Finances

This past week, FedEx Corp. (FDX) reported its earnings for the fourth quarter. The company reported mixed results.

For the quarter, FedEx reported revenue of $11 billion and net income of $550 million. On an earnings per share basis, FedEx reported earnings of $1.73 excluding a one-time charge of $0.26. Including this charge, the company earned $1.99 per share, which compared favorably to the $1.73 per share a year ago.

On an annual basis, FedEx reported revenue of $42.7 billion and net income of $2.03 billion. The company also reported diluted earnings per share of $6.59 (excluding the $0.26 write-off from the fourth quarter).

"FedEx delivered strong earnings results for fiscal 2012 due to the outstanding performance by FedEx Ground, our new value proposition at FedEx Freight and improved yields across all transportation segments," said Frederick W. Smith, FedEx Corp.'s Chairman, President and Chief Executive Officer. "In fiscal 2013, we will continue our focus on improving our operating efficiencies and our financial performance across all of our businesses, while simultaneously enhancing our service capabilities. We remain absolutely committed to higher earnings, margins, cash flows and returns."

"We are focused on improving margins in all businesses, although we face certain cost increases in fiscal 2013," said Alan B. Graf, Jr., FedEx's Executive Vice President and Chief Financial Officer. "These headwinds include higher employee-related costs, including higher pension expenses... as well as higher depreciation costs. We expect to mitigate these challenges by reducing costs and improving efficiencies, and are continuing to evaluate additional actions to substantially improve FedEx Express margins."

Shares of FedEx Corp. (FDX) closed the week trading at $90.54.

Is This The Way Car Buying Should Be?

CarMax Inc. (KMX) reported declining first quarter profits this week. The used car retailer said that its net earnings decreased 4% to $120.7 million, compared with $125.5 million in the first quarter of fiscal 2012. The company said that the decline reflected a challenging sales year. While roughly the same number of customers came through the company's used car superstores, fewer customers made purchases.

CarMax markets to consumers who are looking for low-priced vehicles with no-haggling. The company boasts a broad selection of high quality vehicles and better customer service than the typical used car lot. However, the recent sales decline has analysts questioning whether consumers will buy-in to the CarMax sales model.

On the bright side, the company saw income grow on its auto loan financing business. CarMax auto finance income grew 8% to $75.2 million, compared with $69.7 million in the first quarter of the prior year.

CarMax plans to open ten new superstores in fiscal year 2013, which is double the number opened in fiscal 2012. During their first quarter of fiscal 2013, CarMax opened two used car superstores in Lancaster, Pennsylvania and Bakersfield, California. Prior to the end of the first quarter, CarMax opened stores in Nashville, Tennessee and Ft. Myers, Florida.

CarMax Inc. (KMX) closed the week trading at $25.73.

Walgreen and Rite Aid Report Earnings

Last week, Walgreen Co. (WAG) and Rite Aid Corp. (RAD) reported their latest earnings. Walgreen reported lower earnings while Rite Aid reported improved earnings after lowering its net losses for the quarter.

Walgreen reported net earnings for its third quarter of $537 million. The company's earnings fell 10.8%, down from $603 million in the same quarter a year ago. On an earnings per share basis, the company earned $0.62, down 4.9% from $0.65 per share. For the quarter, Walgreen's net sales also declined from $18.37 billion for Q3 last year to $17.75 billion this quarter.

Rite Aid saw increased revenue for the first quarter, reporting revenue of $6.5 billion versus $6.4 billion in the same period last year. The company reported a net loss of $28.1 million or $0.03 per share. During Q1 last year, Rite Aid reported a net loss of $63.1 million or $0.07 per share.

"By focusing on our key strategies, we are positioning ourselves to be the first choice for health and daily living," said Walgreen's President and Chief Executive Officer, Greg Wasson. "We continue to learn from our 200 pilot Well Experience format stores, including some Duane Reade locations in New York City. We also continue to advance the role of community pharmacy by expanding our pharmacy, health and wellness services and deepening relationships with a number of partners."

"Our turnaround efforts continue to be successful as demonstrated by our sixth consecutive quarter of increased same store sales and Adjusted EBITDA," said John Standley, Rite Aid Chairman, President and Chief Executive Officer. "During the quarter, we saw strong growth in same-store prescription counts while key initiatives like our popular wellness + customer loyalty program, enhanced Rite Aid brand offerings and ground-breaking Wellness store format continued to gain traction."

Shares of Walgreen Co. (WAG) closed the week at $29.57 and of Rite Aid Corp. (RAD) closed at $1.34.

The Dow started the week at 12,767 and closed at 12,641. The NASDAQ started the week at 2,872 and finished at 2,892. The S&P 500 started the week at 1,343 and ended at 1,335.

On June 21, 2012, Moody's Investors Service downgraded the credit rating for several financial companies. The downgrade affected banks with global capital-market operations.

Among the banks affected by the downgrade were Bank of America Corp. (BAC) whose rating was reduced from Baa2 to Baa1 and Citigroup Inc. (C), that experienced a reduction from A3 to Baa2. Both banks were given a negative outlook. Goldman Sachs Group Inc. (GS) was downgraded from A3 to A1, J.P Morgan Chase & Co. (JPM) from A2 to Aa3 and Morgan Stanley (MS) from A2 to Baa1.

Greg Bauer, Moody's Global Banking Manager Director, commented on the downgrades, "All of the banks affected by today's actions have significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities."

The 10-year Treasury note yield finished the week at 1.67% while the 30-year Treasury note yield finished the week at 2.76%.

This week Freddie Mac released its latest Primary Mortgage Market Survey (PMMS). The PMMS revealed that mortgage rates eased "amid worsening economic indicators."

According to Freddie Mac, the average 30-year Fixed Rate Mortgage (FRM) fell over the past week, down from 3.71% in the week prior to a new average of 3.66%. At this time last year, the 30-year FRM averaged 4.50%

Similarly, the average 15-year FRM also fell according to the PMMS. This past week, the 15-year FRM averaged 2.95%, down from 2.98% in the week prior and down from an average of 3.69% at this time last year.

"Treasury bond yields eased somewhat this week on some worsening economic indicators bringing mortgage rates back into record low territory. Industrial production fell in two of the last three months ending in May, and was below the expected market consensus forecast," stated Frank Nothaft, Freddie Mac's Vice President and Chief Economist.

The money market fund finished this week at 0.5%. The 1-year CD finished at 0.7%.