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Tuesday May 17, 2022



Lowe's Reports Earnings

Lowe's Companies, Inc. (LOW) released its first quarter earnings report on Wednesday, May 19. First quarter sales climbed 24%, beating analysts' expectations.

Lowe's posted quarterly sales of $24.4 billion, exceeding Wall Street's estimated revenue of $23.8 billion. This is up from $19.7 billion reported at the same time last year.

"Our outstanding performance continued this quarter, as we delivered strong sales growth and operating margin expansion," said Marvin R. Ellison, President and CEO of Lowe's. "I would like to thank our front-line associates for their hard work and commitment to delivering exceptional customer service. Looking forward, I remain confident in our ability to accelerate our market share gains while driving further improvement in operating margin."

Lowe's reported net income of $2.32 billion or $3.21 per share. This is up from $1.34 billion or $1.76 per share reported at this time last year.

Lowe's operates 1,972 home improvement stores in the U.S. and Canada. The company offers a profit-sharing bonus program for its front-line hourly associates. For the fifth consecutive quarter, 100% of Lowe's stores earned the bonus paying out $152 million to associates. Over the quarter, Lowe's repurchased 16.8 million shares from stockholders at $3.1 billion and distributed $440 million in dividends.

Lowe's Companies, Inc. (LOW) shares closed at $192.47, down 2.6% for the week.

Macy's Reports Strong Earnings

Macy's, Inc. (M) released its first quarter earnings report on Tuesday, May 18. Earnings and revenue far exceeded analysts' expectations.

Macy's posted quarterly revenue of $4.71 billion, beating revenue estimates of $4.37 billion. Revenue was $3.02 billion at this time last year.

"As consumers seek to re-engage with each other, we are seeing promising signs that our core customers are shopping again, and we continue to attract new customers, who increasingly begin their shopping experience with us online," said Macy's CEO Jeff Gennette. "Customers are shopping categories that have been strong throughout the pandemic, including home, fine jewelry and watches, fragrance and luxury items. And we're encouraged by the improvement we're seeing in special occasion categories as customers begin to travel and return to a pre-pandemic lifestyle."

For the quarter, Macy's reported net income of $103 million or $0.39 adjusted earnings per share, better than the $0.41 loss anticipated by analysts. This is up from a net loss of $3.58 billion or $2.03 adjusted earnings per share reported at the same time last year.

Macy's raised its guidance for the full year from between $19.75 and $20.75 billion to between $21.73 and $22.23 billion in net sales. These estimates are based on the strong first quarter coupled with optimism for the recovering economy. The company expects earnings per share to come in between $1.71 to $2.12, up from prior estimates between $0.40 to $0.90. Macy's reported 4.6 million new customers for the first quarter, 47% of whom visited through the digital channel.

Macy's, Inc. (M) shares closed at $18.20, relatively unchanged for the week.

Walmart Reports Earnings

Walmart Inc. (WMT) released its first quarter earnings report on Tuesday, May 18. The retail giant's revenue exceeded analysts' expectations.

Walmart reported revenue of $138.3 billion for the first quarter. This was up 2.7% from $134.6 billion reported in the same quarter last year and exceeded analysts' expectations of $132.0 billion.

"In the U.S., customers clearly want to get out and shop," said Walmart's President and CEO Doug McMillon. "We have a strong position as our store environment improves and eCommerce continues to grow. Stimulus in the U.S. had an impact, and the second half has more uncertainty than a typical year. We anticipate continued pent-up demand throughout 2021."

Walmart reported earnings of $2.73 billion or $0.97 per share for the quarter. This was down from earnings of $3.99 billion or $1.41 per share reported last year at this time.

Walmart's U.S. comparable store sales increased 6% for the quarter, with eCommerce sales contributing 3.6% to comparable store sales. Walmart's U.S. eCommerce sales were up 37%. Sam's Club, owned and operated by Walmart, saw comparable sales increase 7.2%, while eCommerce sales grew 47%.

Walmart Inc. (WMT) shares ended at $141.75, up 1.3% for the week.

The Dow started the week at 34,375 and closed at 34,208 on 5/21. The S&P 500 started the week at 4,170 and closed at 4,156. The NASDAQ started the week at 13,369 and closed at 13,471.

Treasury Yields Decline

Yields on U.S. Treasurys dropped Thursday after comments released from the Federal Reserve suggested it may taper bond purchases. The latest weekly jobless claims data indicate potential progress in the economic recovery, which would support Fed tapering.

On Wednesday, May 19, the Federal Market Open Committee released the minutes from its most recent meeting. Participants indicated a speedy economic recovery could lead to a taper in bond purchases. The Fed currently purchases at least $80 billion in Treasurys and $40 billion in mortgage-backed securities each month, with the total $7.9 trillion held in bonds at almost double the amount held before the pandemic.

"A number of participants suggested that if the economy continued to make rapid progress toward the Committee's goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases," the meeting summary said. However, "various participants" believed it would "likely be some time until the economy had made substantial further progress toward the Committee's maximum-employment and price-stability goals relative to the conditions prevailing in December 2020 when the Committee first provided its guidance for asset purchases."

The 10-year Treasury note opened the week at 1.626%, reached 1.695% on Wednesday, but fell to 1.612% on Friday. The 30-year Treasury bond opened the week at 2.347% and reached as high as 2.404% on Wednesday.

Jobless claims fell to 444,000 for the week ended May 15, down from 478,000 reported by the Labor Department the week before. Jobless claims totaled 2.3 million at this time last year. Continuing claims were up 111,000 this week, for a total of 3.75 million.

"The April jobs report was disappointing," wrote Gus Faucher, PNC chief economist. "But the steady decline in initial unemployment insurance claims over the past few months, as well as other UI data, suggest that the April report understated the improvement in the labor market."

The 10-year Treasury note yield closed at 1.62% on 5/21, while the 30-year Treasury bond yield was 2.32%.

30-Year Mortgage Rates Reach 3%

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, May 20. The report showed an increase in rates since last week.

The 30-year fixed rate mortgage averaged 3.00%, up from 2.94% last week. At this time last year, the 30-year fixed rate mortgage averaged 3.24%.

This week, the 15-year fixed rate mortgage averaged 2.29%, up from 2.26% last week. Last year at this time, the 15-year fixed rate mortgage averaged 2.70%.

"After a run up over the first few months of the year, rates have paused and hovered around three percent since March," said Freddie Mac's Chief Economist Sam Khater. "Despite this favorable rate climate, there remains a shortage of homes for sale. The lack of housing supply has been compounded by labor disruptions and expensive building materials that are driving up the cost of new housing, making it difficult for homebuyers to find homes to purchase."

Based on published national averages, the national average savings rate was 0.06% as of 5/17. The one-year CD averaged 0.14%.

Published May 21, 2021

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