News Archive

PayPal raises 2017 forecasts on growth in users, payment volumes

(Reuters) – Digital payments company PayPal Holdings Inc raised its earnings outlook on Wednesday after reporting better-than-expected quarterly results, driven by growth in users and transaction volumes.

The San Jose, California-based company beat Wall Street expectations for both profit and revenue in the second quarter, and raised its full-year adjusted earnings forecast to a range of $1.80 per share to $1.84 per share, from $1.74 per share to $1.79 per share.

PayPal shares rose 2.9 percent to $60.50 in after-hours trading.

Since separating from eBay Inc in 2015, PayPal has been signing more partnerships and making acquisitions in a bid to gain an edge over rivals in the highly competitive digital payments market.

On a conference call with analysts, Chief Executive Officer Dan Schulman pointed to efforts PayPal has made to improve the customer experience, especially on mobile devices, and deals it has inked with Chinese digital services provider Baidu Inc and No. 2 U.S. lender Bank of America Corp to expand its customer base.

Earlier this month PayPal also struck deals with JPMorgan Chase Co. and Apple Inc.

The company added 6.5 million accounts in the second quarter, up 80 percent from the year-ago period. It was the highest quarterly growth in three years.

The company processed $1.8 billion in total payment volumes, up 23 percent from the second quarter of 2016. Mobile payments rose 50 percent to about $36 billion.

Volumes at Venmo, PayPal’s mobile peer-to-peer payments app popular with younger consumers, more than doubled to $8 billion.

The company is trying to leverage the app more, by allowing shoppers to use Venmo to pay at U.S. merchants who process payments through PayPal.

PayPal is maintaining a goal to get customers to use its service twice a week, on average, something Schulman said is “within our reach.”

For the second quarter, it reported adjusted earnings of 46 cents per share, above the average analyst estimate of 43 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 18.3 percent to $3.14 billion, beating analysts’ average estimate of $3.09 billion.

Reporting by Anna Irrera in New York and Nikhil Subba in Bengaluru; Editing by Sriraj Kalluvila and Andrew Hay

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Fed holds rates steady, expects portfolio cuts ‘relatively soon’

WASHINGTON (Reuters) – The Federal Reserve kept interest rates unchanged on Wednesday and said it expected to start winding down its massive holdings of bonds “relatively soon” in a sign of confidence in the U.S. economy.

The Fed kept its benchmark lending rate in a target range of 1.00 percent to 1.25 percent, as expected, and said it was on track to continue the slow path of monetary tightening that has lifted rates by a percentage point since 2015.

In a statement following a two-day policy meeting, the U.S. central bank’s rate-setting committee indicated the economy was growing moderately and job gains had been solid.

It also noted that both overall inflation and a measure of underlying price gains had declined – trends which have worried some policymakers – but that it expected the economy to continue strengthening.

“The committee expects to begin implementing its balance sheet normalization program relatively soon,” the Fed said, adding that it would follow a plan outlined in June to trim its holdings of U.S. Treasury bonds and mortgage-backed securities.

U.S. stock prices rose following the release of the policy statement while yields on U.S. government debt fell. The dollar dropped against a basket of currencies.

  • Wall Street zeroes in on September for start of Fed balance sheet wind-down: Reuters poll
  • Instant View: Fed holds rates steady; sees balance sheet normalization starting ‘relatively soon’
  • Traders pare bets on December Fed rate hike

After pushing rates nearly to zero to fight the 2007-2009 financial crisis and recession, the Fed pumped over $3 trillion into the economy in a bond-buying spree to further reduce rates. Its balance sheet has grown to $4.5 trillion.

The statement cemented expectations the Fed will announce at its next policy meeting in September the start of its balance sheet reduction plan, marking the end of a controversial tool that drew criticism from Republican lawmakers in Congress.

“The Fed all but told the market the balance sheet run-off will start in September,” said Brian Jacobsen, an investment strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

Inflation Jitters

Torsten Slok, an economist at Deutsche Bank, said the Fed appeared keen to begin balance sheet reduction given the uncertainty over whether President Donald Trump will nominate Fed Chair Janet Yellen for another four-year term.

Trump told the Wall Street Journal this week that Yellen, whose current term expires in February, was among several candidates he would consider to lead the central bank.

While Fed researchers have concluded that bond buying only modestly boosted the economy, Yellen has said the central bank could turn to asset purchases again if the economy fell into a deep rut.

Steady job creation in the economy has pushed the U.S. unemployment rate to 4.3 percent, near a 16-year low.

The Fed had previously signaled it would begin to trim its balance sheet this year.

At the same time, a slowdown in inflation has caused jitters among some Fed officials who are concerned inflation has been below the central bank’s 2 percent target for five years.

The Fed’s preferred measure of underlying inflation dropped to 1.4 percent in May from 1.8 percent in February. The Fed had described inflation as being “somewhat” below target in its policy statement in June, but on Wednesday it simply stated that it was below 2 percent.

“That, I think, is a signal that it’s a slightly more cautious tone,” said Omer Esiner, an analyst at Commonwealth FX in Washington.

Reporting by Jason Lange and Lindsay Dunsmuir; Additional reporting by Rodrigo Campos, Richard Leong and Saqib Ahmed in New York; Editing by Paul Simao

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Foxconn to announce new U.S. manufacturing plant: source

(Reuters) – Apple Inc (AAPL.O) supplier Foxconn Technology Co (2354.TW) will announce plans to build a multi-billion dollar electronics manufacturing plant in Wisconsin at a White House event later on Wednesday, a source briefed on the matter said.

A White House official said President Donald Trump is hosting an event at 5 p.m. EDT with Foxconn “for a technology manufacturing initiative announcement that will bring jobs and billions of dollars in investments to our country.”

Foxconn said last month it plans to invest more than $10 billion in a display-making factory in the United States.

Trump has called for firms to build more products in the United States. He has made several announcements since his election in November about U.S. investments by both foreign and domestic manufacturers, building on his campaign focus on preserving and creating American jobs.

Tai Jeng-wu, CEO of Foxconn’s Japanese unit Sharp Corp (6753.T), said in June that six U.S. states were being looked at for a possible location for a plant making displays.

Foxconn already has operations in Pennsylvania.

News of the plant was first reported by the Wall Street Journal on Tuesday in an interview with Trump. He also said Apple Inc (AAPL.O) Chief Executive Tim Cook has committed to build three big manufacturing plants in the United States.

Reporting by David Shepardson; Editing by Dan Grebler and Chris Sanders

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Coca-Cola profit beats on demand for juices, low-sugar sodas

(Reuters) – Coca-Cola Co’s (KO.N) profit, in its first quarter under new Chief Executive James Quincey, beat analysts’ estimates on higher demand for its healthier non-carbonated beverages as well as low and no-sugar versions of its sodas.

Coca-Cola, like rival PepsiCo Inc (PEP.N), has been building its non-carbonated drinks portfolio and stepping up efforts to reduce sugar in its beverages as consumers look for healthier options.

“Organic revenue growth in sparkling soft drinks was led by innovation in and marketing support for our low- and no-sugar options like Coca-Cola Zero Sugar,” Quincey said in a statement.

Global volume sales of low and no-calorie soda drinks rose in the mid-single digits in the second quarter ended June 30, the company said on Wednesday.

The world’s largest beverages maker said it plans to introduce Coke Zero Sugar in the United States in August.

Coca-Cola said demand rose for its non-aerated drinks such as innocent juice and smoothies in Europe.

The company is delivering on its strategic priorities – growing soda sales by reducing sugar content, broadening beverage portfolio and using higher prices as a driver of profit, Susquehanna analyst Pablo Zuanic wrote in a note.

The change in strategy is paying off for PepsiCo as well. Growing demand for higher-margin healthier foods such as baked chips and smaller soda servings helped its profit beat analysts’ estimate this month.

Net income attributable to Coca-Cola’s shareholders fell to $1.37 billion, or 32 cents per share, in the second quarter ended June 30, from $3.45 billion, or 79 cents per share, a year earlier.

Coca-Cola incurred a charge of $653 million related to refranchising its North America bottling operations, as the company continues to sell most of its low-margin bottling business to cut costs.

Excluding items, Coca-Cola earned 59 cents per share, beating the average analysts’ estimate of 57 cents, according to Thomson Reuters I/B/E/S.

Revenue fell 16 percent to $9.70 billion, hurt by the refranchising of bottling territories and a strong dollar.

However, revenue beat the average analysts’ estimate of $9.65 billion.

The company also forecast adjusted 2017 profit to be flat or down 2 percent, compared with its previous forecast of a 1-3 percent decline, citing lower impact from currency exchange rates.

Coca-Cola’s shares were marginally up in premarket trading on Monday.

Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Arun Koyyur

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D.R. Horton posts slowest order growth in three quarters

(Reuters) – No.1 U.S. homebuilder D.R. Horton Inc (DHI.N) reported its slowest growth in orders in three quarters on Wednesday even as it grapples with higher labor and lumber costs.

The company’s shares fell as much as 3.9 percent on Wednesday as investors also assessed June home sales data.

Shares of other homebuilders were also down: PulteGroup Inc (PHM.N), Lennar Corp (LEN.N), Toll Brothers Inc (TOL.N) were all off about 1 percent.

While new home sales rose for a second straight month in June, housing starts are running well below their historic average, data showed.

An acute shortage of homes for sale has weighed on the housing market for about two years. As the labor market churns out more jobs and builders struggle to secure land, building materials and skilled labor, the situation could worsen.

D.R. Horton said orders, an indicator of future revenue for homebuilders, rose 11.3 percent to 13,040 homes in the third quarter ended June 30. Orders rose 13.8 percent in the second quarter and 14.6 percent in the first quarter.

The company said it expects to sell 45,800 to 46,200 homes in fiscal 2017, which ends in September, and forecast revenue of $13.9 billion to 14.1 billion. It had previously forecast 44,500 to 46,000 homes and revenue of $13.6 billion to $14 billion.

The homebuilder, which mainly sells single-family homes, said it sold 12,497 homes in the quarter, compared with 10,739 a year earlier.

Smaller rival PulteGroup Inc (PHM.N) reported a higher-than-expected quarterly profit on Tuesday, but lowered its full-year gross margin forecast partly due to higher lumber prices following wildfires in Canada.

D.R. Horton said there was a slight pick-up in lumber costs, but it was able to offset the increase with its revenues.

Edward Jones analyst Robin Diedrich said profitability at the home level declined, most likely due to rising labor and commodity costs and the company’s shift toward selling a greater mix of lower-priced homes.

D.R. Horton’s net income rose about 16 percent to $289 million, or 76 cents per share. Analysts had expected a profit of 75 cents per share, according to Thomson Reuters I/B/E/S.

The company’s total revenue, which includes land and lot sales and sales from its financial services business and other items, was $3.78 billion, beating the average estimate of $3.72 billion, according to Thomson Reuters I/B/E/S.

Reporting by Arunima Banerjee in Bengaluru; Editing by Anil D’Silva and Saumyadeb Chakrabarty

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Boeing, AT&T power Wall Street to record; Fed in focus

(Reuters) – Wall Street got a big boost from strong corporate earnings on Wednesday, with all three major indexes hitting record highs, while investors awaited the outcome of a two-day Federal Reserve meeting.

Boeing (BA.N) surged 8.2 percent to an all-time high, while ATT (T.N) gained 4 percent, after the two companies posted higher-than-expected quarterly profit. The planemaker gave the biggest boost to the Dow and was the second biggest gainer on the SP 500 after ATT.

The market’s record run has left equities relatively expensive, but a strong corporate earnings season should allay some of those concerns.

Earnings of the SP 500 companies are expected to have climbed 9.9 percent in the second quarter, up from an 8 percent rise estimated at the start of the month, according to Thomson Reuters I/B/E/S.

“The earning season in general seems to be really quite strong and there haven’t been any significant surprises,” said Paul Springmeyer, investment managing director at U.S. Bank Private Wealth Management.

“It’s still a very much earnings-driven environment and that is continuing to boost stocks.”

The SP 500 is trading around 18 times earnings estimates for the next 12 months, well above its long-term average of 15 times.

The Fed’s statement, which is due at 2 p.m. ET (1800 GMT), is also expected to keep investors occupied.

Although the central bank is not likely to raise interest rates, it is expected to discuss its monetary policy stance and the timing of a long-awaited balance sheet reduction. The Fed’s statement is due at 2 p.m. ET (1800 GMT).

“We don’t really expect any changes coming out of today’s meeting and expect them to maintain status quo,” Springmeyer said. “We will be looking out for any details about the balance sheet reduction.”

At 10:49 a.m. ET (1449 GMT), the Dow Jones Industrial Average .DJI was up 104.24 points, or 0.48 percent, at 21,717.67 and the SP 500 .SPX was up 1.13 points, or 0.04 percent, at 2,478.26.

The Nasdaq Composite .IXIC was up 10.40 points, or 0.16 percent, at 6,422.57.

Six of the 11 major SP sectors were higher, with the telecommunications index’s .SPLRCL 2.3 percent rise leading the gainers.

Amgen (AMGN.O) was down 2.2 percent after the biotechnology company’s sales for an infection fighter drug came in below expectations. The stock was the top drag on the SP and the Nasdaq.

General Dynamics (GD.N) dropped 4.5 percent after the maker of jets, tanks and U.S. Navy ships said it expects lower profit margins in the second half of 2017.

Advanced Micro Devices (AMD.O) jumped 10.6 percent after the chipmaker raised its full-year revenue expectations.

Advancing issues outnumbered decliners on the NYSE by 1,373 to 1,324. On the Nasdaq, 1,362 issues rose and 1,283 fell.

Reporting by Tanya Agrawal in Bengaluru; Editing by Anil D’Silva

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Oil jumps to near eight-week high after big draw in U.S. crude stocks

NEW YORK (Reuters) – Oil prices rose to near eight-week highs on Wednesday, with Brent crude futures at over $50 a barrel, as a fall in U.S. inventories bolstered expectations that the long-oversupplied market was moving toward balance.

Brent crude futures LCOc1 were up 67 cents to $50.87 a barrel by 10:39 a.m. EDT (1439 GMT). Prices surpassed levels seen Tuesday when Brent futures strengthened more than 3 percent.

U.S. West Texas Intermediate futures CLc1 climbed 83 cents to $48.72 a barrel.

U.S. crude stocks fell last week as refineries hiked output and imports dropped, while gasoline stocks decreased and distillate inventories fell, the Energy Information Administration said on Wednesday.

Crude inventories fell 7.2 million barrels in the week ending July 21, more than the expected decrease of 2.6 million barrels. The decline was the fourth consecutive drop, giving support to the market.

This added to hopes a long-awaited rebalancing was underway in the oil market. Saudi Arabia said on Monday it would limit oil exports to 6.6 million barrels per day (bpd) in August, down nearly 1 million bpd from a year earlier.

“Today’s report has strengthened the bullish sentiment already prevailing in the market, although the longevity of the move remains in doubt,” said Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics in London. “Nevertheless, the country’s crude and gasoline stockpiles remain above their five-year averages, which will cap price gains.”

The drawdown was a combination of higher exports from the United States, marginal decline in oil output and a rise in the refinery utilization rate, he said.

“The market has been tightening and the refinery margins are strong,” said PetroMatrix managing director Olivier Jakob, saying the U.S. stock draw offered a boost to prices. “You add geopolitical risk premium for Venezuela, and you’ve got a strong market.”

Venezuela, an OPEC member producing about 2 million bpd of oil, faces deepening economic woes and protests.

President Nicolas Maduro’s opponents launched a two-day national strike on Wednesday to push him to abandon a weekend election. The United States is considering financial sanctions to halt dollar payments for Venezuelan oil.

Nigerian output slipped this week as leaks forced Shell to shut a pipeline exporting some 180,000 bpd of oil. Nigeria, which has been exempted from OPEC-led production curbs, has agreed to cap or cut output when it stabilized at 1.8 million bpd.

But analysts said the current oil price rally could encourage more production, particularly from the United States.

“Relieved bulls should be careful what they wish for. Any price rebound will only embolden U.S. shale producers at a time when rumors have started to emerge that the U.S. shale boom is slowing,” PVM oil analyst Stephen Brennock said in a note.

Anadarko Petroleum Corp (APC.N) said on Monday it would cut its 2017 capital budget by $300 million because of depressed oil prices, the first major U.S. oil producer to do so, after posting a larger-than-expected quarterly loss.

Additional reporting by Fergus Jensen in Singapore and Libby George in London; Editing by Edmund Blair and Frances Kerry

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Boeing shares hit record after cost cuts lift second-quarter profit

NEW YORK (Reuters) – Boeing Co (BA.N) shares soared almost 8 percent to a record high on Wednesday after the world’s biggest plane maker posted second-quarter profit and cash flow well ahead of Wall Street estimates and lifted its full-year forecasts, helped by aggressive cost cutting.

Boeing has reduced spending by streamlining production, cutting jobs and winding down development costs, which has dramatically improved profit and cash flow.

Its 787 Dreamliner contributed about $530 million in cash in the quarter, the second-largest amount in the six years since Boeing started delivering the carbon fiber planes.

Boeing shares rose 7.9 percent to $229.20 in midday trading. The stock has soared 37 percent this year.

The company’s cash from operations, at nearly $5 billion in the quarter, was roughly double estimates of about $2.5 billion.

“Monster cash flow,” said analyst Robert Stallard at Vertical Research. The results were “about as close to perfect as it gets from Boeing,” he added.

Military aircraft sales fell 4 percent to $6.8 billion, but profit jumped 50 percent and margins widened 4.6 percentage points, another sign of cost-cutting.

Boeing now needs to keep speeding up production of 737s and stay on schedule with 787-9 and 787-10 production and the transition to the 777X, a replacement for its 777 jetliner, said Ken Herbert, an analyst at Canaccord Genuity.

The extra cash allowed Boeing to add $1.5 billion to its 2017 operating cash flow forecast, now about $12.25 billion. Boeing will increase share buybacks this year by $3.5 billion, to about $10 billion. And it will make $3.5 billion in additional pension contributions this year to reduce future costs.

Boeing said it will cut full-year capital expenditure by $300 million, but that was expected since the company has made most of the big investments in its 777X wing factory and the 737 MAX and 787-10 programs, said analyst Richard Aboulafia at Teal Group.

Boeing Chief Executive Dennis Muilenburg said that the capital spending reduction reflected declining 777X costs and was a sign that the program remains on track for the first aircraft to reach airlines in 2020.

The company lifted its full-year forecast for core earnings, which exclude some pension costs, by 60 cents to between $9.80 and $10.00 per share.

Boeing swung to a profit of $1.76 billion, or $2.89 per share, in the second quarter, from a loss of $234 million, or 37 cents per share, a year earlier that reflected charges related to the 787, 747 and KC-46 tanker aircraft programs.

Core earnings, which excluded some pension and other costs, were $2.55 per share in the quarter.

Revenue fell 8.1 percent to $22.74 billion.

Analysts expected core earnings of $2.30 per share on revenue of $23 billion, according to Thomson Reuters I/B/E/S.

Reporting by Alwyn Scott in New York and Ankit Ajmera in Bengaluru; Editing by Saumyadeb Chakrabarty, Jeffrey Benkoe and Bill Rigby

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U.S. new home sales rise in June, but trend softening

WASHINGTON (Reuters) – New U.S. single-family home sales increased in June as purchases in the West surged to a near 10-year high, but downward revisions to the sales pace for the prior three months pointed to a housing market that was treading water.

The housing market is being constrained by a dire shortage of properties, which is keeping home prices elevated and sidelining first-time buyers.

The Commerce Department said on Wednesday new home sales rose 0.8 percent to a seasonally adjusted annual rate of 610,000 units last month. The sales pace for March, April and May was revised lower.

Economists polled by Reuters had forecast new home sales, which account for 10 percent of overall home sales, increasing 1.4 percent to a pace of 615,000 units last month. New home sales increased 9.1 percent on a year-on-year basis.

They remain less than half of what they were at the peak of the housing market bubble in 2005. Demand for housing is being driven by a strong labor market, which is near full employment.

Builders are, however, struggling to keep up amid rising lumber costs and shortages of labor and land. Housing starts are running at a 1.22 million-unit pace. That is below their historic average of 1.5 million units, a rate realtors say would eliminate the housing shortage.

A separate report from the Mortgage Bankers Association showed applications for loans to purchase a home fell 2 percent last week from one week earlier to the lowest level since May. Applications, however, increased 8 percent compared to the same period last year.

The PHLX index of housing stocks .HGX fell 0.2 percent, bucking a broadly firmer U.S. stock market. Shares in the nation’s largest homebuilder, D.R. Horton (DHI.N), declined 1.6 percent. Lennar Corp (LEN.N) shares slipped 0.3 percent and Pultegroup (PHM.N) stock rose 0.3 percent.

With homebuilder confidence dropping to an eight-month low in July, the supply of houses is unlikely to improve. A report on Monday showed sales of previously owned homes fell 1.8 percent in June and will likely continue to tread water for the rest of the year.

In June, the inventory of new homes on the market increased 1.1 percent to 272,000 units, the highest level since June 2009. Still, new housing stock is less than half of what it was at its peak during the housing boom.

At June’s sales pace it would take 5.4 months to clear the supply of houses on the market, up from 5.3 months in May. A six-month supply is viewed as a healthy balance between supply and demand.

Last month, new single-family homes sales in the West soared 12.5 percent to a 180,000 unit-rate, the highest level since July 2007. They jumped 10.0 percent in the Midwest, but fell 6.1 percent in the South. Sales were unchanged in the Northeast.

Reporting by Lucia Mutikani; Editing by Andrea Ricci

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