Finances

CVS Health Corporation (CVS) reported quarterly earnings on Wednesday, August 2. The drug store company beat quarterly profit expectations, causing its stock to rise almost 4% after the release of the report.

Revenue for the quarter came in at $88.92 billion, up 10.3% from $80.64 billion at this time last year. This surpassed analysts' expected revenue of $86.41 billion.

"Our diversified business model delivered strong results this quarter," said CVS Health CEO, Karen S. Lynch. "We continue to execute on our strategy to expand access to health services across our care delivery channels and strengthen our engagement with consumers to improve their health and well-being."

The company reported a net income of $1.91 billion or $1.48 per adjusted share. This is down from net income of $3.04 billion or $2.29 per adjusted share reported at this time last year.

During the quarter, the company saw revenue growth across all segments. CVS's Health Care Benefits segment grew 17.6% to $26.75 billion compared to one year ago and medical membership increased by 121,000 members to 25.6 million. Health Services revenue increased 7.6% to $46.22 billion. Pharmacy & Consumer Wellness revenue also rose by 7.6% to $28.78 billion compared to a year ago. CVS revised its full-year 2023 guidance and expects to earn between $6.53 to $6.75 per diluted share.

CVS Health Corporation (CVS) shares ended the week at $72.89, down 3% for the week.

Starbucks Brews Strong Earnings

Starbucks Corporation (SBUX) reported its quarterly financial results on Tuesday, August 1. While the coffeehouse chain reported increased revenue and earnings, its shares declined by 1% following the release of the report.

The company reported third-quarter net revenue of $9.17 billion, up 12.5% from $8.15 billion reported in the same quarter last year. This fell below analysts' expected revenue of $9.29 billion.

"Our strong third quarter results point to all-around momentum in the business, and reflect the significant progress we are making against our Reinvention Plan. Our results were also amplified by the distinctive competitive advantages that set us apart in the market," said Starbucks CEO, Laxman Narasimhan. "Starbucks is an iconic, durable brand and I am confident in the multiple paths available for the company to drive significant growth and margin improvement, which position us well to create outsized long-term shareholder value."

Starbucks' net income for the quarter rose to $1.14 billion or $0.99 per adjusted share. This was up from $912.9 million or $0.79 per adjusted share in the same quarter last year.

Starbucks opened 588 new stores in the third quarter and ended the period with 37,222 stores in total. Comparable sales in North America increased by 7% and international comparable sales increased by 24%, which were both attributed to an increase in average ticket price and comparable transactions. Active U.S. Rewards Membership reached 31.4 million in the third quarter, up 15% year-over-year. The company declared a quarterly cash dividend of $0.53 per share. The cash dividend will be due to the stockholders of record on August 11, 2023, with an anticipated payment date of August 25, 2023.

Starbucks Corporation (SBUX) shares ended the week at $100.68, relatively unchanged for the week.

Cheesecake Factory Serves Up Earnings

Cheesecake Factory, Inc. (CAKE) released its second quarter earnings report on Wednesday, August 2. While the restaurant company reported increased revenue and income for the quarter, shares dropped nearly 1.5% following the release of the report.

Cheesecake Factory posted quarterly revenue of $866.2 million. This was up from $832.6 million reported at the same time last year and below analysts' expectations of $882.1 million.

"We delivered another quarter of comparable sales growth across our portfolio of concepts, with comparable sales at The Cheesecake Factory restaurants continuing to outpace the industry relative to 2019," said Cheesecake Factory CEO, David Overton. "Our experienced operators drove solid operational execution within our restaurants to deliver year-over-year improvements in labor productivity and hourly staff and manager retention. We remain intently focused on accelerating our unit growth and achieving our long-term unit growth objectives, despite ongoing construction and permitting challenges."

For the second quarter, Cheesecake Factory reported net income of $42.7 million or $0.87 per adjusted share. This is up from $25.7 million or $0.50 per adjusted share reported at this time last year.

Cheesecake Factory's comparable restaurant sales in the second quarter increased 1.5% year-over-year. The company expects to open as many as 20 new restaurants in 2023 consisting of six Cheesecake Factory restaurants, five North Italia restaurants, three Flower Child locations and as many as nine FRC restaurants. Currently, the company has a total of 321 restaurants open. The company's Board of Directors declared a quarterly dividend of $0.27 per share payable on August 29, 2023, for stockholders of record of August 16, 2023.

Cheesecake Factory, Inc. (CAKE) shares closed at $36.37, down 2% for the week.

The Dow started the week of 7/31 at 35,466 and closed at 35,066. The S&P 500 started the week at 4,585 and closed at 4,478. The NASDAQ started the week at 14,338 and closed at 13,909.

U.S. Treasury yields rose midweek as investors assessed a downgrade to the U.S. government's credit rating. Yields pared back slightly on Friday following the latest labor market data which showed gradual cooling off.

On Tuesday, Fitch Ratings, a leading provider of credit ratings, commentary and research for global capital markets, downgraded the credit rating for the U.S. government from AAA to AA+. While the U.S. still holds the second highest possible rating, Fitch attributes the downgrade to the government's political standoffs and last-minute fiscal and debt resolutions.

"[Fitch's downgrade] will likely not have an impact on U.S. government debt or markets broadly," said Chief Fixed-income Strategist for LPL Financial, Lawrence Gillum. "The U.S. remains the safe haven during times of market stress and the downgrade will likely not change that."

The benchmark 10-year Treasury note yield opened the week of July 31 at 3.95% and traded as high as 4.20% on Thursday. The 30-year Treasury bond opened the week at 4.01% and traded as high as 4.32% on Thursday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment increased by 6,000 to 227,000 for the week ending July 29. Continuing unemployment claims rose by 21,000 to 1.70 million. On Friday, the July jobs report announced that 187,000 positions were added, below economists' expectations of a 200,000 gain.

"The claims data today offers further evidence that the spike in claims to 18-month highs in the middle of June was more likely a statistical quirk than a sign of legitimate weakening in labor market conditions," said Economist at Jefferies, Thomas Simons. "Job growth is likely going to continue to slow from here, but not for lack of demand. The lack of supply of available labor makes it increasingly difficult to find to fill open positions."

The 10-year Treasury note yield finished the week of 7/31 at 4.05%, while the 30-year Treasury note yield finished the week at 4.20%.

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, August 3. The survey showed another week of increased mortgage rates.

This week, the 30-year fixed rate mortgage averaged 6.90%, up from last week's average of 6.81%. Last year at this time, the 30-year fixed rate mortgage averaged 4.99%.

The 15-year fixed rate mortgage averaged 6.25% this week, up from 6.11% last week. During the same week last year, the 15-year fixed rate mortgage averaged 4.26%.

"The combination of upbeat economic data and the U.S. government credit rating downgrade caused mortgage rates to rise this week," said Freddie Mac's Chief Economist, Sam Khater. "Despite higher rates and lower purchase demand, home prices have increased due to very low unsold inventory."

Based on published national averages, the savings rate was 0.42% as of 7/17. The one-year CD averaged 1.72%.

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