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Wednesday September 23, 2020

Finances

Finances
 

Lyft Posts Earnings

Lyft, Inc. (LYFT) reported second quarter earnings on Wednesday, August 12. Despite a sharp decrease in revenue, the San Francisco-based ride sharing company's shares were up 4% in after-hours trading following the report's release.

The company announced revenue of $339.3 million for the second quarter. This was down 61% from $867.3 million in the same quarter last year but exceeded analysts' expectations of $336.8 million.

"While rideshare rides in the quarter were down significantly year-over-year, we are encouraged by the recovery trends we are beginning to see, with monthly rideshare rides in July up 78% compared to April," said Lyft co-founder and CEO Logan Green. "Lyft's second quarter results reflect an operating environment that was not only challenging for our core ridesharing business, but also for our valued riders and drivers and the communities we serve. Our performance reinforces our belief that Lyft is taking on the critical work necessary to emerge from the crisis as a stronger company."

Lyft reported a net loss for the second quarter of $437.1 million or a loss of $1.41 per share. This is better than the net loss of $644.2 million or $2.23 per share reported during the same quarter last year.

This was Lyft's first full reporting quarter since the beginning of the coronavirus pandemic. Lyft reported nearly 8.7 million riders for the quarter, down from 21.8 million riders reported at the same time last year. Lyft announced it may halt operations in its home state of California if the courts there rule that Lyft must classify its drivers as employees rather than independent contractors. California currently accounts for 16% of Lyft's rides. The company has suspended guidance for the next quarter due to uncertainties surrounding the pandemic.

Lyft, Inc. (LYFT) shares ended at $28.51, down 5.8% for the week.

Cisco Reports Earnings


Cisco Systems, Inc. (CSCO) released its fourth quarter and full year earnings report on Wednesday, August 12. The developer of high-technology networking software, hardware and telecommunications equipment's stock dropped more than 7% after the report's release, despite exceeding analysts' revenue and earnings expectations.

Cisco posted quarterly revenue of $12.2 billion, down 9% from $13.4 billion reported at the same time last year, but greater than the $12.08 billion analysts expected. Revenue for the year came in at $49.3 billion, down from $51.9 billion reported last year.

"By the end of fiscal 2020, we achieved our goal of more than half of our revenue coming from software and services, and this strategy continues to resonate with customers as they digitize their organizations," said CEO and chairman of Cisco Chuck Robbins. "Throughout fiscal 2020, Cisco has demonstrated operational resilience based on our strong customer relationships, solid financial foundation, and differentiated innovation."

For the fourth quarter, Cisco reported net income of $3.4 billion, down 4% from $3.6 billion reported at this time last year. Net income for the full year came in at $11.2 billion, down from $11.6 billion last year.

In guidance released for the first quarter, Cisco anticipates a revenue decrease of 9% to 11%, which contributed to the drop in share prices after the release. Also affecting share prices, Cisco's CFO, Kelly Kramer announced her retirement as the company offers voluntary retirement deals in order to reach a $1 billion cost reduction goal. Cisco also announced it will "rebalance R&D investments to focus on new areas." These shifts come as the corporation adapts to changes in the industry due to the coronavirus. These changes include the decrease in demand for hardware, one of Cisco's staples, and an increase in demand for software and software services that assist with remote work.

Cisco Systems, Inc. (CSCO) shares closed at $42.50, down 9.9% for the week.

Eastman Kodak Reports Earnings


Eastman Kodak Co. (KODK) announced its second quarter earnings on Tuesday, August 11. The New York-based printing company's shares rose 7% following the report's release.

Kodak reported quarterly revenue of $213 million. This was down from revenue of $307 million at this time last year.

"Kodak continued to navigate the challenges posed by the pandemic during the second quarter," said Kodak's Executive Chairman Jim Continenza. "Although the print industry slowdown impacted our performance, we continued to serve our customers and furthered our long history of innovation through the launch of six new print products…. As we look ahead, we remain committed to investing in our business to support our position as a leader in advancing the evolution of the print industry."

Kodak reported a net loss of $5 million or $0.08 per share for the quarter. This is down from net income of $201 million and a loss of $0.19 per share reported at the same time last year.

Kodak has recently gained investors' attention as the company is the potential recipient of a $765 million government loan to work on pharmaceuticals amid the coronavirus pandemic. The U.S. International Development Finance Corporation (DFC) will provide the loan, if approved. However, the DFC has put the process on hold while the company conducts an internal review of recent stock transactions by Kodak executives.

Eastman Kodak Co. (KODK) shares closed at $8.43, down 5.3% for the week.

The Dow started the week at 27,488 and closed at 27,931 on 8/14. The S&P 500 started the week at 3,356 and closed at 3,373. The NASDAQ started the week at 11,034 and closed at 11,019.
 

Treasury Yields Increase

Yields rose on Thursday as the week's jobless claims report beat analysts' expectations. Meanwhile, the demand for precious metals, such as gold, dropped from record highs as investors moved back into the stock market.

First-time jobless claims for the week ending on August 8 fell below 1 million for the first time since March 21. First-time claims for unemployment came in at 963,000, beating analysts' estimates of 1.1 million new claims.

The benchmark 10-year treasury note yield rose to a high for the week of 0.728% after the report's release as did the 30-year bond, which traded as high as 1.443% on Thursday. The 10-year Treasury note opened the week at 0.568%, hit a low of 0.543% on Monday, August 10, and was trading at 0.720% on Friday, August 14. In March, the 10-year Treasury hit an all-time low of 0.318% and the 30-year hit a record low of 0.702%. Bond yields rise as bond prices fall.

"The labor market continues to improve, but unemployment remains a huge problem for the U.S. economy," wrote Gus Faucher, Chief Economist at PNC Financial Services. "The number of people filing for unemployment insurance, both regular and [Pandemic Unemployment Assistance] benefits, continues to steadily decline as layoffs abate. But job losses remain extremely elevated, far above their pre-pandemic level."

As bond yields climbed, demand for gold as a safe haven asset posted the biggest drop since April 2013. Gold prices fell from a high of $2,060 on Monday, August 10 to a low of $1,874 on Wednesday, August 12. The drop came as news for the week revealed potential tax cuts in the U.S., falling hospitalizations in some states and the announcement that Russia approved a coronavirus vaccine. By Friday, August 14, gold was trading higher, at above $1,950 an ounce.

"I think the underlying, fundamental, positive reasons for gold haven't gone away," said Citigroup technical strategist Tom Fitzpatrick. "Once the momentum in this lags, we'll probably consolidate for a while, but we still think we might find ourselves back up at $2,400 [for gold prices] by the end of the year."

The 10-year Treasury note yield closed at 0.71% on 8/14, while the 30-year Treasury bond yield was 1.44%.
 

Mortgage Rates Rise

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, August 13. The report showed an increase in rates.

The 30-year fixed rate mortgage averaged 2.96%, up from 2.88% last week. At this time last year, the 30-year fixed rate mortgage averaged 3.60%.

This week, the 15-year fixed rate mortgage averaged 2.46%, up from 2.44% last week. Last year at this time, the 15-year fixed rate mortgage averaged 3.07%.

"Homebuyer demand remains strong, especially for those in search of an entry-level home where the improvement in affordability via lower mortgage rates has a material impact," said Freddie Mac's Chief Economist Sam Khater. "Even with this week's uptick, very low rates are providing a significant boost to the housing market that continues to hold up well during this time of uncertainty."

Based on published national averages, the national average savings rate was 0.06% on 8/14. The one-year CD finished at 0.21%.

Published August 14, 2020
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