Treasury Secretary Sets Date For Middle Class Tax Cuts, Plus Boston Beer Posts Disappointing Q4 Earnings

morning brew

Enjoy your February 24th hand-crafted Brew!

QUOTE OF THE DAY

“Close to the edge” — Elon Musk, commenting on a potential cash crunch leading up to Tesla’s highly-anticipated Model 3 launch. Will Tesla need to raise more capital to complete the launch? It could come down to the wire.

Market Snapshot

  • The Dow and S&P 500 managed small gains on Thursday, and just FYI it was the Dow’s tenth straight record close—not too shabby. But the Nasdaq closed in the red, weighed down by biotech stocks
  • Oil recovered from Wednesday’s losses following data that revealed a smaller than anticipated rise in U.S. crude inventories

Dropping LikeBirds?

…Close enough. That’s right, two more Twitter (-0.31%) executives are joining the already extensive list of execs that have left the company this past year. The two new departees are Lara Cohen, head of entertainment talent, and David Bicknell, director of finance. These recent exits might slow the company’s recovery efforts from a rough 2016—which was a “transformative year” according to CEO Jack Dorsey.

Tremendous Tax Plan

…Still waiting. Steven Mnuchin, the newly-minted U.S. Treasury Secretary, announced yesterday that tax relief for the middle class and businesses is coming in August of this year. U.S. equities are currently booming in anticipation of the tax reform, but investors are anxious for more details. Following the announcement of a more concrete timeline, the dollar fell slightly and U.S. stocks shrugged it off. One thing we can be sure about: more information has to be released before businesses can really make moves.

Boston Beer Loses Fizz

…And investors wake up to a nasty hangover following disappointing Q4 earnings. Yep, sales of Boston Beer’s (-5.22%) Samuel Adams and Angry Orchard lines are getting flat, a result of a softening craft beer sector. As drinkers get more hip, the entry of new craft brewers expanding their distribution are stealing Boston Beer’s previously-held special status. Its first spring brew, Hopscape, has had a rough debut—and it isn’t even spring yet.

Papa John’s Pulls a Peyton Manning

…As weak NFL ratings hurt the pizza giant’s first quarter results. Despite its October pan pizza rollout, Peyton’s cheesy post-Super Bowl L #xoxo moment with Papa John’s’ (-1.04%) founder John Schnatter was considered a massive headwind to sales. A crusty Papa blames bad NFL ratings for this dip—its expensive investments in the NFL contributed to the tough times, along with worse-than-expected same store sales.

Nissan’s Mr. Fix It

…Carlos Ghosn unexpectedly steps down as co-CEO (-0.09%) to focus on building the auto alliance between Nissan, Renault (-1.20%) and Mitsubishi Motors (-0.13%). Ghosn is hailed as one of the greatest turnaround experts ever after bringing Nissan back from the brink of bankruptcy in 1999 to the industry giant it is today. He remains in top positions at all three of the companies in the auto alliance, which reduces costs by taking advantage of greater economies of scale (three car companies buying the same parts get cheaper parts). Safe to say, Mr. Ghosn is a legend…who’s even been portrayed as a comic book superhero.

Kohl’s Is Trimming Down

…But only on square footage. Both rivals Kohl’s (-2.06%) and Macy’s (+0.25%) have a new plan in mind: carve out prime space within their cavernous locations to lease to other retailers. Kohl’s lost 19 stores in 2016, but doesn’t plan to lose any more with this new endeavor. Have no fear, because Kohl’s Q4 earnings beat analyst expectations and the company raised its dividend. The dueling moves to lease out real estate underscores the pressing need for the two chains to better monetize their real estate assets, as the shift from in-store to online shopping becomes increasingly evident.

Other Stories

  • HP Enterprise down 6% on weak profit forecast
  • Former head of IMF sentenced for embezzlement
  • Herbalife announces $1.5 billion stock buyback
  • Amazon looks to enter liquor business

Economic Calendar


Water Cooler

Oscars 2017: Glitz, Glamour and Low Grossing Movies

The biggest night in Hollywood is only days away. To best prepare for Oscar Sunday, let’s take a look at the numbers. Unsurprisingly, Meryl Streep earned her 20th career nomination this year, and Lin-Manuel Miranda is one award shy of joining the EGOT club (Emmy, Grammy, Oscar and Tony). Here’s what’s more surprising:

  • The most renowned Academy Award, Best Picture, is more likely to go to a low-budget, low-grossing film than a blockbuster. Time to roll out the red carpet for the movies you probably didn’t see.
  • Not one of the nine nominees, averaging $54 million in domestic ticket sales, made enough to rank in the top 50 highest grossing films for the year. “La La Land” is the favorite to win Best Picture, making $134.6 million domestically and $340.5 million globally. The second favorite, however, grossed much, much less: “Moonlight” only made $22 million domestically.
  • Lions Gate has the most overall nominations of any distributor, with “Hacksaw Ridge,” “Hell or High Water” and “La La Land.” Viacom did well this year too, with two best picture nominees in “Arrival” and “Fences.”

The Breakroom

Interview Question of the Day

The average age of 10 members of a committee is the same as it was four years ago because an old member has been replaced by a young member. How much younger is the new member? (Answer)

Business Term of the Day

The Securities and Exchange Commission is increasingly calling out companies that offer a different flavor of “non-GAAP” accounting that they refer to as ”individually tailored” accounting. For example, last fall Tesla touted its non-GAAP revenues as if it was allowed to recognize deferred revenue from lease-type arrangements immediately. The SEC questioned this practice and Tesla said it would stop reporting non-GAAP revenues in response.

Food for Thought

Norwegian Air announced yesterday that it will launch flights from the U.S. Northeast to Europe for as low as $65. Wow.
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