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    Tuesday August 9, 2022



    Best Buy Exceeds Earnings Expectations

    Best Buy Co., Inc. (BBY) posted its second quarter earnings on Tuesday, August 24. The Minneapolis-based electronics retailer saw revenue rise 20% and profits increase 70%.

    The company's quarterly revenue came in at $11.85 billion, up from $9.91 billion during the same quarter last year. This exceeded analysts' expected revenue of $11.49 billion.

    "We are lapping an unusual quarter last year as our stores were limited to curbside service or in-store appointments for roughly half the quarter," said Best Buy CEO Corie Barry. "Customer demand for technology products and services during the quarter remained very strong. Customers continued to leverage technology to meet their needs, and we are providing solutions that help them work, learn, entertain, cook and connect at home. The demand was also bolstered by the overall strong consumer spending ability, aided by government stimulus, improving wages and high savings levels."

    Best Buy reported $734 million in net earnings for the quarter. This was up from $432 million reported last year at this time.

    Best Buy expects third quarter revenue to reach $11.4 billion to $11.6 billion and comparable store sales to decline between 1% and 3%. For the full year, the company expects revenue of $51.0 billion to $52.0 billion with comparable sales growth rising between 9% and 11%. The company previously estimated comparable growth to rise between 3% and 6%.

    Best Buy Co., Inc. (BBY) shares ended the week at $117.50, up 4% for the week.

    Palo Alto Networks Reports

    Palo Alto Networks, Inc. (PANW) posted its fourth quarter and full-year earnings on Monday, August 23. The global cybersecurity company's stock reached record levels following the earnings release.

    The company's net sales reached $1.22 billion for the quarter, up from $950.4 million at this time last year. For the year, net sales were $4.26 billion, up 25% from $3.41 billion the year before.

    "Our strong Q4 performance was the culmination of executing on our strategy throughout the year, including product innovation, platform integration, business model transformation and investments in our go-to-market organization," said Palo Alto Networks' CEO and chairman Nikesh Arora. "In particular, we saw notable strength in large customer transactions with strategic commitments across our Strata, Prisma and Cortex platforms."

    The company reported a net loss of $119.3 million during the quarter compared to a net loss of $58.9 million at this time last year. For the year, the company reported a net loss of $498.9 million compared with a net loss of $267.0 million last year.

    "Billings" is a key metric for the company and represents total revenue plus amounts that have not yet been recognized as revenue but are contracted future earnings. For the next quarter, Palo Alto Networks expects billings between $1.29 billion to $1.31 billion, representing growth between 19% and 21%. For the upcoming fiscal full year, it expects billings between $6.60 billion to $6.65 billion. For the next quarter, the company expects revenue in the range of $1.19 billion to $1.21 billion. For the year, the company expects revenue in the range of $5.275 billion to $5.325 billion.

    Palo Alto Networks, Inc. (PANW) shares ended the week at $461.28, up 25.1% for the week.

    Nordstrom Catalogues Earnings

    Nordstrom, Inc. (JWN) reported its second quarter earnings results on Tuesday, August 24. The Seattle-based clothiers reported improved sales and raised guidance for the fiscal year.

    Net sales reached $3.66 billion during the quarter. This was up from net sales of $1.86 billion at this time last year.

    "Our second quarter results demonstrate the strength of our two brands, the power of our 'closer to you' strategy and the success of our iconic Anniversary Sale," said CEO Erik Nordstrom. "We capitalized on improving customer demand with focused execution, healthy inventory sell-through and continued expense management to deliver strong quarterly results. We remain focused on executing our strategy to win in our most important markets, broaden the reach of Nordstrom Rack and increase our digital velocity, and are well-positioned for continued progress toward our long-term strategic and financial goals as we look ahead to the second half of the year."

    The company posted net income of $80 million, up from a loss of $255 million during the same quarter last year.

    Nordstrom shares dropped Tuesday after the earnings release revealed second quarter sales were still 6% below pre-pandemic levels. However, sales more than doubled from last year at this time. Online sales comprised 40% of Nordstrom's overall business for the quarter. Online sales rose 30% from the prior year. The company raised guidance for fiscal 2021 from over 25% expected revenue growth to over 35%.

    Nordstrom, Inc. (JWN) shares ended the week at $29.22, down 18.4% for the week.

    The Dow started the week at 35,161 and closed at 35,456 on 8/27. The S&P 500 started the week at 4,450 and closed at 4,509. The NASDAQ opened the week at 14,777 and closed at 15,130.

    Treasury Yields Decrease

    Yields on U.S. Treasury bonds dipped after the Federal Reserve gave no indication as to when it will begin tapering off monthly bond purchases. Yields also decreased as consumer spending data shows growth has slowed.

    On Friday, Federal Reserve Chairman Jerome Powell's speech, presented remotely at the Jackson Hole Economic Policy Symposium, continued to describe inflation as "transitory." The speech indicated the Fed may start paring back its government bond purchases of $120 billion per month sometime this year, but gave no timeline.

    "At the FOMC's recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year," said Powell. "We have said that we will continue to hold the target range for the federal funds rate at its current level until the economy reaches conditions consistent with maximum employment, and inflation has reached 2% and is on track to moderately exceed 2% for some time."

    The benchmark 10-year Treasury note yield hit a high of 1.369% during trading on Thursday, up from Monday's opening rate of 1.261%. The 30-year Treasury bond yield also hit a high on Thursday of 1.983% after opening at 1.870% on Monday.

    On Friday, data from the Commerce Department revealed consumer spending growth slowed to 0.3% in July, while household incomes rose by 1.1%. The department attributed the income growth to government aid and wage increases. The personal consumption expenditures (PCE) price index, used by the Federal Reserve to gauge inflation, also rose 0.3% in July.

    "The worsening of the health situation is weighing on activities that we initially thought would thrive during the summer," said Gregory Daco, Chief U.S. Economist at Oxford Economics. "But still people are spending. It's not the same type of environment in prior waves where you had a big pullback."

    The 10-year Treasury note yield closed at 1.31% on 8/27, while the 30-year Treasury bond yield was 1.92%.

    Mortgage Rates Stay Put

    Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, August 26. The report showed interest rates holding firm.

    This week, the 30-year fixed rate mortgage averaged 2.87%, largely unchanged from last week's average of 2.86%. Last year at this time, the 30-year fixed rate mortgage averaged 2.91%.

    The 15-year fixed rate mortgage averaged 2.17% this week, up slightly from last week's average of 2.16%. At this time last year, the 15-year fixed rate mortgage averaged 2.46%.

    "The tug-of-war between the economic recovery and rising COVID-19 cases has left mortgage rates moving sideways over the last few weeks," said Freddie Mac's Chief Economist Sam Khater. "Overall, rates continue to be low, with a window of opportunity for those who did not refinance under 3%. From a homebuyer perspective, purchase application demand is improving, but the major obstacle to higher home sales remains very low inventory for consumers to purchase."

    Based on published national averages, the savings rate was 0.06% as of 8/16. The one-year CD averaged 0.14%.

    Published August 27, 2021
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