmark 10-year Treasury note yield ended the week at 2.16% after opening at 2.21%.

The 10-year Treasury note peaked this week at 2.19% on Tuesday but fell to 2.14% on Thursday following the release of the Senate's latest health care bill. A vote on the bill is expected on Thursday, June 29, giving lawmakers exactly one week to review and tinker with the bill.

The bill appears to lack the support necessary for passage. Four Republican senators issued a joint statement on Thursday, expressing their concern over the bill.

"Currently, for a variety of reasons, we are not ready to vote for this bill, but we are open to negotiation and obtaining more information before it is brought to the floor," said Senators Rand Paul, Ron Johnson, Ted Cruz and Mike Lee. "There are provisions in this draft that represent an improvement to our current health care system, but it does not appear this draft as written will accomplish the most important promise that we made to Americans: to repeal Obamacare and lower their health care costs."

The 10-year Treasury note yield finished the week of 6/19 at 2.14%, while the 30-year Treasury note yield was 2.71%.

Mortgage Rates Hold Steady

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, June 22. Mortgage rates showed little movement this week.

This week, the 30-year fixed rate mortgage averaged 3.90%, down slightly from last week's average of 3.91%. During this time last year, the 30-year fixed rate mortgage averaged 3.56%.

The 15-year fixed rate mortgage averaged 3.17% this week. This is down slightly from 3.18% last week. Last year at this time, the 15-year fixed rate mortgage averaged 2.83%.

"Following last week's sharp decline, the 10-year Treasury yield rose 3 basis points this week," said Freddie Mac chief economist Sean Becketti. "The 30-year mortgage rate remained relatively flat, falling 1 basis point to 3.90%. Mortgage rates are continuing to hold at year-to-date lows amidst ongoing economic uncertainty."

Based on published national averages, the money market account finished the week of 6/19 at 0.59%. The 1-year CD finished at 1.38%.

Published June 23, 2017
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