Finances

The Home Depot, Inc. (HD) released its second quarter results on Tuesday, August 15. After reporting better-than-expected earnings, the company's shares rose nearly 2% following the release.

The company reported revenue of $42.92 billion, down 2% from $43.79 billion during the same quarter last year. Revenue was slightly ahead of analysts' expectations of $42.23 billion.

"We were pleased with our performance in the second quarter," said Home Depot CEO, Ted Decker. "We remain very positive on the medium-to-long term outlook for home improvement and our ability to grow share in a large and fragmented market. Our associates did an outstanding job delivering value and service for our customers throughout the quarter and I would like to thank them for their dedication and hard work."

Home Depot reported quarterly net earnings of $4.66 billion. This is down almost 10% from net earnings of $5.17 billion during the same quarter last year.

The Atlanta, Georgia-based home improvement retailer reported U.S. comparable store sales decreased 2% year-over-year, better than analysts' expectations of a 3.9% decrease. The company also reported a 1.8% decrease in customer transactions during the quarter. Average consumer spending per ticket remained nearly unchanged at $90.07. Home Depot maintained its fiscal 2023 outlook following the results, expecting a 2% to 5% decline in sales and comparable sales, and a 7% to 13% decline in diluted earnings per share.

The Home Depot, Inc. (HD) shares ended the week at $327.37, down 1% for the week.

H&R Block Releases Earnings

H&R Block, Inc. (HRB) reported its fourth quarter and full year earnings on Tuesday, August 15. The tax preparation service provider's shares jumped more than 6% following the earnings release.

H&R Block announced revenue of $1.03 billion for the fourth quarter. This was down 2% from $1.05 billion one year ago but ahead of analysts' expectations of $1.01 billion. Full-year revenue returned at $3.47 billion, a slight increase from $3.46 billion in fiscal 2022.

"We had a good finish to the year and I am pleased that we were able to grow revenue, deliver material EBITDA growth, and adjusted EPS that grew 9% despite the many headwinds we faced," said H&R Block CEO, Jeff Jones. "Our DIY strategy delivered, we demonstrated pricing power in the Assisted channel and saw positive customer satisfaction metrics, Small Business continued to be a growth driver, and we are executing on our Block Horizons strategy. We feel well positioned and look forward to FY24."

H&R Block reported net income of $302.27 million or $1.96 per diluted share for the quarter. This was an increase from $222.70 million or $1.36 per diluted share during the same quarter last year. For the full year, H&R Block reported net revenue of $553.70 million or $3.51 per adjusted share. This was relatively unchanged from $553.67 million or $3.22 per adjusted share in fiscal 2022.

The tax-preparation service company attributed its increase in revenue to higher U.S. Assisted tax preparation services, which was partially offset by decreases in its Emerald Card revenues. H&R Block announced a 10% increase in its quarterly dividend, marking the seventh increase in seven years. The company announced a regular cash dividend of $0.32 per share of the company's common stock, payable on October 4, 2023, to stockholders of record on September 7, 2023. For fiscal year 2024, H&R Block expects revenue to be in the range of $3.53 billion to $3.59 billion and earnings between $4.10 and $4.30 per adjusted share.

H&R Block, Inc. (HRB) shares closed at $39.40, up 12% for the week.

Target Announces Earnings

Target Corporation (TGT) announced its second quarter earnings report on Wednesday, August 16. Despite a decrease in sales, the retailer's stock rose 3% following the report's release.

Target reported quarterly revenue of $24.77 billion. This was down 5% from revenue of $26.04 billion in the same quarter last year and below analysts' expectations of $25.18 billion.

"Our second quarter financial results clearly demonstrate the agility of our team and the resilience of our business model, as we saw better-than-expected profitability in the face of softer-than-expected sales," said Target CEO, Brian Cornell. "As we move into the Fall, the team is gearing up for the biggest seasons of the year, with a focus on continuing to serve our guests with newness throughout our assortment. At the same time, we continue to take a cautious approach to planning our business, and have therefore adjusted our financial guidance in anticipation of continued near-term challenges on the topline."

The company reported a net income of $835 million for the quarter or $1.80 per share. This is an increase of 357% from net income of $183 million or $0.39 per share in the same quarter last year.

Target's total comparable sales decreased 5.4% in the quarter, stemming from declines in discretionary categories. Same-day services increased 4% in the quarter with the Drive-Up service leading the way with a 7% increase. Inventory for the quarter was 17% lower due to a 25% reduction in discretionary categories like fashion and home furnishings. Target expects to earn between $7.00 to $8.00 per adjusted share in fiscal year 2023. This is a decrease from former guidance indicating earnings between $7.75 to $8.75.

Target Corporation (TGT) shares ended the week at $131.21, relatively unchanged for the week.

The Dow started the week of 8/14 at 35,274 and closed at 34,501 on 8/18. The S&P 500 started the week at 4,458 and closed at 4,370. The NASDAQ started the week at 13,599 and closed at 13,291.

U.S. Treasury yields fluctuated early in the week as investors reacted to the minutes from the Federal Reserve's latest meeting. Yields rose at the end of the week following the latest data showing the labor market remains strong.

On Wednesday, the Federal Reserve's July meeting minutes were released. The Federal Reserve signaled it may raise interest rates further given the risks of continued inflation. During the meeting, the central bank approved a 0.25% rate hike as part of its effort to push inflation below the Federal Reserve's goal of 2%.

"Markets continue to sell off as the Fed minutes underscore that the economic backdrop needs to pull back so that demand softens accordingly," said Chief Global Strategist at LPL Financial, Quincy Krosby. "Recent third-quarter GDP estimates, coupled with fresh retail sales data, suggest a much more robust underpinning to the economy, certainly not what the Fed wants to see as they navigate the so-called ‘last mile' towards achieving price stability."

The benchmark 10-year Treasury note yield opened the week of August 14 at 4.15% and traded as high as 4.33% on Thursday. The 30-year Treasury bond opened the week at 4.26% and traded as high as 4.43% on Thursday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment decreased by 11,000 to 239,000 for the week ended August 12. Continuing unemployment claims increased 32,000 to 1.72 million.

"The labor markets are not imploding," said Chief Economist at FWDBONDS, Christopher Rupkey. "The economy may be heating up instead of cooling down as the monetary medicine of higher 5.5% interest rates is not slowing aggregate demand like the economics textbooks say it should."

The 10-year Treasury note yield finished the week of 8/14 at 4.25%, while the 30-year Treasury note yield finished the week at 4.38%.

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, August 17. The survey showed the 30-year fixed mortgage rate increased for the fourth consecutive week to the highest levels seen in two decades.

This week, the 30-year fixed rate mortgage averaged 7.09%, up from last week's average of 6.96%. Last year at this time, the 30-year fixed rate mortgage averaged 5.13%.

The 15-year fixed rate mortgage averaged 6.46% this week, up from 6.34% last week. During the same week last year, the 15-year fixed rate mortgage averaged 4.55%.

"The economy continues to do better than expected and the 10-year Treasury yield has moved up, causing mortgage rates to climb," said Freddie Mac's Chief Economist, Sam Khater. "The last time the 30-year fixed-rate mortgage exceeded 7% was last November. Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales."

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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