Thursday December 12, 2019
CVS Reports Earnings
The company reported revenue of $64.81 billion in the third quarter. This was an increase of 36.5% from revenue of $47.49 billion during the same quarter last year.
“All of our core businesses performed in line with or above expectations, reflecting strong operational execution,” said CVS CEO Larry Merlo. “As a result, we delivered strong growth and generated robust operating cash flow, which enabled us to continue to delever while returning capital to our shareholders. Based on strong year-to-date performance, we are raising and narrowing our full-year 2019 Adjusted EPS guidance range to $6.97 to $7.05.”
Net income for the quarter totaled $1.53 billion, up 10% from $1.39 billion at this time last year. On an adjusted earnings per share basis, the company earned $1.84 per share.
CVS attributed the strong revenue growth to the acquisition of health insurer Aetna, which was acquired on November 28, 2018. The company’s healthcare benefits segment income soared to $17.18 billion in the quarter primarily due to the Aetna acquisition. Its medical memberships segment had numbers consistent as compared with second quarter numbers at 22.8 million.
CVS Health Corporation (CVS) shares ended the week at $72.49, up 6.6% for the week.
Shake Shack Releases Earnings
Shake Shack Inc. (SHAK) reported its third quarter earnings on Monday, November 4. The restaurant chain reported increased quarterly revenue and sales.
The company reported revenue of $157.8 million for the quarter, up 31.9% from $119.6 million during the same quarter last year. This was consistent with analysts’ expectations.
“We're pleased to report total revenue grew nearly 32% and the team delivered another quarter of positive Same-Shack sales of 2%, continuing to drive positive traffic of 1.2%,” said Randy Garutti, Shake Shack CEO. “Based on our results to date, we are raising our 2019 revenue guidance, including our licensing revenue guidance. This has been the biggest development year in Shack history as we’ve grown our presence around the country and internationally in the new markets of Mainland China, Singapore, the Philippines and Mexico.”
Shake Shack reported a net income of $11.4 million, an improvement over net income of $6.9 million last year at this time. On an earnings per share basis, the company earned $0.31 per share in the quarter, up from $0.17 in the same quarter last year.
The New York City-based company revised its earnings outlook for the full-year to a range of $592 to $597 million, up from its previous outlook of $585 to $590 million. Shake Shake’s same –store sales guidance was revised downward from 2.0% to 1.5% for the full-year. Shares in the company dropped more than 14% after the release of the earnings report.
Shake Shack Inc. (SHAK) shares ended the week at $62.38, down 25.3% for the week.
Red Robin Fails to Deliver
Red Robin Gourmet Burgers, Inc. (RRGB) announced its third quarter earnings on Tuesday, November 5. The casual-dining chain’s results were below analysts’ expectations.
The company reported revenue of $294.2 million during the quarter. This was a modest decline of 0.2% year-over-year from $294.9 million.
“I am encouraged by the current momentum at Red Robin, reflected in rising operating and guest metrics, complemented by an effective new omni-channel creative campaign, that are driving better topline results,” said Red Robin CEO Paul J.B. Murphy III. “The team is making progress strengthening and transforming the dine-in business while investing in our strategic priorities.”
Red Robin reported a net loss for the quarter of $1.82 million, or $0.14 per share. This was down from net income of $1.71 million, or $0.13 per share during the prior year's quarter.
Shares of the company’s stock decreased almost 6% following the release of its earnings report. The company saw a 37.3% increase in its off-premises sales and catering in the quarter. Comparable restaurant guest traffic for the company declined by 3.1% in the quarter. Comparable sales for the quarter increased 1.6% and average guest check increased 4.7%.
Red Robin Gourmet Burgers, Inc. (RRGB) shares ended the week at $26.72, down 14.5% for the week.
The Dow started the week at 27,402 and closed at 27,665 on 11/8. The S&P 500 started the week at 3,079 and closed at 3,089. The NASDAQ started the week at 8,446 and closed at 8,464.
Trade Talk Optimism Boosts Yields
On Thursday, U.S. Treasury bond yields hit a three-month high. China’s Commerce Ministry reported Thursday that the U.S. and China have agreed to cancel existing trade tariffs on one another and are in “phase one” of a trade agreement. A White House trade advisor refuted the existence of an agreement in “phase one” to remove existing tariffs.
“Exuberance over trade triggered a rally in risky assets and a meaningful sell-off in bonds, with the 10-year Treasury yield at its highest level since the August lows,” said Adam Kurpiel, head of rates strategy at Societe Generale. “We expect bonds to ultimately trade in line with fundamentals and do not see clear catalysts for a sustained sell-off in the context of a slowdown in global growth.”
The benchmark 10-year Treasury note yield hit a high of 1.96% on Thursday, marking its largest single-day move since 2016. The 30-year Treasury bond peaked at 2.44% on Thursday.
“Given the lack of new economic information today, it’s more a result of the positive trade war headlines and that coupled with a 30-year funding auction,” said Benjamin Jeffery, rates strategist at BMO. “The positive trade headline was the catalyst and more technical factors are what’s driving the bulk of the move after that initial knee-jerk.”
The 10-year Treasury note yield closed at 1.93% on 11/8, while the 30-year Treasury bond yield was 2.42%.
Mortgage Rates Dip
The 30-year fixed rate mortgage rate averaged 3.69%, down from 3.78% last week. At this time last year, the 30-year fixed rate mortgage averaged 4.94%.
This week, the 15-year fixed rate mortgage averaged 3.13%, down from 3.19% last week. Last year at this time, the 15-year fixed rate mortgage averaged 4.33%.
“After a year-long slide, mortgage rates hit a cycle low in September 2019 and have risen in six out of the last nine weeks due to modestly better economic data and trade related optimism,” said Freddie Mac’s Chief Economist Sam Khater. “The improvement in sentiment has been one of the main drivers behind the surge in equity prices and will provide a halo effect to consumer spending heading into the important holiday shopping season.”
Based on published national averages, the savings rate was 0.09% on 11/8. The one-year CD finished at 0.51%.