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BlackBerry Releases Quarterly Report

BlackBerry Limited (BB) released its third quarter report on Tuesday, December 20. The software company reported a decrease in revenue which caused its stock to fall by almost 8% following release of the report.

BlackBerry's revenue fell to $169 million for the quarter, down from $184 million at the same time last year. Despite experiencing a down quarter, the company's revenue still beat analysts' expectations of $164 million for the quarter.

"This quarter we saw good progress in both of BlackBerry's business units," said BlackBerry CEO, John Chen. "Our IoT business has strong momentum and delivered a record quarter for design-phase revenue, driven largely by design wins in core safety-critical auto and general embedded domains. In our Cybersecurity business, the rebuilding continues to gain momentum. In line with the path outlined last quarter, churn improved and there was further evidence that investments in go-to-market and the product portfolio will drive further sequential improvements and progress towards a return to ARR growth next fiscal year."

The company reported a net loss of $4 million or $0.09 per adjusted share for the quarter. This was a decrease from a net income of $74 million or $0.05 per adjusted share during the same quarter last year.

The company saw a 19% increase to $51 million in IoT (Internet of Things) revenue. The company's cybersecurity revenue reached $106 million, down from $128 million in revenue last year. Licensing and Other revenue was $12 million, down from $13 million last year. BlackBerry reported $185 million in net cash used in operating activities for the quarter, attributed to a one-time payment of the litigation settlement from the first quarter of this fiscal year. For the fourth quarter, the company expects improvement in customer churn, new logo acquisition and sequential billings.

BlackBerry (BB) shares ended the week at $3.41, down 19% for the week.

FedEx Earnings Fall Short

FedEx Corp. (FDX) released its second quarter earnings report on Tuesday, December 20. Despite reporting a decrease in revenue and net income, the stock rose almost 4% following the release.

Revenue came in at $22.8 billion for the quarter, down from $23.5 billion at this time last year. This fell short of analysts' expected quarterly revenue of $23.7 billion.

"The FedEx team moved with urgency to make rapid progress on our ongoing transformation while navigating a weaker demand environment," said FedEx CEO, Raj Subramaniam. "Our earnings exceeded our expectations in the second quarter driven by the execution and acceleration of our aggressive cost reduction plans. At the same time, we continue to focus on delivering excellent service for our customers."

The company posted net income of $788 million for the quarter, or $3.07 per diluted share, down from $1.04 billion, or $3.88 per diluted share one year ago. On an adjusted basis, Fed Ex posted earnings of $3.18 per share, ahead of analysts' expectations of $2.82.

FedEx reported a decline of 64% year-over-year for their FedEx Express segment, attributable to lower global volumes, partially offset by an 8% package yield increase. To mitigate the impact of volume declines, the company implemented incremental cost reduction actions during the quarter which included structural air network changes and temporary parking of aircraft. FedEx Ground segment increased by 24% and FedEx Freight increased by 32% year-over-year, both driven by yield increases. For fiscal 2023, FedEx expects earnings per diluted share to be between $13 and $14.

FedEx (FDX) shares ended the week at $175.92 up 3% for the week.

Rite Aid's Reports Earnings

Rite Aid Corporation (RAD) reported its third quarter earnings on Wednesday, December 21. The drug store chain beat revenue expectations and reported smaller-than-anticipated losses which caused shares to rise more than 7% in premarket trades.

Rite Aid announced revenue of $6.08 billion for the fourth quarter. This is down from revenue of $6.23 billion reported in the same quarter last year but above the $5.94 billion in revenue that analysts expected.

"Our third quarter beat consensus on top and bottom line, and we are pleased with our results at Elixir and our accelerated sales growth at retail," said Rite Aid CEO, Heyward Donigan. "In addition, we are kicking off a performance acceleration program, which allows us to fast-track initiatives that will improve sales, script volume and operating margins, and free up cash. We look forward to updating you on our progress at year end."

The company reported a net loss of $67.14 million for the quarter, a decline from net losses of $36.06 million one year ago. On an adjusted earnings per share basis, the company posted an earnings loss of $1.23 per share, a reduction from earnings loss of $0.67 last year.

Rite Aid attributed its net loss to a rise in interest expenses and an increase in restructuring charges. Retail Pharmacy segment decreased 0.5% in the quarter due to reductions in COVID vaccines, testing revenue and store closures, but partially offset by an increase in acute and maintenance prescriptions. Same store sales increased 7.5% year-over-year which consisted of a rise in pharmacy sales of 9.5% and an increase in front-end sales of 2.2%. The company lowered its outlook for fiscal 2023 and expects total revenues to be between $23.7 billion and $24.0 billion, and net losses to be between $584 million and $551 million.

Rite Aid Corporation (RAD) shares closed at $3.44, down 20% for the week.

The Dow started the week at 32,921 and closed at 33,144 on 12/23. The S&P 500 started the week at 3,854 and closed at 3,836. The NASDAQ started the week at 10,707 and closed at 10,478.

Treasury Yields Vary

U.S. Treasury yields moved up this the week as consumer confidence improved in December but fears of recession linger. Yields retreated slightly from midweek highs on Thursday following a modest increase in unemployment numbers.

On Wednesday, the Conference Board announced that the consumer confidence index stood at 108.3 in December, rising from 101.4 in the prior month and reaching the highest point since April 2020. The rebound in confidence exceeded economists' expectations of 101.0 for December.

"Consumers may be more confident than they were over the summer months, but they are still exhibiting more caution than was apparent in 2021," said senior economist at Wells Fargo, Sam Bullard. "The outlook for consumer confidence in 2023 will hinge on the Fed's ability to deliver a soft landing on what could be described as a narrow runway."

The benchmark 10-year Treasury note yield opened the week of 12/19 at 3.49% and traded as high as 3.72% on Wednesday. The 30-year Treasury bond yield opened the week at 3.55% and traded as high as 3.78% on Wednesday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment insurance totaled 216,000, an increase of 2,000 for the week ending December 17 and below economists' estimates of 222,000. Continuing unemployment claims were down 6,000 to 1.67 million.

"We expect that claims are going to trend higher over time, but only gradually so," said economist at Jefferies, Thomas Simons. "It is important to keep in mind that initial and continuing claims are rising off of historically low levels."

The 10-year Treasury note yield closed at 3.75% on 12/23, while the 30-year Treasury bond yield was 3.83%.

Mortgage Rates Decline

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, December 22. Mortgage rates for the 30-year fixed continued to decrease for the sixth consecutive week.

This week, the 30-year fixed rate mortgage averaged 6.27%, down from last week's average of 6.31%. Last year at this time, the 30-year fixed rate mortgage averaged 3.05%.

The 15-year fixed rate mortgage averaged 5.69% this week, up from 5.54% last week. During the same week last year, the 15-year fixed rate mortgage averaged 2.30%.

"Heading into the holidays, mortgage rates continued to move down," said Freddie Mac's Chief Economist, Sam Khater. "Rates have declined significantly over the past six weeks, which is helpful for potential homebuyers, but new data indicates homeowners are hesitant to list their homes. Many of those homeowners are carefully weighing their options as more than two-thirds of current homeowners have a fixed mortgage rate of below four percent."

Based on published national averages, the savings rate was 0.30% as of 12/19. The one-year CD averaged 1.07%.

Published December 23, 2022

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