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Tuesday July 28, 2015



Apple Reports Record Earnings

Apple Inc. (AAPL) reported its latest quarterly earnings on Tuesday, July 21. The company reported record third quarter results.

Apple reported net sales of $49.61 billion for the quarter. This represents a significant increase from the same quarter last year when the company reported net sales of $37.43 billion.

"We had an amazing quarter, with iPhone revenue up 59% over last year, strong sales of Mac, all-time record revenue from services, driven by the App Store, and a great start for Apple Watch," said Tim Cook, Apple's CEO. "The excitement for Apple Music has been incredible and we're looking forward to releasing iOS9, OS X El Capitan and watchOS 2 to customers in the fall."

The company reported quarterly net income of $10.68 billion. This also represents an increase over the comparable quarter last year when Apple reported net income of $7.75 billion. Earnings per share came in at $1.85 per share.

Apple released the Apple Music smartphone app on June 30. Apple music is a streaming music service available for $9.99 per month. Using the app, a smartphone user can listen to any song, album or playlist in the Apple Music catalog. In addition, the app includes access to Apple's Beats 1 radio, which features radio stations created by DJs in Los Angeles, New York and London.

Apple Inc (AAPL) shares ended the week at $124.48, down 4.96% for the week.

Coke Still Looking for a Solution

The Coca-Cola Company (KO) reported its latest quarterly earnings on Wednesday, July 22. The company's earnings were in line with expectations.

The company reported quarterly revenue of $12.16 billion. This represents a slight decrease from the same period last year when Coca-Cola reported revenue of $12.57 billion.

"Our second quarter results were in line with our expectations and mark continued progress toward restoring momentum in our global business," said Muhtar Kent, Chairman and CEO of The Coca-Cola Company. "We are executing against our strategic initiatives and remain focused on driving efficiencies through productivity and making disciplined investment decisions to accelerate growth. While there is more work to do, we remain confident that we have the right plans in place and are committed to leveraging our superior brand portfolio together with our unparalleled global distribution system to continue creating long-term shareowner value."

Coca-Cola reported net income of $3.11 billion for the quarter. This represents an increase from the comparable quarter last year when the company reported net income of $2.60 billion.

Coke offset sluggish soda sales by reducing the size of packaging and increasing prices. In addition, the company received a boost from sales of non-carbonated drinks like bottled water, milk and tea. However, the company still receives 70% of its revenue from soda. The company is still looking for a long-term solution to the drop-off in sales plaguing sugary soft drinks.

The Coca-Cola Company (KO) shares ended the week at $40.44, down 2.2% for the week.

Microsoft Earnings Disappoint Investors

Microsoft Corp. (MSFT) reported its latest quarterly and annual earnings on Wednesday, July 22. Microsoft's earnings disappointed investors after an $8.4 billion charge in the company's mobile phone operation caused a $3.20 billion loss for the quarter.

The company reported quarterly revenue of $22.18 billion and annual revenue of $93.58 billion. The annual revenue represents an increase compared to last year when Microsoft reported revenue of $86.83 billion.

"Our approach to investing in areas where we have differentiation and opportunity is paying off with Surface, Xbox, Bing, Office 365, Azure and Dynamics CRM Online all growing by at least double-digits," said Satya Nadella, CEO at Microsoft. "And the upcoming release of Windows 10 will create new opportunities for Microsoft and our ecosystem."

Microsoft reported a quarterly net loss of $3.20 billion and annual net income of $12.19 billion. The company's annual net income was much higher last year when Microsoft reported net income of $22.07 billion. Earnings per share came in at $1.48 for the year compared with $2.63 last year.

While the company generated a loss for the quarter, tablet sales proved to be a bright spot in Microsoft's latest earnings report. The company's tablet sales jumped 64% during the latest fiscal year. This is during the same period that Apple's iPad sales dropped 22%. So, Microsoft may be finding its niche in a very competitive consumer technology market.

Microsoft Corp. (MSFT) shares ended the week at $45.97, down 1.46% for the week.

The Dow started the week of 7/20 at 18,086 and closed on 7/24 at 17,569. The S&P 500 started the week at 2,127 and ended at 2,080. The NASDAQ started the week at 5,223 and finished at 5,089.

Treasury Yields Fall Slightly

Treasury prices rose and yields fell slightly this week as investors wait for the Federal Open Market Committee (FOMC) to meet next week. In addition, disappointing news from China and Europe led to limited trading activity.

The FOMC plans to meet next Wednesday, July 29. This will be the final meeting before its September meeting, where some investors believe that the FOMC will announce its first rate hike since the recession began. These investors are looking for language in the minutes for next week's meeting pointing to the Committee's intent to raise rates.

This week the Caixin China Manufacturing Purchasing Manager's Index, a private survey of factory activity, came in at a 15-month low of 48.2. A reading above 50 shows expansion from the previous month and a reading below 50 shows contraction. This reading was much lower than analysts expected and shows that China's economy has yet to regain its momentum despite efforts by the Chinese government to provide a jumpstart.

On Thursday, the Greek parliament voted to support a package of reforms that will be the basis for a new round of debt talks with Greek's creditors. The reforms included privatizing state-owned assets, reforming pensions, reforming Greece's Value Added Tax and imposing spending cuts if Greece fails to meet its target surplus. Over the next month, Greece and its creditors will discuss a $93 billion bailout package to help Greece meet its more immediate debt obligations.

The news regarding the FOMC, China and Greece caused investors to engage in limited trading this week. Early Friday, the 10-year bond yield fell only slightly to 2.26%. The 30-year-bond yield fell to 2.96%. "The market appears to be at a relative standstill for the time being as investors continue to square positions and move to the sidelines, ahead of next week's crucial FOMC meeting decision," said Millan Mulraine, Head of U.S. Strategy at TD Securities.

The 10-year Treasury note yield finished the week of 7/20 at 2.27% while the 30-year Treasury note yield finished the week at 2.97%.

Interest Rates Fall

Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, July 23. The results showed average fixed mortgage rates falling after mixed economic data released this week.

This week, the 30-year fixed rate mortgage averaged 4.04%. This represents a decrease from last week when it averaged 4.09%. One year ago, the 30-year fixed rate mortgage averaged 4.13%.

The 15-year fixed rate mortgage averaged 3.21% this week. This represents a decrease from last week when it averaged 3.25%. Last year at this time, the 15-year fixed rate mortgage averaged 3.26%.

"U.S. Treasury yields dropped following announcements that many blue chip companies' earnings failed to meet expectations," said Sean Becketti, Chief Economist at Freddie Mac. "This drove the 30-year fixed rate mortgage down 5 basis points to 4.04% this week. Housing continues to be the bright spot in the economic recovery. Existing home sales beat market expectations coming in at a seasonally adjusted annual rate of 5.49 million homes. This is up 9.6% from a year ago and the fastest pace since 2007. Also, housing starts jumped 9.8% responding to strong demand in the multifamily market."

The money market fund finished the week of 7/20 at 0.3%. The 1-year CD finished at 0.6%.

Published July 24, 2015

Previous Articles

Google's Earnings Impress

WD-40 Company Misses Expectations

General Mills Continues to Struggle

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FedEx's Earnings Disappoint

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