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Monday September 27, 2021



Delta Air Lines Posts Quarterly Results

Delta Air Lines (DAL) reported its quarterly earnings on Tuesday, October 13. The major airline company posted yet another large net loss as summer travel was hindered by the COVID-19 pandemic.

The company's revenue came in at $3.06 billion, which failed to meet Wall Street's expected revenue of $3.11 billion. This was down 76% from $12.56 billion during the same quarter last year.

"While our September quarter results demonstrate the magnitude of the pandemic on our business, we have been encouraged as more customers travel and we are seeing a path of progressive improvement in our revenues, financial results and daily cash burn," said Delta's CEO, Ed Bastian. "The actions we are taking now to take care of our people, simplify our fleet, improve the customer experience, and strengthen our brand will allow Delta to accelerate into a post-COVID recovery."

Delta posted a net loss of $5.38 billion, or $3.30, per share for the quarter. Last year at this time, the company reported net income of $1.50 billion.

The entire airline industry continues to struggle with the effects of the COVID-19 pandemic. In total, Delta has reported more than $11 billion in losses the last two quarters. Due to the losses, the company has been forced to continue to retire aircrafts. Approximately one fifth of its employees accepted buyouts and early retirement packages. Similar to other major airlines, Delta has introduced enhanced cleaning procedures and other safety procedures, such as leaving the middle seat open. Delta continues to withhold guidance, but remains optimistic with Thanksgiving and Christmas travel seasons arriving soon.

Delta Air Lines (DAL) shares ended the week at $31.47, down 3.7% for the week.

Wells Fargo Reports Earnings

Wells Fargo & Co. (WFC) released its third quarter earnings report on Wednesday, October 14. The long-standing banking institution reported its third consecutive quarter of poor results largely due to low rates causing reduced net interest income.

Wells Fargo reported revenue of $18.9 billion. This was down from $22.0 billion reported in the third quarter last year, but surpassed analysts' expected revenue of $18.0 billion.

"Our third quarter results reflect the impact of aggressive monetary and fiscal stimulus on the US economy," said Wells Fargo's CEO, Charlie Scharf. "Strong mortgage banking fees, higher equity markets, and declining sequential charge-offs positively impacted our results, while historically low interest rates reduced our net interest income and our expenses continued to remain elevated. We continue to provide support for our customers having helped more than 3.2 million consumers and small businesses by deferring payments and waiving fees."

Wells Fargo reported quarterly net income of $2.0 billion or $0.42 per share. This compares to net income of $4.6 billion or $0.92 per share for the same quarter last year.

The bank's net interest income was reported at $9.4 billion for the quarter, which fell by 19% year over year. The reduced income is a result of the Federal Reserve's decision to keep interest rates at historically low levels due to the COVID-19 pandemic. In other areas the bank's non-interest type income exceeded analysts' expectations at $9.5 billion. Wells Fargo continues to withhold any future guidance due to uncertainties with the pandemic and further fiscal stimulus.

Wells Fargo & Co. (WFC) shares ended the week at $22.86, down 9.3% for the week.

Del Taco Posts Earnings

Del Taco Restaurants, Inc. (TACO) reported its latest quarterly earnings on Thursday, October 15. The second-largest Mexican-American fast food chain's shares dropped 5% in the hours after the report's release.

The company reported net revenue of $120.8 million for the quarter. Revenue was relatively unchanged year over year with a 0.5% increase, but exceeded analysts' expectations of $120.4 million.

"As we continue to navigate the challenges and opportunities related to COVID-19, I am proud of our actions to stabilize our business as demonstrated by our strong third quarter performance, said John D. Cappasola Jr., President and CEO of Del Taco. "Positive third quarter comparable restaurant sales for company-operated and franchised restaurants reflects our value-oriented [Quick Service Restaurant+] positioning, expanding off-premise convenience and use of innovation with the very successful launch of new fresh Guacamole and our Crispy Chicken menu. We also drove operational efficiencies and maintained our cost discipline to help slightly expand our restaurant contribution margin after adjusting for the timing of advertising expense which will normalize during our fourth quarter."

The restaurant company reported net income for the quarter at $5.8 million or $0.15 per share. This was an increase compared to a net loss of $7.7 million or $0.21 per share at the same time last year.

The company's sales increased year over year by 4.1% due to company operated restaurants' sales increasing 2.0% and franchised operated restaurants' sales increasing 6.5%. During the quarter, one company-operated and four franchise-operated restaurants opened, while two franchise-operated restaurants closed. The company is also anticipating two restaurants opening in the fourth quarter, with the first Del Taco location opening in the state of Ohio. The company continues to refrain from forward-looking statements, but is looking ahead to 2021 to improve brand engagement and transforming their digital capabilities.

Del Taco Restaurants, Inc. (TACO) shares ended the week at $8.18, down 13.5% for the week.

The Dow started the week of 10/12 at 28,671 and closed 28,606 on 10/16. The S&P 500 started the week at 3,500 and closed at 3,484. The NASDAQ started the week at 11,732 and closed at 11,672.

Treasury Yields Buoyed by Consumer Spending

Earlier in the week, the U.S. Treasury yields saw its biggest single day drop in the past four months due to reported setbacks in the efforts to develop a vaccine for COVID-19. However, later in the week Treasury yields rose in reaction to economic data related to increased consumer spending in September.

On Monday, Johnson & Johnson reported that clinical trials for its COVID-19 vaccine were paused due to an unexplained illness in a participant. Another pharmaceutical company, Eli Lilly, reported a pause in its clinical trial for COVID-19 antibody treatment.

The 10-Year Treasury note yield slid 4.9 basis points to 0.726%, the biggest single day drop since the middle of June. The 30-year bond yield slipped 6 basis points to 1.513%, the biggest single day drop since early July.

On Friday, treasury yields increased following data of a 1.9% increase in U.S. retail sales for September. Treasury yields move inversely to prices, the increase in September retail sales alleviated concerns that consumer spending would halt without an additional government stimulus package.

"Despite unemployment benefits expiring for millions of Americans, today's retail sales figure shows us there is still some gas in the tank for the consumer," said Charlie Ripley, a senior investor strategist for Allianz Investment Management.

The 10-year Treasury note yield closed at 0.75% on 10/16, while the 30-year Treasury bond yield was 1.54%.

Mortgage Rates Fall Further

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, October 15. After a period of relative stability, rates fell further.

This week, the 30-year fixed rate mortgage averaged 2.81%, down from last week's average of 2.87%. Last year at this time, the 30-year fixed rate mortgage averaged 3.69%.

The 15-year fixed rate mortgage averaged 2.35% this week, down from 2.37% last week. At this time last year, the 15-year fixed rate mortgage averaged 3.15%.

"Low mortgage rates have become a regular occurrence in the current environment," said Sam Khater, Freddie Mac's Chief Economist. "As we hit yet another record low, the tenth record this year, many people are benefitting as refinance activity remains strong. However, it's important to remember that not all people are able to take advantage of low rates given the effects of the pandemic."

Based on published national averages, the national savings rate was 0.05% for the week of 10/12. The one-year CD finished at 0.18%.

Published October 16, 2020
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