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Thursday March 22, 2018



Salesforce Reports Revenue Boost

Salesforce (CRM) announced quarterly earnings on Wednesday, February 28. The cloud-based software company posted increased revenue and earnings that exceeded Wall Street's estimates.

Revenue for the fourth quarter reached $2.85 billion. This is up 24% from $2.29 billion reported during the same quarter last year and is slightly above the $2.81 billion that analysts predicted.

"We had an outstanding quarter of growth that propelled Salesforce over the $10 billion revenue milestone for the year," said Salesforce CEO Marc Benioff. "No other enterprise software company has achieved this scale faster than Salesforce. Our relentless focus on customer success continues to strengthen our position as the global leader in CRM."

Salesforce reported quarterly profit of $67.56 million, up from last year's fourth quarter loss of $51.44 million. On an adjusted earnings per share basis, the company posted profit of $0.35 per share, surpassing the $0.33 per share Wall Street expected.

Following the earnings release, shares reached an all-time high of $118.60 in after-hours trading on Wednesday. The company's stock prices have risen 43% over the past year as the company's cloud-based sales and marketing software continues to gain momentum. On Wednesday, Salesforce raised its 2019 fiscal year guidance to a range of $12.6 billion to $12.65 billion, an increase of up to 21% year-over-year.

Salesforce (CRM) shares ended the week at $121.92, up 5% for the week.

Macy's Earnings Surprise Investors

Macy's, Inc. (M) released its latest quarterly earnings report on Tuesday, February 27. The company's shares spiked following the earnings release due to better-than-expected earnings and same-store sales.

Macy's reported quarterly revenue of $8.67 billion. This was an increase from last year's fourth quarter revenue of $8.52 billion and slightly below the $8.68 billion analysts expected.

"Macy's, Inc. had a solid fourth quarter, including strong performance in January, and the full year exceeded our expectations for annual comparable sales and adjusted earnings per diluted share. We are encouraged to see a trend improvement in our brick & mortar business, and we had the 34th consecutive quarter of double-digit growth in our digital business," said Macy's CEO Jeff Gennette. "We head into 2018 with an improved base business, healthy inventories, a focused and engaged organization and a clear path to return Macy's to growth."

The company announced quarterly earnings of $1.33 billion, up from earnings of $475 million one year ago. Macy's reported adjusted earnings of $2.82 per share, surpassing the $2.71 per share Wall Street predicted.

Macy's fourth quarter results were a pleasant surprise to its investors who have witnessed the brick and mortar company's ongoing struggle to compete with online giants like Amazon. The company's same-store sales were up 1.3% for the quarter, topping the 0.1% analysts expected. Macy's upbeat earnings caused shares to jump more than 12% on Tuesday following the report's release.

Macy's, Inc. (M) shares ended the week at $30.41, up 12.5% for the week.

Fitbit's Profits Fall Short

Fitbit, Inc. (FIT) reported quarterly earnings on Monday, February 26. The wearable technology brand's revenue and earnings fell short for the quarter, causing shares to plummet 15% in after-hours trading following the report's release.

Fitbit announced revenue of $570.8 million for the fourth quarter, down from revenue of $573.8 million reported in the same quarter last year and below analysts' revenue estimates of $588.9 million. For the full year, the company reported revenue of $1.62 billion, compared to $2.17 billion reported in the previous year.

"We made important progress in 2017 under rapidly changing market conditions. We delivered on our full year guidance and drove down operating expenses while continuing to invest in innovation," said Fitbit CEO James Park. "In 2018 we'll focus on managing down expenses, continuing to expand in the smartwatch category and supporting our engaged global community on their health and fitness journeys."

Fitbit reported a loss in adjusted net earnings of $0.02 per share for the quarter. Analysts were expecting the company's earnings to break even.

The disappointing results were the product of decreased sales in the company's consumer hardware business. For the full-year, Fitbit sold 15.3 million devices, down seven million from the 22.3 million sold in fiscal 2016. The company has struggled to compete with other smartwatches, such as the Apple Watch, which continues to make strides in the health and fitness arena. On Monday, Park explained that Fitbit is making progress "integrating into the healthcare system, with strategic collaborations with United Healthcare and Dexcom, and acceptance into the FDA's digital health pre-certification program."

Fitbit, Inc. (FIT) shares ended the week at $4.97, down 7.6% for the week.

The Dow started the week of 2/26 at 25,403 and closed at 24,538 on 3/2. The S&P 500 started the week at 2,757 and closed at 2,691. The NASDAQ started the week at 7,373 and closed at 7,258.

Fed Remarks, Tariff Talk Influence Yields

Treasury yields rose this week in the wake of Federal Reserve Chairman Jerome Powell's first appearance before Congress as the head of the nation's central bank. Yields returned to lower levels later in the week following President Trump's announcement of proposed tariffs on steel and aluminum.

Chairman Powell, who recently replaced Janet Yellen, appeared confident on Tuesday that inflation is increasing as expected. Many investors interpreted Powell's remarks as an indication that the Fed may raise interest rates four times this year.

"At the December meeting the median participant called for three rate increases in 2018," Powell said. "Since then, what we've seen is incoming data that suggests a strengthening in the economy and continuing strength in the labor market. We've seen some data that in my case will add some confidence to my view that inflation is moving up to target."

The benchmark 10-year Treasury yield, which opened the week at 2.87%, jumped to a high of 2.92% following Powell's remarks. The 30-year Treasury bond yield jumped to 3.199% after opening the week at 3.159%.

On Thursday, President Trump met with representatives from the steel and aluminum industries. During the meeting, the president proposed tariffs of 25% for imported steel and 10% for aluminum.

"[S]teel and aluminum will see a lot of good things happen," said President Trump during the meeting. "We're going to have new jobs popping up. We're going to have much more vibrant companies. And then the rest is going to be up to management to make them truly great."

The president's proposal, along with more moderate remarks by Chairman Powell during a second appearance before Congress on Thursday, pushed yields to their lowest level of the week, with the 10-year Treasury note yield dropping to 2.799%. Treasury yields fall as prices rise.

The 10-year Treasury note yield finished the week of 2/26 at 2.80%, while the 30-year Treasury note yield was 3.09%.

Mortgage Rate Streak Continues

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, March 1. Mortgage rates have now risen for eight consecutive weeks.

The 30-year fixed rate mortgage averaged 4.43% this week, up from 4.40% last week. During this time last year, the 30-year fixed rate mortgage averaged 4.10%.

The 15-year fixed rate mortgage averaged 3.90% this week, up from 3.85% last week. Last year at this time, the 15-year fixed rate mortgage averaged 3.32%.

"As we documented, historically when mortgage rates surge, housing swoons," said Len Kiefer, Deputy Chief Economist at Freddie Mac. "But we think strength in the economy and pent up housing demand should allow U.S. housing markets to post modest growth this year even with higher mortgage rates."

Based on published national averages, the money market account finished the week of 2/26 at 0.85%. The 1-year CD finished at 1.94%.

Published March 2, 2018

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