Quotes at time of story, top stories today:
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Existing Home Sales Top 5.00 mln SAAR for the First Time Since October
Existing home sales increased to 5.04 mln SAAR in June from an upwardly revised 4.91 mln SAAR (from 4.89 mln SAAR) in May. The Briefing.com consensus expected existing home sales to increase to 5.00 mln SAAR. This was the first time sales exceeded 5.00 mln SAAR since October 2013. Still, sales are down 2.3% year-over-year. Distressed sales accounted for 11% of June sales, down from 15% a year ago. Investor sales, however, have not gone away.
Sales to all-cash buyers accounted for 32% of existing home sales in June, up from 31% in June 2013. First-time homebuyers accounted for 28% of all sales, which was the same rate as June 2013. Without an acceleration in first-time buyers, existing home sales growth will likely remain tepid. Inventory levels improved in June, increasing 2.2% to 2.30 mln from 2.25 mln in May. Unfortunately, that still represents only 5.5 months' supply at the current sales pace. That will continue to put upward pressure on prices and prevent first-time homebuyers from affording a home. The median sales price increased 4.3% y/y to $223,300 from $214,000.
Higher Energy Costs Drive Overall Consumer Price Growth
- Consumer prices increased 0.3% in June, down from a 0.4% increase in May. The Briefing.com consensus expected the CPI to increase 0.3%. As expected from the June PPI report, a strong increase in energy prices, up 1.6% in June, was the main catalyst for the overall increase in consumer prices. That was the largest increase in monthly energy costs since December. Gasoline costs rose 3.3% after increasing 0.7% in May. Food prices moderated a bit in June. Prices increased only 0.1% after growing by at least 0.4% per month since February. Excluding food and energy, core CPI increased 0.1% in June after increasing 0.3% in May. The consensus expected core prices to increase 0.2%.
- There were no outliers in the core data and the slowdown in core price growth can be chalked up to normal volatility. The larger-than-normal increase in May was simply offset by slower-than-normal growth in June. Year-over-year, core CPI increased 1.9%. That was down from a 2.0% y/y increase in May, but slightly higher than the 1.7% yearly increase that the index has averaged over the last five years. Even with the slight uptick in core pricing trends, price growth remains below the FOMC's implied target rate.
Texas Instruments shares little changed following beat on earnings
- Texas Instruements (TXN $49.26 +0.09) reported second quarter GAAP earnings of $0.62 per share, which is higher than expected, while revenues rose 8.0% year/year to $3.29 billion which is in line with estimates. The company issued guidance for the third quarter with EPS of GAAP EPS of $0.66-0.76 which is line with estimates and revenues of $3.31-3.59 billion which is in line with estimates "Revenue for the quarter came in just above the middle of our expected range and earnings were near the top of the range, marking another quarter of solid execution.
- "We delivered 8 percent year-over-year revenue growth, or 13 percent when legacy wireless revenue is excluded. Analog and Embedded Processing comprised 82 percent of second-quarter revenue, 4 points higher than a year ago"
- Gross margin of 57.1% (ests ~56.3%), a new record, reflects the quality of our Analog and Embedded Processing portfolio and the efficiency of our manufacturing strategy.
Ultra Clean Holdings shares fall 6% following downside guidance
- Ultra Clean Holdings (UCTT $8.60 -0.56) reported second quarter earnings of $0.23 per share, excluding non-recurring items, which is higher than expected, while revenues rose 20.5% year/year to $132.7 million which is higher than expected. The company issued guidance for the third quarter with EPS of $0.13-0.16, excluding non-recurring items which is below estimates and revenues of $115-120 million which is below estimates. Semiconductor equipment revenue was 76.6% of total revenue and revenue outside the U.S. accounted for 32.8% of total revenue for the second quarter of 2014. Gross margin for the second quarter of 2014 was 15.9%, compared to 16.2% for the previous quarter and 14.6% for the same period a year ago.
Canadian Natl Rail shares little changed following higher than expected earnings
- Canadian Natl Rail (CNI) reported second quarter earnings of CAD$1.03 per share, which is higher than expected, whle revenues rose 16.9% year/year to CAD$3.12 billion which is line with estimates. The increase in revenues was mainly attributable to higher freight volumes due to a record Canadian grain crop, strong energy markets and market share gains, particularly in intermodal; the positive translation impact of the weaker Canadian dollar on U.S.-dollar-denominated revenues; and freight rate increases. Revenues in the second quarter of 2014 also benefited from increased volumes as the Company recovered from winter weather-related challenges that delayed shipments in the first quarter of 2014.
- Carloadings for the second quarter rose 11 per cent to 1,463 thousand. Revenue ton-miles increased by 14 per cent over the year-earlier quarter. Rail freight revenue per revenue ton-mile increased by four per cent over the year-earlier period, driven by the positive translation impact of the weaker Canadian dollar and freight rate increases, partly offset by an increase in the average length of haul.Canadian Natl Rail revises 2014 outlook The company expects to deliver solid double-digit EPS growth in 2014 over adjusted diluted 2013 EPS of CAD$3.06, compared with its earlier forecast of aiming for double-digit 2014 EPS growth.
Chipotle Mexican Grill soar 10% following beat on earnings and strong comps
- Chipotle Mexican Grill (CMG $648.25 +58.32) reported second quarter earnings of $3.50 per share, which is higher than expected, while revenues rose 28.6% year/year to $1.05 billion which is higher than expected. Chipotle Mexican Grill reports Q2 comps of 17.3% which is well ahead of expectations. The company raised fiscal year 2014 comp guidance to mid teens guidance from prior guidance of high single digit growth. The growth in revenue was driven by a 17.3% increase in comparable restaurant sales and from new restaurants not in the comparable base. Comparable restaurant sales growth was driven primarily by increased traffic and to a lesser extent from an increase in average check, which includes the benefit of the nationwide menu price increases that were fully rolled out by the end of the quarter. "We opened 45 new restaurants during the quarter, bringing the total restaurant count to 1,681."
- Food costs were 34.6% of revenue, an increase of 150 basis points, driven by increased prices for beef, avocados, and dairy, partially offset by the menu price increase and lower tomatillo prices. Restaurant level operating margin was 27.3% in the quarter, a decrease of 30 basis points from the second quarter of 2013. The decrease was primarily driven by higher food and marketing costs, partially offset by favorable sales leverage in labor and occupancy costs. FY14 Guidance: 180 -- 195 new restaurant openings Mid-teens comparable restaurant sales increasesAn effective full year tax rate of approximately 39.1%.
NetFlix shares rise 1% following in line earnings/guidance
- Netflix (NFLX $456.67 +4.72) reported second quarter earnings of $1.15 per share, in-line with the Capital IQ Consensus Estimate of $1.15; revenues rose 25.4% year/year to $1.34 billion which is in line with estimates. The company issued guidance for the third quarter with EPS of $0.89 which is below estimates. "In September, we'll be launching Netflix in Germany, France, Austria, Switzerland, Belgium, and Luxembourg. This launch into markets with over 60 million broadband households will significantly increase our European presence and raise our current international addressable market to over 180 million broadband households, or 2x the number of current U.S. broadband households".
- "Our European expansion this quarter will add new expenses to the segment, so we expect a consolidated contribution loss of ($42) million for the international segment in Q3. Even after our upcoming expansion in Europe, we'll only address about one-third (271 million of 728 million ) of current global broadband households, providing a great opportunity to build on our international success beyond 2014". "We expect ARPU to rise slowly as members at the new prices grow as a percentage of total membership. There was minimal impact on membership growth from this price change"."We are introducing physical gift cards in select stores in the U.S., Canada, Mexico, and Germany starting later this year. In mature markets, gift cards will extend our brand presence and make it easier to access Netflix. In newer markets, gift cards help build the brand and provide an easier alternative for consumers to join Netflix in markets with developing online payments"."The Netflix app for Google's Android TV platform will appear on TVs from Sony, Sharp, and others in the coming months".