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Tuesday November 20, 2018



CVS Announces Earnings and Prescription Delivery Service

CVS Health Corporation (CVS) announced quarterly earnings on Monday, November 6. The nation's largest retail pharmacy reported better-than-expected earnings and revealed that it will begin offering free prescription drug delivery services in 2018.

CVS reported quarterly revenue of $46.18 billion. This was an increase from last year's third quarter revenue of $44.62 billion and slightly above the $46.17 billion in revenue that Wall Street expected.

"The solid third quarter results we posted today keep us well on track to achieve our full-year targets," said CVS president and CEO Larry Merlo. "While operating profit in the Retail/LTC Segment was impacted by the devastating hurricanes, operating profit in the Pharmacy Services Segment was in line with expectations."

The company announced quarterly earnings of $1.29 billion, down from $1.54 billion one year ago. On an adjusted earnings per share basis, CVS reported profit of $1.50 per share, which exceeded the $1.48 per share expected by analysts.

On Monday, CVS announced that it will begin offering free next-day prescription delivery nationwide beginning in early 2018. The company hopes that the move will help combat its declining in-store sales and thwart competition from other companies, like Amazon, that are considering entering into the pharmacy business. Customers in some cities, including Miami, Boston, Philadelphia, Washington, D.C. and San Francisco, will be eligible for same-day delivery of their prescriptions. CVS will begin rolling out free same-day delivery from all of its Manhattan locations beginning on December 4.

CVS Health Corporation (CVS) shares ended the week at $70.99, up 4% for the week.

Macy's Stock Surges on Upbeat Holiday Outlook

Macy's, Inc. (M) released its latest quarterly earnings report on Thursday, November 9. The department store giant announced increased earnings for the quarter and provided an upbeat sales outlook for the upcoming holiday season.

Revenue for the third quarter reached $5.28 billion. This is down from $5.63 billion reported during the same quarter last year and is below the $5.31 billion that analysts predicted.

"Overall, we're pleased with the results for the third quarter and we remain on track to meet our full-year sales and earnings guidance for 2017," said Macy's CEO Jeff Gennette. "Importantly, we also saw better gross margin performance primarily due to our tightly controlled inventory position."

Macy's reported net income for the quarter was $36 million, or $0.23 per share. This was up from $17 million, or $0.17 per share, during the prior year's quarter.

With the holidays fast approaching, Macy's is ramping up its efforts to draw in customers and drive up profits in the upcoming months. On Thursday, Gennette told investors that the company has a tight grip on its inventory heading into the holiday season and that he expects double-digit online sales growth in the fourth quarter. Shares jumped 11.7% on Thursday as a result of the upbeat outlook.

Macy's, Inc. (M) shares ended the week at $19.98, up 9.1% for the week.

Priceline Posts Quarterly Earnings

The Priceline Group Inc. (PCLN) reported quarterly earnings on Monday, November 6. The travel company reported increased earnings and revenue but disappointed investors with lackluster fourth-quarter projections causing shares to fall 9% in after-hours trading on Monday.

Priceline announced revenue for the quarter was $4.43 billion, which beat analysts' projected revenue of $4.34 billion. Last year at this time, the company reported revenue of $3.69 billion.

"The Priceline Group delivered solid growth and operating results during our seasonally busy third quarter," said Priceline CEO Glenn Fogel. "Globally, our accommodation business booked 178 million room nights in the third quarter, up 19% over the same period last year."

Priceline reported net income of $1.72 billion, or $35.22 per share. Last year in the third quarter, the company's net income was $506.02 million, or $29.69 per share.

The Priceline Group, which owns several online travel service brands in addition to its flagship, including, KAYAK,, and OpenTable, provided lower-than-expected fourth quarter guidance on Monday. The company expects growth in its room bookings to be between 8% and 13%, which is less than the 15% growth projected by analysts. Priceline's brands have faced increased competition for online bookings from Google's "Book on Google" reservation system as well as vacation rental companies like Airbnb.

The Priceline Group Inc. (PCLN) shares ended the week at $1,697.25, down 10% for the week.

The Dow started the week of 11/6 at 23,534 and closed at 23,422 on 11/10. The S&P 500 started the week at 2,587 and closed at 2,582. The NASDAQ started the week at 6,763 and closed at 6,751.

Treasury Yields Move Upward

After the gap between the 10-year and 2-year Treasury yields flattened to its lowest level in a decade on Monday, the yield curve steepened slightly as the week came to a close. The rise in yields at week's end was a result of investors shifting their focus to Washington's tax reform debate.

On Friday, the yield on the 10-year Treasury note rose to 2.395% compared to 2.333% Thursday and 2.343% at the end of last week. A contributing factor to the increase in yields is speculation surrounding how the proposed tax bill would affect the budget deficit. Some analysts predict that the proposed tax bill would expand the budget deficit, which would in turn cause the government to issue more bonds.

"What the bond market is likely responding to is the fact that there's no answer for the budget deficit in either one of these plans," said Kevin Giddis, head of fixed income capital markets at Raymond James. Treasury yields were on track for their third consecutive day of advances on Friday.

Earlier in the week, the gap between the 10-year and 2-year Treasury notes fell to 69 basis points—its flattest point since November 2007. Contributing to the flattening of the curve is widespread anticipation that the Federal Reserve is on track to raise interest rates in December along with upbeat economic data in recent weeks.

"The yield curve typically flattens with the Fed raising rates," said Eric Stein, co-director of the global income group at Eaton Vance in Boston. "We also have decent growth and low inflation."

Over the past few weeks, investors have favored longer-dated Treasury bonds as uncertainty surrounding tax reform has led many analysts to doubt the likelihood of the government introducing a Treasury bond that matures beyond 30 years. Investors are also preparing for future rate hikes by the Fed, yet another factor contributing to the demand for longer-dated debt.

The 10-year Treasury note yield finished the week of 11/6 at 2.40%, while the 30-year Treasury note yield was 2.88%.

Mortgage Rates Slightly Lower

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, November 9. The report revealed that the 15 and 30-year fixed mortgage rates were slightly lower than last week's averages.

The 30-year fixed rate mortgage averaged 3.90% this week. This represents a decrease from last week when it averaged 3.94%. Last year at this time, the 30-year fixed rate mortgage averaged 3.57%.

This week, the 15-year fixed rate mortgage averaged 3.24%. This was lower than last week's average of 3.27%. The 15-year fixed rate mortgage averaged 2.88% one year ago.

"After holding steady last week, rates dipped slightly this week," said Sean Becketti, Chief Economist at Freddie Mac. "The 10-year Treasury yield fell roughly 7 basis points, while the 30-year mortgage rate dropped 4 basis points to 3.90%."

Based on published national averages, the money market account finished the week of 11/6 at 0.73%. The 1-year CD finished at 1.58%.

Published November 10, 2017
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