PepsiCo, Inc. (PEP) released its third quarter earnings report on Tuesday, October 10. The beverage and snack manufacturer’s shares increased 2% following the earnings report.

The company reported quarterly revenue of $23.45 billion, exceeding analysts’ estimates of $23.39 billion. This was up from $21.97 billion in revenue during the same quarter last year.

“We are pleased with our performance as our businesses and associates displayed tremendous agility and resilience across geographies and categories in an evolving and dynamic environment,” said PepsiCo’s CEO, Ramon Laguarta. “We believe that our businesses can continue to perform well in the coming years with category growth normalizing, as we have made numerous investments in our brands, manufacturing capacity, go-to-market systems, supply chain, technology, and people, to execute against our strategic framework and modernize our company.”

PepsiCo reported net income of $3.09 billion for the quarter, or $2.24 per adjusted share. This was up from $2.70 billion, or $1.95 per adjusted share in the same period a year ago.

The company’s PepsiCo Beverages North America segment grew 8% to sales of $7.16 billion. The Frito-Lay North America segment experienced a sales growth of 7%, with $5.95 billion in revenue for the quarter. The Quaker Foods North America segment generated sales of $747 million for the quarter, growing 5% year-over-year. PepsiCo reaffirmed its guidance for fiscal 2023 and expects 10% organic revenue growth. The company continues to expect to return $7.7 billion to shareholders, including $6.7 billion through the payment of dividends and share repurchases of $1 billion.

PepsiCo, Inc. (PEP) shares ended the week at $160.00, relatively unchanged for the week.

Delta Air Lines’ Earnings Take Off

Delta Air Lines (DAL) reported third quarter earnings on Thursday, October 12. The Atlanta-based airline’s stock rose over 2% in premarket trading after reporting record revenue.

The company posted revenues of $15.49 billion for the quarter ended September 2023. This is up 11% from $13.98 billion in revenue during the third quarter of 2022 and beat analysts’ estimates of $15.29 billion.

"Thanks to the outstanding work of our entire team, Delta delivered record September quarter revenue and a double-digit operating margin,” said Delta’s CEO, Ed Bastian. “Our operational reliability continues to strengthen, thanks to our people, and I am pleased to recognize their outstanding efforts with over $1 billion accrued year-to-date towards profit sharing."

Delta reported net income of $1.11 billion or $1.72 per adjusted share. This is up 59% from net income of $695 million or $1.08 per adjusted share in the same quarter last year.

Delta Airline’s third-quarter earnings were highlighted by an increase in travel demand. Domestic travel revenue increased by 6% to $8.66 billion during the quarter. International travel revenue jumped 35%, the highest increase of all segments, which included a 34% increase in transatlantic travel of $3.11 billion. Delta’s costs for each seat decreased by 7% to $18.44 million and revenue passenger miles increased 17% to $64.10 million. With domestic and international travel demands on the rise, the company expects the fourth quarter to continue its upward trend with revenue up 9% to 12% compared to December 2022.

Delta Air Lines (DAL) shares ended the week at $34.10, down 4.6% for the week.

Walgreens Posts Earnings

Walgreens Boots Alliance, Inc. (WBA) released its fourth quarter and full-year earnings on Thursday, October 12. Despite missing earnings’ estimates, the company’s stock rose over 4% after the earnings release.

The company reported sales of $35.42 billion for the quarter, up 9% from $32.45 billion reported during the same quarter last year and above analysts’ expectations of $34.80 billion. Full-year sales returned at $139.08 billion, a 5% increase from $132.70 billion in fiscal 2023.

"Our performance this year has not reflected WBA’s strong assets, brand legacy, or our commitment to our customers and patients,” said Walgreens Interim CEO, Ginger Graham. “In just six weeks, we have taken a number of steps to align our cost structure with our business performance, including planned cost reductions of at least $1 billion, and lowered capital expenditures by approximately $600 million. We anticipate seeing the impact of these actions in fiscal 2024, beginning in the second quarter.”

Walgreens posted a net loss of $180 million for the quarter or $0.21 per adjusted share. This was an improvement from a net loss of $415 million or $0.48 per adjusted share one year ago. For the full year, the company reported net losses of $3.08 billion or $3.57 per adjusted share. This was down from net income of $4.34 billion or $5.01 per adjusted share in fiscal 2023.

Walgreens reported that their increased sales for the fourth quarter was attributed to growth across all major segments. The company’s U.S. Retail Pharmacy segment saw an increase in fourth quarter sales of 3.7% to $27.67 billion. The U.S. Healthcare segment reported sales of $1.97 billion, an increase from the $622 million in sales one year ago. Internationally, the company saw an increase of 12.4% from the same time last year to $5.78 billion in sales, up from $5.14 billion at the same time last year. Boots UK comparable pharmacy sales increased 9.9% compared to last year. For fiscal 2024, the company expects sales to be between $141.0 billion to $145.0 billion and earnings of $3.20 to $3.50 per share.

Walgreens Boots Alliance, Inc. (WBA) shares ended the week at $23.25, up 6.8% for the week.

The Dow started the week at 33,260 and closed at 33,670 on 10/13. The S&P 500 started the week at 4,289 and closed at 4,328. The NASDAQ started the week at 13,326 and closed at 13,407.

Treasury Yields fluctuated throughout the week as investors responded to the latest consumer price index data. Yields reacted at the end of the week following the latest jobs data report, which showed signs of a strong job market despite historically high interest rates.

On Thursday, the U.S. Bureau of Labor Statistics announced that the consumer price index (CPI), which measures the cost of dozens of everyday consumer goods, rose 0.4% in September and was above economists’ forecast of 0.3%. The CPI year-over-year rose to 3.7%, slightly higher than economists’ projections of 3.6%.

“Just because the rate of inflation is stable for now does not mean its weight is not increasing every month on family budgets,” said Corporate Economist with Navy Federal Credit Union, Robert Frick. “That shelter and food costs rose particularly is especially painful.”

The benchmark 10-year Treasury note yield opened the week of October 9 at 4.80% and traded as high as 4.73% on Thursday. The 30-year Treasury bond opened the week at 4.97% and traded as high as 4.90% on Thursday.

On Thursday, the U.S. Department of Labor reported that initial claims for unemployment remained at 209,000 for the week ending October 7. Continuing unemployment claims increased by 30,000 to 1.7 million.

“Overall, layoffs remain low and demand for workers remains strong,’' said Chief U.S. Economist at High Frequency Economics, Rubeela Farooqi. “Even as the Fed has taken aggressive action to soften labor market conditions, businesses are not shedding workers at a rapid pace.’'

The 10-year Treasury note yield finished the week of 10/9 at 4.63%, while the 30-year Treasury note yield finished the week at 4.77%.

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, October 12. The survey showed 30-year mortgage rates persisting well above 7%, causing purchasing demand to drop as housing affordability continues to be problematic for would-be homebuyers.

This week, the 30-year fixed rate mortgage averaged 7.57%, up from last week’s average of 7.49%. Last year at this time, the 30-year fixed rate mortgage averaged 6.92%.

The 15-year fixed rate mortgage averaged 6.89% this week, up from 6.78% last week. During the same week last year, the 15-year fixed rate mortgage averaged 6.09%.

“For the fifth consecutive week, mortgage rates rose as ongoing market and geopolitical uncertainty continues to increase,” said Freddie Mac’s Chief Economist, Sam Khater. “The good news is that the economy and incomes continue to grow at a solid pace, but the housing market remains fraught with significant affordability constraints. As a result, purchase demand remains at a three-decade low.”

Based on published national averages, the savings rate was 0.45% as of 9/18. The one-year CD averaged 1.76%.

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