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Tuesday April 7, 2020

Finances

Finances
 

Netflix Shows Strong Member Gains

Netflix, Inc. (NFLX) released its latest quarterly and full-year earnings report on Tuesday, January 21. The video streaming giant reported strong gains in its paid memberships.

The company's revenue for the fourth quarter was $5.47 billion. This was up from $5.25 billion during the same quarter last year. Netflix reported revenue of $20.16 billion for the full year.

"We had a strong finish to 2019, with Q4 revenue growing 31% year over year, bringing full year 2019 revenue to over $20 billion, while FY19 operating income rose 62% to $2.6 billion," said Netflix executives in a letter to shareholders. "During the quarter, we surpassed 100 million paid memberships outside of the US. Streaming entertainment is a global phenomenon and we're working hard to build on our early progress."

Netflix reported net income of $586.97 million during the quarter, or $1.34 per share. During the same quarter last year, the company's net income totaled $665.24 million, or $1.52 per share.

Netflix was hoping to add 600,000 domestic subscribers in the quarter, but missed that mark added only 420,000 domestic subscribers. The company's global streaming paid memberships increased to 167.09 billion, which represented a 20% increase. Netflix acknowledged competition in the streaming arena from Amazon, Disney+ and Apple, but stated that their subscription growth globally and domestically was strong and consistent with recent quarterly outcomes.

Netflix, Inc. (NFLX) shares ended the week at $353.16, up 3.8% for the week.

American Express Reports Earnings


American Express Company (AXP) released its latest quarterly and full-year earnings on Friday, January 24. Revenue reflected stronger-than-expected growth causing shares to rise after the report's release.

The company reported revenue of $11.37 billion. This was an increase of 9% from $10.47 billion reported at this time last year. Full year income was $43.56 billion.

"We once again delivered steady, consistent performance in the fourth quarter, marking our 10th
straight quarter of FX-adjusted revenue growth at or above 8%," said American Express Chairman and CEO Stephen Squeri. "These results demonstrate the success of our strategy to generate sustainable, profitable growth across the enterprise over the long term."

American Express posted net income of $1.693 billion for the quarter. This is a 16% drop from $2.010 billion this time last year.

The financial services company delivered stronger-than-expected growth in card fee revenue. During the full year, American Express added 11.5 million new proprietary cards. The new card growth provided strong billings growth and strong card member spending.

American Express Company (AXP) shares ended the week at $135.11, up 3.1% for the week.

Johnson & Johnson Reports Earnings


Johnson & Johnson (JNJ) posted its latest quarterly and full-year earnings on Wednesday, January 22. The company reported increased sales but lower profits for the quarter.

The company reported revenue of $20.75 billion for the quarter. This was up from revenue of $20.39 billion during the fourth quarter of last year. Full year income came in at $82.06 billion.

"As we enter into 2020 and this next decade, our strategic investments focused on advancing our pipelines and driving innovation across our entire product portfolio, position us well to deliver long-term sustainable growth and value to our shareholders," said Alex Gorsky, Chairman and CEO of Johnson & Johnson. "I am extremely proud of our talented and dedicated colleagues who live Our Credo values each and every day, and are inspired to deliver transformative healthcare solutions that improve the lives of our patients and consumers around the world."

Johnson & Johnson reported net earnings of $4.010 billion for the quarter, or $1.50 per share. This was up from $3.042 billion in net earnings, or $1.12 per share, during the same quarter last year.

The health care company reported increased consumer sales of 0.9%. In the fourth quarter, Johnson & Johnson's pharmaceutical sales increased 3.5%. For the full year, pharmaceutical sales increased 5.8%, excluding acquisitions and divestitures. The strong pharmaceutical sales were attributed to prescription medication sales.

Johnson & Johnson (JNJ) shares ended the week at $148.32, virtually unchanged for the week.

The Dow started the week at 29,269 and closed at 28,990 on 1/24. The S&P 500 started the week at 3,321 and closed at 3,295. The NASDAQ started the week at 9,361 and closed at 9,315.
 

Treasury Yields Dip

U.S. Treasury yields fell this week due to economic concerns stemming from reports of an outbreak of a new strain of coronoavirus in China. Investors demand for safe haven assets continued into the end of the week with yields on a downward trend. Yields move inversely to prices.

On Friday, the 10-year Treasury note hit its lowest rate since November 1, 2019. The 10-year note also marked its largest single week move since November.

"I think it's a reaction to the coronavirus," said Jim Caron, a portfolio manager at Morgan Stanley Investment Management. "Most people think global growth is going to be stable and go up a little bit."

The Chinese government has implemented a travel lockdown in the city of Wuhan, which is where the virus is believed to have originated. Investors flocked to safe haven assets amid growing concern that global growth may slow due to the lockdown. The lockdown comes at the beginning of the Chinese Lunar New Year, interfering with one of the world's busiest travel weeks.

The 10-year Treasury note yield dipped to 1.68% during trading on Friday, a sharp difference from its opening rate of 1.82%. The yield on the 30-year Treasury bond was at 2.13% on Friday, after opening the week at 2.28%.

"The focus on coronavirus and its parallels with SARS has conjured concern around the last time a severe epidemic had a meaningful impact on Asian (and potentially global) economic activity," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets. "While the direct influence of the outbreak on domestic growth is questionable at best, the spillover into local markets and the accompanying contagion risk added a bullish tilt to trading in [Treasurys] on Tuesday."

The 10-year Treasury note closed at 1.68% on 1/24, while the 30-year Treasury bond yield was 2.13%.
 

Mortgage Rates Dip

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, January 23. The report revealed lower rates.

The 30-year fixed rate mortgage averaged 3.60% this week, down from last week's average of 3.65%. At this time last year, the 30-year fixed rate mortgage averaged 4.45%.

This week, the 15-year fixed rate mortgage averaged 3.04%, down from an average of 3.09% last week. During the same week last year, the 15-year fixed rate mortgage averaged 3.88%.

"Rates fell to the lowest level in three months and are about a quarter point above all-time lows," said Sam Khater, Chief Economist at Freddie Mac. "The very low rate environment has clearly had an impact on the housing market as both new construction and home sales have surged in response to the decline in rates, the rebound in the economy and improving financial market sentiment."

Based on published national averages for non-jumbo deposits, the savings rate was 0.09% for the week of January 20. The one-year CD finished at 0.48%.

Published January 24, 2020
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