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Wednesday June 3, 2020



Salesforce's Shares Rise on Upbeat Earnings

Salesforce.com, Inc. (CRM) released its quarterly earnings report on Tuesday, June 4. The cloud-based software company reported better-than-expected earnings and revenue for the quarter, causing shares to jump 9% following the report's release.

Salesforce reported quarterly revenue of $3.74 billion. This is up 24% from last year's first quarter revenue of $3.01 billion and above the $3.68 billion in revenue that Wall Street predicted.

"I am thrilled with our results this quarter, and I am especially excited to have delivered record revenue in Q1 and operating cash flow of almost $2 billion, up 34% year-over-year," said Marc Benioff, co-CEO of Salesforce. "We have a massive opportunity in front of us and are well-positioned for long-term growth as the world's #1 CRM."

The company announced earnings of $392 million for the quarter, which was up from earnings of $344 million one year ago. On an adjusted earnings per share basis, the company reported earnings of $0.93 per share, which was more than the $0.61 per share that analysts predicted.

In the first quarter, Salesforce's Service Cloud product surpassed the $1.0 billion revenue mark for the first time, reaching $1.02 billion in sales. The company's revenue was also boosted by its MuleSoft offerings and its expanded product portfolio, which includes marketing and customer support. On Tuesday, Salesforce increased its full-year earnings guidance to a range of $2.88 to $2.90 per share, surpassing analysts' full-year earnings projections of $2.66 per share.

Salesforce.com, Inc. (CRM) shares closed at $161.24, up 7% for the week.

Tiffany's Sales Impacted by Decline in Tourist Spending

Tiffany & Co. (TIF) announced quarterly earnings on Tuesday, June 4. The luxury jewelry company's quarterly sales declined year-over-year, due in large part to a decrease in tourist sales.

Revenue for the first quarter reached $1.00 billion. This is down 3% from revenue of $1.03 billion reported during the same quarter last year and below the $1.02 million in revenue that analysts expected.

"Our first quarter results reflect significant foreign exchange headwinds and dramatically lower worldwide spending attributed to foreign tourists," said Tiffany CEO Alessandro Bogliolo. "That said, we were pleased that, at the core of our business, global sales attributed to local customers, led by sales in China, grew over last year's very strong sales results."

Tiffany reported quarterly net earnings of $125.2 million, compared to last year's earnings of $142.3 million. On an adjusted earnings per share basis, the company posted earnings of $1.03 per share, surpassing the $1.01 per share that analysts predicted.

The company reported that sales to tourists visiting the U.S. fell 25% in the quarter, taking a bite out of the company's revenue and prompting the jeweler to scale back its earnings per share guidance for fiscal 2019. During a call with investors on Tuesday, Tiffany CFO Mark Erceg explained that, in addition to decreased foreign tourist spending, the company has also been impacted by "the recent imposition of higher tariff rates on jewelry products that we export from the U.S. into China." The company is not, however, planning to increase its retail prices in China to offset the financial impact of the increased tariffs at this time.

Tiffany & Co. (TIF) shares closed at $90.46, up 1.4% for the week.

Campbell Tops Earnings Estimates

Campbell Soup Company (CPB) reported quarterly earnings on Wednesday, June 5. The company reported revenue and earnings that were above analysts' estimates, causing shares to jump more than 9% following the report's release.

Campbell announced revenue of $2.39 billion for the third quarter. This is up from revenue of $2.13 billion reported in the same quarter last year and above the $2.35 billion in revenue that analysts expected.

"Our results this quarter were ahead of our expectations, making it the third consecutive quarter that we met or exceeded our outlook," said Campbell's CEO Mark Clouse. "I am also pleased to see profitability trends are improving, driven by sequential gross margin improvement."

The company reported earnings of $84 million for the quarter, up from an earnings loss of $393 million one year ago. On an adjusted earnings per share basis, Campbell posted earnings of $0.56 per share, topping analysts' earnings estimates of $0.46 per share.

On Wednesday, Campbell revised its full-year revenue and earnings guidance. The company now expects revenue to total between $9.08 billion and $9.13 billion, compared to previous revenue estimates of $9.98 billion to $10.10 billion. On an adjusted earnings per share basis, Campbell expects to earn between $2.50 and $2.55 per share in fiscal 2019, up from previous estimates of $2.45 to $2.53 per share.

Campbell Soup Company (CPB) shares closed at $43.08, up 18.9 % for the week.

The Dow started the week at 24,830 and closed at 25,984 on 6/7. The S&P 500 started the week at 2,752 and closed at 2,873. The NASDAQ started the week at 7,441 and closed at 7,742.

Weak Jobs Data Pushes Yields Lower

Yields on U.S. Treasuries fell on Friday after a report from the Labor Department revealed that the economy added fewer jobs than expected in May. The news pushed yields to their lowest levels since September 2017 and boosted expectations that the Federal Reserve could move forward with an interest rate cut this year.

On Friday, the Labor Department's jobs report revealed that 75,000 jobs were added in May, falling below the 180,000 jobs economists expected. The unemployment rate remained unchanged at 3.6%, while average hourly earnings were up 3.1% year-over-year.

"The softening in consumer spending and uncertainty related to trade policy have taken a toll in recent months, but the jobs market had remained a relative bright spot," said Jim Baird, partner and chief investment officer with Plante Moran Financial Advisors. "The weakness of this report shouldn't be overlooked."

Following the release of the jobs report on Friday, the yield on the 10-year Treasury note fell to 2.055%, marking its lowest level since September 2017. The yield on the 30-year Treasury bond was also lower at 2.571%. Bond yields move inversely to prices.

The latest jobs report has many economists pointing to the likelihood of an interest rate cut this year, possibility as soon as July. Earlier in the week, Federal Reserve Governor Lael Brainard noted that the Fed would be watching Friday's jobs report closely as "the labor market does give us a lot of signals about what's going on in the economy."

"This is the type of read the doves will really take to, as it supports the argument for cutting rates beyond politics or trade issues, which were never part of the Fed's mandate to begin with," said Mike Loewengart, vice president of investment strategy for E-Trade Financial. "That said, our historically low unemployment rate hasn't moved, and even though the number came in low we're still creating jobs, which supports the case that the economy is still expanding. So the Fed will have to walk a really thin line."

The 10-year Treasury note yield closed at 2.09% on 6/7, while the 30-year Treasury bond yield was 2.57%.

Mortgage Rates Fall

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, June 8. The report revealed that mortgage rates continued to fall for the sixth consecutive week, with the 30-year fixed rate mortgage reaching its lowest rate since September 2017.

The 30-year fixed rate mortgage averaged 3.82% this week, down from 4.07% last week. During this time last year, the 30-year fixed rate mortgage averaged 4.54%.

This week, the 15-year fixed rate mortgage averaged 3.28%, a decrease from last week when it averaged 3.53%. Last year at this time, the 15-year fixed rate mortgage averaged 3.46%.

"While the drop in mortgage rates is a good opportunity for consumers to save on their mortgage payment, our research indicates that there can be a wide dispersion among mortgage rate offers. By shopping around and getting a single additional mortgage rate quote, a borrower can save an average of $1,500," said Sam Khater, Chief Economist at Freddie Mac. "These low rates are also good news for current homeowners. With rates dipping below 4%, there are over $2 trillion of outstanding conforming conventional mortgages eligible to be refinanced – meaning the majority of what was originated in 2018 is now eligible."

Based on published national averages, the money market account closed at 1.41% on 6/7. The one-year CD finished at 2.68%.

Published June 7, 2019

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