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Thursday July 25, 2024



PepsiCo Posts Earnings

PepsiCo, Inc. (PEP) released its third quarter earnings report on Wednesday, October 12. The beverage and snack manufacturer's shares increased 3% following the earnings report.

The company reported quarterly revenue of $21.97 billion, well above analysts' estimates of $20.84 billion. This was up from $20.19 billion in revenue during the same quarter last year.

"We are very pleased with our results for the third quarter as our global business momentum remains strong," said PepsiCo's CEO, Ramon Laguarta. "Given our year-to-date performance, we now expect our full-year organic revenue to increase 12% (previously 10% and core constant currency earnings per share to increase 10% (previously 8%)."

PepsiCo reported net income of $2.70 billion for the quarter, or $1.95 per adjusted share. This was up from $2.22 billion, or $1.60 per adjusted share in the same period a year ago.

The company's PepsiCo Beverages North America segment grew 4%, to sales of $6.64 billion. The Frito-Lay North America segments led the way with a sales growth of 20%, with $5.56 billion in revenue for the quarter. The Quaker Foods North America segment generated sales of $713 million for the quarter, growing 15% year-over-year. Despite the company's snack volumes falling by 1.5%, their beverages increased by 3% which helped push their organic revenue growth to 16%. PepsiCo affirmed its guidance for 2022, to return $7.7 billion to shareholders, including $6.2 billion through the payment of dividends and share repurchases of $1.5 billion.

PepsiCo, Inc. (PEP) shares ended the week at $170.19, up 5% for the week.

Delta Air Lines Posts Quarterly Results

Delta Air Lines (DAL) reported third quarter earnings on Thursday, October 13. The Atlanta-based airline's stock rose over 4% in premarket trading and continued to rise following its release of record revenue.

The company posted revenues of $13.98 billion for the quarter ended September 2022. While this is up 11% from $12.56 billion in revenue during the third quarter of 2019, it missed analysts' estimates.

"Thanks to the incredible work of our entire team, Delta delivered a strong September quarter with record quarterly revenues and a double-digit operating margin," said Delta's CEO, Ed Bastian. "The travel recovery continues as consumer spend shifts to experiences and demand improves in corporate and international. In this environment, we expect December quarter revenue growth to accelerate versus 2019 with an operating margin of approximately 10%."

Delta reported net income of $695 million or $1.08 per adjusted share. This is down from net income of $1.5 billion or $2.31 per adjusted share in the same quarter of 2019.

Delta Airline's third-quarter earnings were impacted by Hurricane Ian with mass flight cancellations last month resulting in approximately $35 million in revenue loss. Despite the setback, strong overall travel demand led most of Delta's recovery. Delta continues to compare its results to 2019 to track its progress of returning to pre-pandemic levels. Domestic travel revenue increased by 2% to $8.15 billion during the quarter. International passenger revenue represented a 97% recovery compared to the same quarter in 2019. Delta's costs for each seat increased by 43% to $19.87 million and its fuel expenses grew 84% to $3.57 billion compared to $1.94 billion in 2019. With corporate travel improving, and domestic and international travel demands on the rise, the company expects the following quarter to continue its upward trend with predicted quarter revenue up 5% to 9% compared to December 2019.

Delta Air Lines (DAL) shares ended the week at $31.11, up 6% for the week.

Domino's Pizza Serves Up Earnings

Domino's Pizza, Inc. (DPZ) released its latest quarterly earnings on Thursday, October 13. The restaurant chain's stock soared, rising 9% following the report's release.

Revenue came in at $1.07 billion during the third quarter, just above analysts' expectations of $1.06 billion. This was up from revenue of $997.99 million during the same quarter last year.

"I'm encouraged with our performance and the sequential improvements we made during the third quarter," said Domino's CEO, Russell Weiner. "Our team members and franchisees around the world continued to show the agility and perseverance required to operate in a volatile macro-economic environment. As we begin the fourth quarter, I believe Domino's is poised to emerge from these volatile times stronger than ever."

Domino's reported net income of $100.5 million, or $2.79 per adjusted share. This was down from $120.4 million in net income, or $3.24 per adjusted share last year at this time.

The pizza company credited its net income decline to a higher provision for income taxes and lower income from operations. While net income was down, the company's domestic same store sales increased by 2% from the same quarter last year. Internationally, same store sales decreased by 1.8%, which the company attributes to the value added tax holiday in the United Kingdom in 2021 that did not occur in 2022. Additionally, the company reported a net increase of 24 stores in the U.S. and 201 new stores abroad, ending the quarter with 19,294 total stores globally.

Domino's Pizza, Inc. (DPZ) shares ended the week at $317.64, relatively unchanged for the week.

The Dow started the week at 29,419 and closed at 29,635 on 10/14. The S&P 500 started the week at 3,648 and closed at 3,583. The NASDAQ started the week at 10,660 and closed at 10,321.

Treasury Yields On the Rise

U.S. Treasury yields climbed throughout the week as markets reacted to the latest inflation data. Yields continued their rise on Friday as unemployment numbers slightly increased but remained historically low.

On Thursday, the U.S. Department of Labor announced that the consumer price index (CPI), which measures the cost of dozens of everyday consumer goods, rose 0.4% in September, topping economists' expected growth of 0.3%. The CPI reached 8.2% year-over-year, hitting a high last seen in the early 1980s.

"The pace of inflation remains stubbornly high, in defiance of the Fed's attempts to tamp down the economy by tightening monetary policy," said managing director of Charles Schwab UK, Richard Flynn. "Rising prices, combined with last month's stronger than expected jobs report, all but guarantee the Fed will enact its fourth 0.75% rate hike when officials next meet in November."

The benchmark 10-year Treasury note yield opened the week of October 10 at 3.89% and traded as high as 4.07% on Thursday. The 30-year Treasury bond opened the week at 3.85% and traded as high as 4.02% on Thursday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment increased by 9,000 reaching 228,000 for the week ending October 8. Continuing unemployment claims increased by 3,000 to 1.37 million, remaining historically low.

"The labor market remains extremely tight and companies continue to be unwilling to lay off workers," said senior economic advisor at Brean Capital in New York, Conrad DeQuadros.

The 10-year Treasury note yield finished the week of 10/14 at 4.02%, while the 30-year Treasury note yield finished the week at 3.98%.

Mortgage Rates Increase

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, October 13. Mortgage rates for the 30-year fixed reached highs last seen in April 2002.

The 30-year fixed rate mortgage averaged 6.92%, up from last week's average of 6.66%. Last year at this time, the 30-year fixed rate mortgage averaged 3.05%.

The 15-year fixed rate mortgage averaged 6.09% this week, up from 5.90% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.30%.

"Rates resumed their record-setting climb this week, with the 30-year fixed-rate mortgage reaching its highest level since April of 2002," said Freddie Mac's Chief Economist, Sam Khater. "We continue to see a tale of two economies in the data: strong job and wage growth are keeping consumers' balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously. The next several months will undoubtedly be important for the economy and the housing market."

Based on published national averages, the savings rate was 0.17% as of 9/19. The one-year CD averaged 0.60%.

Published October 14, 2022
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