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Monday June 18, 2018



H&R Block's Earnings Beat Expectations

H&R Block, Inc. (HRB) released its quarterly earnings report on Tuesday, June 13. The tax preparation company reported stronger than expected profits.

The company reported revenue of $3.04 billion for the quarter. This was relatively unchanged from the same quarter last year.

"We came into this year with a very aggressive goal to change the client trajectory. With competitive promotions, impactful marketing and an improved client experience, we achieved this goal and also produced strong financial results, all during a year in which the industry experienced a decline in returns," said H&R Block President and CEO Bill Cobb. "I couldn't be more proud of our team who delivered these impressive results."

Net income for the quarter was $421 million, or $1.96 per share. During the same quarter last year, H&R Block reported net income of $384 million, or $1.53 per share.

The company's stock rose 7.9% on Wednesday in reaction to Tuesday's strong earnings release. H&R Block also announced on Tuesday that it will be increasing dividends by 9% to $0.24 per share. The report marks a strong ending to CEO Bill Cobb's time with the company, as he prepares to retire at the end of July.

H&R Block (HRB) shares ended the week at $29.92, up 15% for the week.

Kroger Reports Drop in Profits

The Kroger Co. (KR) announced its latest quarterly earnings on Thursday, June 15. The grocery store chain reported mixed results.

The company reported $36.3 billion in sales during the first quarter. This was an increase from $35.0 billion during the same quarter last year.

"We remain focused on our strategy. This will make a difference for our customers and create value for our shareholders," said Kroger CEO Rodney McMullen. "We are running the business with an eye toward where the customer is going. Customers tell us they want to connect with us in multiple ways with the help of friendly associates to easily provide meals to their families at prices that enable them to stretch their budgets. We are committed to providing that experience, and we will not lose on price."

Kroger's net profit totaled $303 million for the quarter. This is down sharply from $696 million during the prior year's quarter.

The Kroger Co. operates grocery stores in 35 states under the Kroger name as well as Ralph's, Harris Teeter, Pick N' Save and more. The company reported that identical store sales excluding fuel fell from $28.7 billion to $28.6 billion for the quarter, a decrease of 0.2%. Factoring in fuel, identical store sales rose 1.6%.

The Kroger Co. (KR) shares ended the week at $22.29, down 27% for the week.

Bob Evans Reports Mixed Results

Bob Evans Farms, Inc. (BOBE) announced its fourth quarter earnings on Thursday, June 15. The company reported decreased revenue but an increase in earnings that beat Wall Street's estimates and caused shares to rise 4% in premarket trading.

Bob Evans reported quarterly revenue of $313.4 million. This was down 9.3% from last year's fourth quarter revenue of $ $345.6 million.

"We closed the fiscal year with strong fourth quarter earnings, exceeding our full year guidance, and completed the strategic transactions that have reshaped Bob Evans into a higher growth and higher margin, pure-play packaged foods company," said Bob Evans President and CEO Mike Townsley. "We are now focusing our attention on capitalizing on the growth opportunities in our refrigerated side-dish business while completing the integration of Pineland Farms Potato Company."

Bob Evans announced that adjusted earnings per share for the first quarter were $0.61 per share compared to $0.48 per share a year ago. This beat Wall Street's earnings estimate of $0.42 per share.

On April 28, the company sold its restaurant division to Golden Gate Capital. Bob Evans now is primarily a producer and distributor of food products and boasts the title of the leading seller of refrigerated dinner sides in the U.S. The Ohio-based company's products are sold under the Bob Evans, Owens and Country Creek brand names and their products include mashed potatoes, macaroni and cheese, pork sausage, home-style gravy and breakfast potatoes. In the fourth quarter, the food-products division reported revenue of $99.9 million compare to $102.4 million in the same period last year.

Bob Evans Farms, Inc. (BOBE) shares ended the week at $69.56, down 2.4% for the week.

The Dow started the week of 6/12 at 21,260 and closed at 21,384 on 6/9. The S&P 500 started the week at 2,426 and closed at 2,433. The NASDAQ started the week at 6,154 and closed at 6,152.

Treasury Yields Volatile Amid Mixed Economic Signals

Yields on U.S. Treasury bonds fell sharply this week in response to weaker than expected economic growth numbers. Releases from the Labor and Commerce Departments showed consumer price index and housing starts both fell short of expectations.

The U.S. Department of Labor released its latest Consumer Price Index Summary on Wednesday, June 14. The report showed a 0.1% decrease in May after rising 0.2% in April. Following the release, the 10-year Treasury note, which opened at 2.21% on Wednesday, fell to 2.13% by the day's end.

Despite the most recent inflation numbers, the Federal Open Market Committee moved forward with its plan to raise interest rates at its June 13-14 meeting. After years of near-zero rates, the Fed has now raised rates four times since December 2015.

"Following a slowdown in the first quarter, economic growth appears to have rebounded, resulting in a moderate pace of growth so far this year," said Federal Reserve Chairman Janet Yellen. "Household spending, which was particularly soft earlier this year, has been supported by solid fundamentals, including ongoing improvement in the job market and relatively high levels of consumer sentiment and wealth."

Yields rose on Thursday following the Fed's rate hike, but began to trend downward on Friday in the wake of the Commerce Department's residential construction report. The report showed housing starts dropped to a rate of 1.09 million units, down 5.5% from April.

The 10-year Treasury note yield finished the week of 6/12 at 2.16%, while the 30-year Treasury note yield was 2.78%.

Mortgage Rates Rise After Steady Decline

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, June 15. Mortgage rates ticked upward after a gradual decline over the last several weeks.

The 30-year fixed rate mortgage averaged 3.91% this week. This is up from last week's average of 3.89%. Last year at this time the 30-year fixed rate mortgage averaged 3.54%.

The average on the 15-year fixed rate mortgage for the week was 3.18%, up from 3.16% last week. During this time last year, the 15-year fixed rate mortgage averaged 2.81%.

"The 30-year mortgage rate rose 2 basis points over the week to 3.91%," said Freddie Mac chief economist Sean Becketti. "However, our survey was conducted before investors drove Treasury yields sharply lower in a reaction to the surprisingly weak CPI release. If that drop in yields sticks, mortgage rates are likely to follow in next week's survey."

Based on published national averages, the money market account finished the week of 6/12 at 0.59%. The 1-year CD finished at 1.38%.

Published June 16, 2017
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