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Thursday April 18, 2024



Alphabet Posts Quarterly Results

Alphabet Inc. (GOOGL) released its latest quarterly and full-year earnings on Tuesday, January 30. Despite surpassing revenue expectations, the tech titan's shares fell more than 6% following a shortfall in ad revenue.

The company reported revenue of $86.31 billion, up 13% from $76.05 billion during the same quarter last year. Revenue surpassed analysts' expected quarterly revenue of $85.33 billion. Full-year revenue rose to $307.39 billion, up from $282.84 billion in 2022.

"We are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud," said Alphabet CEO, Sundar Pichai. "Each of these is already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come."

Alphabet posted net income of $20.69 billion or $1.64 per adjusted share for the fourth quarter. This was up from $13.62 billion or $1.05 per adjusted share during the same time last year. For the full year, Alphabet reported net income of $73.80 billion, up from $59.97 billion last year.

Alphabet, the parent company of Google, reported Google advertising revenue of $65.52 billion for the quarter, up from $59.04 billion during the same quarter last year but missed expectations of $65.94 billion. YouTube advertising revenue increased to $9.20 billion, compared to $7.96 billion at the same time last year. Google Cloud revenue came in at $9.19 billion, up from $7.32 billion one year ago. Operating income for the quarter was $23.70 billion, up from $18.16 billion one year ago. The company spent $2.1 billion in the fiscal year related to employee severance and related expenses.

Alphabet Inc. (GOOGL) shares ended the week at $143.54, down 6.6% for the week.

General Motors Drives Up Earnings

General Motors Company (GM) reported fourth quarter and full-year earnings on Tuesday, January 30. The automaker reported better-than-expected revenue for the quarter resulting in its stock rising more than 6%.

General Motors announced revenue of $42.98 billion for the quarter, a slight decrease from $43.11 billion at this time last year but exceeded analysts' estimates of $38.81 billion. Revenue for the full year reached $171.84 billion, up almost 10% from $156.74 billion one year ago.

"As we begin 2024, I believe GM is well positioned for a year of strong financial performance that will build on everything we accomplished — and learned — in 2023," said General Motors CEO, Mary Barra in a letter to shareholders. "Consensus is growing that the U.S. economy, the job market and auto sales will continue to be resilient, and at GM, we expect healthy industry sales of about 16 million units with the mix of EVs continuing to grow."

General Motors reported quarterly net income of $2.10 billion or $1.59 per adjusted share. This was up from $2.00 billion or $1.39 per adjusted share during the same quarter last year. Full-year net income came in at $10.13 billion or $7.32 per adjusted share, up from $9.93 billion or $6.13 per adjusted share one year ago.

The automotive manufacturing company's North America segment saw fourth quarter revenue increase to $2.01 billion, down from $3.65 billion one year ago. General Motors' international segment reported revenue of $269 million, down from $272 million the prior year. The company announced that it sold 2.6 million vehicles in the U.S. in 2023, a 14% increase year-over-year. General Motors expects full-year fiscal 2024 income to reach between $9.8 billion and $11.2 billion.

General Motors Company (GM) shares ended the week at $38.91, up 10.5% for the week.

Starbucks Brews Earnings

Starbucks Corporation (SBUX) reported its first quarter financial results on Tuesday, January 30. Despite missing first quarter revenue expectations, the coffeehouse chain's shares increased almost 4% following the release of the report.

The company reported first quarter net revenue of $9.43 billion, up 8% from $8.71 billion reported in the same quarter last year. This fell below analysts' expected revenue of $9.59 billion.

"Our first quarter performance was strong on many measures. Of note was the unwavering commitment of our most loyal customers, the growth in rewards members, tender and spend per member," said Starbucks CEO, Laxman Narasimhan. "Despite headwinds, our brand is very strong, and that coupled with innovation and a relentless focus on our green apron partners form long-term differentiators, along with focused execution on Triple Shot Reinvention, will drive balanced and attractive earnings growth."

Starbucks' net income for the quarter rose to $1.02 billion or $0.90 per adjusted share. This was up from $855.2 million or $0.74 per adjusted share in the same quarter last year.

Starbucks opened 549 net new stores in the first quarter and ended the period with 38,587 stores in total. Comparable sales in North America increased by 5%, primarily attributed to an increase in average ticket price. International comparable sales increased by 7%, which was attributed to an increase in comparable transactions. Active U.S. Rewards Membership reached 34.3 million in the first quarter, up 13% year-over-year. The company declared a quarterly cash dividend of $0.57 per share. The cash dividend will be due to the stockholders of record on February 9, 2024, with an anticipated payment date of February 23, 2024.

Starbucks Corporation (SBUX) shares ended the week at $92.99, relatively unchanged for the week.

The Dow started the week of 1/29 at 38,116 and closed at 38,654. The S&P 500 started the week at 4,893 and closed at 4,959. The NASDAQ started the week at 15,471 and closed at 15,629.

Treasury Yields Shift

U.S. Treasury yields fell earlier in the week as investors assessed the Federal Reserve's first interest rate decision for 2024. Yields inched back up Friday following the release of jobless claims data showing unemployment rates rising to the highest levels seen in three months.

On Wednesday, the Federal Reserve announced that it was holding interest rates at its current levels of 5.25% to 5.50%. The Fed indicated a wait and see approach regarding economic indicators, leaving interest rates unchanged in the meantime.

"The Fed is certainly pushing back on the notion of a March interest rate cut, dashing investors' hopes again, but keeping options open and remaining non-committal as a central bank does," said chief financial analyst at Bankrate, Greg McBride. "Interest rates took the elevator going up but are going to take the stairs coming down."

The benchmark 10-year Treasury note yield opened the week of January 29 at 4.14% and traded as low as 3.81% on Thursday. The 30-year Treasury bond opened the week at 4.37% and traded as low as 4.06% on Thursday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment increased by 9,000 to 224,000 for the week ended January 27. Continuing unemployment claims rose by 70,000, reaching 1.9 million.

"We may see a modest rise in claims as labor market conditions ease further," said lead U.S. economist at Oxford Economics, Michael Pearce. "However, we do not expect a sharp rise in claims as we look for job growth to slow but remain positive."

The 10-year Treasury note yield finished the week of 1/29 at 4.02%, while the 30-year Treasury note yield finished the week at 4.22%.

Mortgage Rates Decrease

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, February 1. The survey showed mortgage rates fell following the Federal Reserve's decision to hold interest rates steady.

This week, the 30-year fixed rate mortgage averaged 6.63%, down from last week's average of 6.69%. Last year at this time, the 30-year fixed rate mortgage averaged 6.09%.

The 15-year fixed rate mortgage averaged 5.94% this week, down from last week's 5.96%. During the same week last year, the 15-year fixed rate mortgage averaged 5.14%.

"Although affordability continues to impact homeownership, the combination of a solid economy, strong demographics and lower mortgage rates are setting the stage for a more robust housing market," said Freddie Mac's Chief Economist, Sam Khater. "Mortgage rates have been stable for nearly two months, but with continued deceleration in inflation we expect rates to decline further. The economy continues to outperform due to solid job and income growth, while household formation is increasing at rates above pre-pandemic levels. These favorable factors should provide strong fundamental support to the market in the months ahead."

Based on published national averages, the savings rate was 0.47% as of 1/16. The one-year CD averaged 1.86%.

Editor's Note: The publicly available financial information is offered as a helpful and informative service to our friends. This article is not an endorsement of any company, product or service.

Published February 2, 2024

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