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Highlights from the past week

Market / Macro Economic Summary

Markets declined in the first week, but it should not have been much of a surprise.  I’m never one to play the game of “I knew it” but most of us should have understood this was a possibility.  We concluded 2023 with a nine-week winning streak and it should have been expected that we take a breather at some point.  We received some good news on Friday as the payroll numbers came in with the US economy adding 216,000 jobs.  Additionally, the unemployment rate held steady at 3.7% which means the economy is not buckling or hurting despite the elevated interest rate environment.  I’ll continue to emphasize that this year’s returns in the market will be dependent on the Federal Reserve lowering interest rates at some point and the economy keeping from cracking.  Both of which I think are a fairly high probability.

Company Specific / Macro Economic Summary

Walgreen’s Boots Alliance (WBA)

Shares declined as much as 10% but closed 5% lower on the day, as the company cut its dividend for the first time in 50 years and by a whopping 48%.  The stock used to be the highest dividend yielder in the Dow Jones Industrial average, but now the dividend has gone from 7% to 4%.  Newly installed CEO Tim Wentworth said it was an incredibly important and responsible decision to secure the long-term balance sheet and cash position.  Earnings per share of 66 cents exceeded the calls for 61 cents.  Revenues of $36.71 billion was also higher than the $34.86 billion analysts were looking for.  

Constellation Brands (STZ)

Shares rose nearly 4% as the wine and spirits distributor reported a mixed quarter.  Earnings per share rose 13% over the same period last year to $3.19 as compared to the $3.00 Wall Street was looking for.  Sales did increase 1% to $2.47 billion but fell short of the analyst estimates of $2.54 billion.  Beer sales were led by Modelo Especial, which retained its #1 place in the US above Bud Light.  Constellation also had strong growth in the beer category from Corona Extra and Pacifico.  Wine and Spirts sales were light in lieu of a decline in the wine market.

Parting Thoughts

This is a rare opportunity for me to highlight the rather rare instance in which dividends can be cut.  Companies rarely do this but oftentimes, when new management takes over, this is their chance to essentially clean the slate and try to reorganize the company for future growth and improvements.  This is where active management becomes important because the investment thesis behind keeping money in Walgreen’s Boots becomes something that must be considered if monies are already allocated here.

We welcome an opportunity to discuss the above detail and wish you much success in the rest of your week!

Regards,

E.Palacios

Erick J.  Palacios, MBA

Plan to Prosper Wealth Management’s clients & employees will from time-to-time hold securities mentioned above. Commentary is not endorsements or recommendations of any securities.