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Wednesday July 6, 2022



American Airlines Reports Revenue Lift

American Airlines Group Inc. (AAL) posted its second quarter earnings report on Thursday, July 22. The Texas-based airline reported lower losses than expected.

The company reported revenue of $7.48 billion for the second quarter, up from $1.62 billion during the same quarter last year. Revenue exceeded analysts' expectations of $7.3 billion.

"We have taken a number of steps to solidify our business through our Green Flag Plan and it shows in our second-quarter results," said American Airlines' CEO Doug Parker. "We have reshaped our network, simplified our fleet and made our cost structure more efficient, all to create an airline that will outperform competitors and deliver for customers. The green flag has dropped and we are ready thanks to the tremendous efforts and dedication of the American Airlines team."

The company reported a net loss of $1.09 billion or $1.69 per share for the quarter. This was an improvement over the net loss of $3.35 billion or $7.82 per share reported at the same time last year.

American Airlines announced plans to pay off $15 billion of its $48 billion in debt by 2025. The company received $1 billion in aid over the quarter from the federal government. American Airlines expects revenue for its third quarter to be down 20% from third quarter numbers reported pre-pandemic in 2019.

American Airlines Group Inc. (AAL) shares ended the week at $21.20, up 12.6% for the week.

IBM Posts Earnings

International Business Machines Corp. (IBM) released its second quarter earnings report on Monday, July 19. The technology company reported revenue that exceeded Wall Street's expectations, causing shares to rise 4% in response.

IBM reported revenue of $18.75 billion, a 3% year-over-year increase from $18.12 billion in revenue the same quarter last year. This exceeded analysts' expected revenue of $18.29 billion.

"In the second quarter client adoption of our hybrid cloud platform contributed to strong performance in Global Business Services and software and drove improved overall revenue growth," said IBM's CEO Arvind Krishna. "At the same time, we continued to help clients infuse our AI-based technology offerings into their core business workflows. We are pleased with our progress and we remain on track to deliver full-year revenue growth and meet our cash flow objective."

The company reported second quarter net income of $1.33 billion or $1.47 per share. Net income was $1.36 billion or $1.52 per share in the same quarter last year.

IBM spent $1.75 billion over the quarter in acquisitions. The company is in the process of acquiring myInvenio, which will provide businesses with data to help identify areas where artificial intelligence can provide automated services. The Global Business Services segment, which includes consulting work, saw revenues of $4.3 billion, which is up 11.6% in total and up 16% in the area of consulting.

International Business Machines Corp. (IBM) shares ended the week at $141.34, up 3.6% for the week.

Domino's Delivers Fresh Earnings

Domino's Pizza, Inc. (DPZ) released its latest quarterly earnings on Thursday, July 22. The largest pizza company in the world based on global retail sales reported strong sales growth for the quarter.

The company's revenue reached $1.03 billion for the quarter. This was up from $920.02 million during the same quarter last year.

"I am very pleased with our strong global retail sales and store growth momentum during the second quarter, which demonstrated the power of our investments in innovation, our focus on food quality and superior service, and our dynamic franchisees who are dedicated to serving their local neighborhoods," said Domino's CEO Ritch Allison. "Given our current operating environment, we are watching our two-year sales trends anchored to pre-Covid fiscal 2019 results."

Net income came in at $116.62 million. This fell below the $118.67 million in net income last year at this time.

Domino's reported a 21.6% increase in global sales for the quarter. The company's same store sales increased 3.5% from the same quarter last year. Internationally, same store sales grew 13.9%. Over a two-year period, same store sales increased 19.6% in the United States. International same store sales increased 15.2% from 2019.

Domino's Pizza, Inc. (DPZ) shares ended the week at $525.45, up 8.7% for the week.

The Dow started the week at 34,528 and closed at 35,062 on 7/23. The S&P 500 started the week at 4,296 and closed at 4,412. The NASDAQ started the week at 14,236 and closed at 14,837.

Yields Fluctuate on Release of Jobs Report

Yields on U.S. Treasurys fell Thursday after initial jobless claims unexpectedly increased. However, yields recovered to week's highs by Friday morning.

On Thursday, the U.S. Department of Labor released its unemployment report for the week ending July 17, revealing higher claims than expected. Initial unemployment claims came in at 419,000 while economists expected claims of 350,000. Last week's numbers were revised upward to 368,000 filings. The four-week moving average increased to 385,250.

"We need to filter the noise in the data points and not lose sight of the big picture, which is that the trend line continues to head lower," said Commonwealth Financial Network senior global investment analyst Anu Gaggar. "There has been some distortion in data and in consensus expectations around automakers' annual retooling shutdowns that will work its way through the system in the upcoming weeks."

The benchmark 10-year Treasury note yield hit a low of 1.133% on Tuesday after opening the week at 1.294%. The 30-year Treasury bond yield dropped to 1.776% on Tuesday after opening the week at 1.922%.

Despite the rise in initial jobless claims, the report revealed a decrease in continuing claims to 3.24 million. This is the lowest level since March of last year when many businesses were ordered to close. However, the decrease missed analysts' expectations of 3.1 million.

"The total number of individuals on some form of unemployment assistance remains historically elevated at nearly 12.6 million," said Mark Hamrick, senior economic analyst at Bankrate. "But that total should decline sharply in a couple of months as the federal pandemic programs expire."

The 10-year Treasury note yield closed at 1.28% on 7/23, while the 30-year Treasury bond yield was 1.92%.

Mortgage Rates Decline

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, July 22. The report showed a decrease in mortgage rates from the previous week.

The 30-year fixed rate mortgage averaged 2.78%, down from 2.88% last week. Last year at this time, the 30-year fixed rate mortgage averaged 3.01%.

This week, the 15-year fixed rate mortgage averaged 2.12%, down from last week's average of 2.22%. During the same time last year, the 15-year fixed rate mortgage averaged 2.54%.

"Concerns about the Delta variant, and the overall trajectory of the pandemic, are undoubtedly affecting economic growth," said Freddie Mac's Chief Economist Sam Khater. "While the economy continues to mend, Treasury yields have decreased, and mortgage rates have followed suit. Unfortunately, many homebuyers are unable to take advantage of low rates due to low inventory and high prices. However, these declining rates provide yet another opportunity for homeowners to save money on their monthly mortgage payment through a refinance."

Based on published national averages, the savings rate was 0.06% as of 7/19. The one-year CD averaged 0.14%.

Published July 23, 2021
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