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Monday December 18, 2017



Adobe Reports Record Revenue and Income

Adobe Systems, Inc. (ADBE) announced its fourth quarter and full-year revenue on Thursday, December 15. The maker of Photoshop reported record revenue and net income for the quarter.

The company's revenue grew 23% during the quarter to $1.61 billion, topping estimates of $1.58 billion. For the full year revenue was $5.85 billion.

"Adobe's market-leading digital media and digital marketing solutions are revolutionizing how customers design and deliver exceptional digital experiences," said Adobe President and CEO Shantanu Narayen. "We enter 2017 with significant market momentum and strong technology tailwinds."

Adobe earned $0.90 per share on an adjusted basis, higher than the expected $0.86 per share. Annual earnings for the fiscal year were $3.01 per share.

Adobe has focused in recent years on its Creative cloud business, which has allowed it to move its popular products such as Photoshop to an online subscription. The cloud segment's revenues rose 33% this past quarter to $886 million. Selling its software on a subscription basis has allowed Adobe to post double-digit revenue growth for six consecutive quarters. For the first quarter of fiscal 2017, the company expects revenue of $1.63 billion.

Adobe Systems, Inc. (ADBE) shares ended the week at $103.52, down 1% for the week.

Oracle's Cloud Business Continues to Grow

Oracle Corporation (ORCL) announced its second quarter results on Thursday, December 15. The multinational computer technology company reported lower revenue than expected, partly due to modest growth in its cloud computing business.

The company reported revenue of $9.04 billion during the quarter, essentially flat in terms of growth compared to the same period last year. Expectations were for slightly higher revenue of $9.11 billion.

"Oracle has now passed salesforce.com and become number one in SaaS cloud applications sales to customers with over 1,000 employees according to the latest IDC report," said Oracle CEO Mark Hurd. "In other words, this year we are selling more enterprise SaaS than any cloud services provider in the world."

Oracle reported earnings per share of $0.61 during the quarter. This just came in ahead of estimates of $0.60 per share.

Oracle has invested heavily in beefing up its cloud computing business recently, acquiring NetSuite for $9.3 billion in November of this year. To Oracle's credit, its cloud computing business has experienced significant growth, rising 81.4% this past quarter to $878 million. This pace was not as strong as expected, however, falling below the $879.5 million estimate. Oracle Executive Chairman Larry Ellison has publicly predicted that the company's cloud computing business will eclipse market-leader Amazon in the future.

Oracle Corporation (ORCL) shares ended the week at $39.10, down 3% for the week.

Scholastic's Profits Rise

Scholastic Corporation (SCHL) announced its second quarter results on Thursday, December 15. The children's book publisher missed on revenue but topped earnings expectations.

The company reported that revenue increased 4% during the quarter to $623.1 million. This fell below Wall Street's estimated $628.6 million.

"In the U.S., our plan for level revenue and higher profits in book fairs is on track for the full-year," said Scholastic Corporation Chairman, President and CEO Richard Robinson. "In book clubs, where we reduced catalog mailings in the quarter, revenues were lower than expected, although we were successful in trimming costs to protect profitability. We are now expanding mailings of higher performing catalogs and anticipate improved club revenue in the second half of the fiscal year."

On an adjusted basis Scholastic earned $1.99 per share during the quarter. This was $0.07 better than the expected $1.92.

Scholastic, which holds the perpetual U.S. publishing rights to the popular Harry Potter book series, benefitted from new Harry Potter publishing that coincided with the new spinoff film franchise Fantastic Beasts and Where to Find Them. The new Harry Potter material helped Scholastic conjure up strong revenue growth in the U.S. and Canada. Scholastic's children's book publishing segment saw revenue increase 5% to $432.5 million.

Scholastic Corporation (SCHL) shares ended the week at $48.71, up 6.3% for the week.

The Dow started the week of 12/12 at 19,770 and closed at 19,843 on 12/16. The S&P 500 started the week at 2,259 and closed at 2,258. The NASDAQ started the week at 5,428 and closed at 5,437.

Yields Fall After Fed Rate Announcement

Treasury yields ended the week down from the highs they reached on Wednesday after the Federal Reserve raised interest rates at its December policy meeting. Though the Fed's rate hike showed confidence in the U.S. economy, housing start data for November produced a gloomier picture.

The Fed's announcement of a 25 basis point interest rate hike on Wednesday was expected. What surprised many analysts and investors was the belief of many Fed members that there could be three rate hikes in 2017 instead of the expected two.

On Thursday, the benchmark yield on the 10-year note rose 11 basis points to 2.64% before closing at 2.60%, a high for the week. As the news of Fed members' rate hike projections sunk in, the 10-year yield began to fall, dropping 3 basis points to 2.57% during early Friday trading. Yields move inversely to prices, so as they fall, prices rise.

"The bond market's reaction is based on what the [rate forecasts] show," said Investec chief economist Philip Shaw. "But this has not been a good guide before, so we need to get some perspective."

Though the Fed seems confident enough in the U.S. economy to predict three rate increases next year, data released Friday showed housing starts in November were less than expected. New housing projects in the U.S. fell 18.7% in November to 1.09 million units, less than an expected 1.23 million unit rate.

The 10-year Treasury note yield finished the week of 12/12 at 2.60%, while the 30-year Treasury note yield was 3.18%.

Mortgage Rates' Rise Reaches Seventh Week

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, December 15. Mortgage rates rose for the seventh consecutive week, though this week's rate survey was completed prior to the Federal Reserve's decision to raise interest rates.

The 30-year fixed rate mortgage averaged 4.16% this week. This is up from 4.13% last week. During the same time last year, the 30-year fixed rate mortgage averaged 3.97%

This week the 15-year fixed rate mortgage averaged 3.37%, up from 3.36% last week. At this time last year, the 15-year fixed rate mortgage averaged 3.22%.

"This week's mortgage rate survey was completed prior to the FOMC announcement," said Sean Becketti, Chief Economist at Freddie Mac. "The 30-year mortgage rate rose 3 basis points on the week to 4.16%. The MBA's Applications Survey posted drops in both refinance and purchase applications, registering the impact of recent mortgage rate increases. If rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017."

Based on published national averages, the money market account finished the week of 12/12 at 0.51%. The 1-year CD finished at 1.17%.

Published December 16, 2016
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