Trefis Helps You Understand How a Company's Products Impact Its Stock Price
COMPANY OF THE DAY : BOEING
The Paris Air Show could add some lift to Boeing's share price as new orders will provide some confidence around its outlook. The company plans to debut a new Dreamliner tomorrow, and GE Capital Aviation Services is reportedly planning to place a large order.
However Airbus' wide body challenger, the new A380, aims to upset these plans and recently announced an $8 billion order from German aircraft leasing company Doric Asset Finance.
See Complete Analysis for Boeing
However Airbus' wide body challenger, the new A380, aims to upset these plans and recently announced an $8 billion order from German aircraft leasing company Doric Asset Finance.
See Complete Analysis for Boeing
Related Companies:
Caterpillar
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Lockheed Martin
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Corning
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General Electric
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FORECAST OF THE DAY : NSN WIRELESS MARKET SHARE
Nokia's telecom equipment partner Siemens is looking at options to potentially sell its stake in NSN. Nokia's stake in NSN accounts for almost 40% of Nokia's stock value by our estimates.
Siemens is considering options including a sale to private equity funds, a sale to Nokia or an IPO.
NSN's fortunes have improved in recent years due to cost cutting efforts and a business recovery that have lifted its outlook and implied price tag.
Read more...
Siemens is considering options including a sale to private equity funds, a sale to Nokia or an IPO.
NSN's fortunes have improved in recent years due to cost cutting efforts and a business recovery that have lifted its outlook and implied price tag.
Read more...
RECENT ACTIVITY ON TREFIS
FINRA Warns Investors On Alternate Funds
Last week the Financial Industry Regulatory Authority (FINRA) released a cautionary note aimed at educating investors about the risks involved in the increasingly popular alternate mutual fund offerings. The note emphasized on the fact that alternate (or ‘alt’) funds use complex trading strategies and extend one’s exposure well beyond debt and equity, because of which retail investors should be very clear about the risks involved before they put their money in these rapidly growing investment options. The warning in itself is not totally unexpected considering that the prolonged low-interest rate environment has tempted institutional and retail investors alike to explore alternative investment options that promise higher returns – a situation that has led to the alt fund market swelling in size, nearly six-fold from just over $30 billion in 2008 to almost $180 billion this May. And with the world’s biggest brokerages Bank of America-Merrill Lynch (NYSE:BAC) and Morgan Stanley (NYSE:MS) as well as asset management giants BlackRock (NYSE:BLK) and State Street (NYSE:STT) unveiling plans to make more money from the growing alternative fund industry in the recent past, unrestricted growth in the area could easily see this warning ending with tighter regulations down the line.
DuPont Lowers Its Expected Agricultural Earnings On Weather
During the Deutsche Bank Global Industrials and Basic Materials Conference held on June 13, DuPont (NYSE:DD) lowered its earnings per share (EPS) guidance for the first half of the current year. Previously the company guided for a 7-9% y-o-y decline in EPS, which it now expects to be 10% below H1 2012 earnings. The company attributed the projected decline to lower than expected agricultural segment earnings due to unseasonably cold and wet spring weather across North America and Europe this year. However, the company has reposed faith in the turnaround of its performance chemicals business by the end of this year as TiO2 inventories fall to more normalized levels. DuPont generates revenues by supplying high-performance materials and chemicals, electronic materials, high-performance coatings and agricultural products to industries and consumers worldwide. The company relies on its technological expertise and research & development to deliver products that cater to market needs. Most products manufactured by DuPont are used as raw materials by other industries, making it a predominantly B2B (business-to-business) based company with the exception of agriculture and nutrition divisions.
Small-Cap Stocks the Place to Be—If Economic Growth Is Real Email
Submitted by Abby Joseph at Profit Confidential as part of our contributors program . Make no mistake about it. The wealth in America continues to rise as it is in other parts of the world. Fueling the creation of wealth has been the easy monetary policy, which has essentially pushed up the stock market to its record-highs. Now the economy is also on the mend; albeit, it has largely been driven by the lure of easy money. Yet growth is growth. At this juncture, the growth, while somewhat muted, is there. Cyclical stocks are faring well and will continue to do so as long as the economy continues to grow. These companies include the likes of General Electric Company (NYSE/GE), Schlumberger Limited (NYSE/SLB), and Cisco Systems, Inc. (NASDAQ/CSCO). Yet to make the real big gains and increase the overall return of your portfolio, small-cap stocks are the place to have some of your capital working. The small-cap Russell 2000 index is leading the pack so far in 2013, up a healthy 16.25% as of Wednesday. The reason is that small companies tend to perform well out of a recession and during economic growth. The stock market has been seeing some shifting of capital into defensive dividend-paying stocks (read “ Investors Down-Shift Risk, Search for Safety Ongoing Theme for 2013 ”), but small-caps delivered their top gains in the months of January, March, May, and, so far, June. And my feeling is that as long as the economy grows, small-caps will outperform. Take a look at the chart of the Russell 2000 index below. The index broke north, as shown by the purple oval, out of the bullish ascending triangle. A bullish “golden cross” is firmly in place, based on my technical analysis. Chart courtesy of www.StockCharts.com We know that the key to stock market success is to make sure there’s ample diversification in your investment strategy as far as sectors and market caps. Small-cap stocks entail added risk, but the reward is what could really pay off for your portfolio as far as the total expected return. If you have too many small-cap stocks, you leave yourself open to excess selling if the market turns lower due to the high beta of small-cap stocks. You want a good balance and you need to have patience. I favor small-cap stocks for long-term growth as the valuations tend to be more attractive and worth a look for aggressive investors. And while the buying of large-cap stocks will always be an integral part of your portfolio, I suggest for added overall portfolio returns, add some small-cap stocks. Also keep in mind that reward is not without risk, but in my view, small-cap stocks are still attractive and could offer large returns if the economy and easy money continue to expand.
Major Oil Stock Picks With Low Valuations & High Yields
Submitted by George Putnam, III as part of our contributors program . These value stocks will likely move independently from the stock market. Add that to healthy dividend rewards, and these companies offer an especially useful—and potentially lucrative—portfolio addition when a bear market eventually rolls around. With the stock market continuing to surge, it has become more of a challenge to find stocks trading at attractive valuations . One group that recently caught my eye is the major integrated oil companies. Most of the stocks in this group have underperformed the S&P 500 Index over the past year, many by a significant margin. Moreover, several of the stocks discussed below have actually declined in 2013 while the S&P has gained about 16%. In addition to trading at more reasonable valuations than much of the market today, most of these stocks have the added benefit of paying relatively high dividends. Therefore, you get well paid from the dividends even if the stock prices continue to languish for a while longer. Although they may be market laggards at the moment, I like the long-term stock prospects for the big oil companies. Demand for oil (and natural gas, which many of them produce in addition to oil) is likely to keep rising for the foreseeable future, particularly in the developing countries. And whether oil prices go up or down, the major oil companies always seem to find a way to grind out substantial profits. Finally, the very fact that the oils often do move independently of the stock market as a whole makes them attractive investments. An oil stock or two can be a useful “anchor to windward” when a bear market eventually rolls around. The four stocks discussed below are all large international oil producers. They all trade at attractive valuations and pay generous dividends. If you like these investment candidates, I recently identified four additional major integrated oil stock profit opportunities . BP (BP) (British Petroleum) is in the middle of a major restructuring that was initially triggered by the disaster at its Deepwater Horizon rig in the Gulf of Mexico. The company has been shedding substantial assets, ranging from the Gulf of Mexico to Russia. In spite of large settlements relating to the Gulf disaster, management has maintained a strong balance sheet. After a brief hiatus, it reinstated the dividend in 2011 and recently raised it. BP’s strategy is to develop higher margined assets; recent successes include a major offshore gas discovery in India and a winning bid for offshore Brazilian properties. Chevron (CVX) is the fourth-largest oil company in the world, based on reserves. Chevron’s production visibility is reasonably good, and so we expect cash flow to remain strong. The balance sheet is outstanding with no net debt (cash comfortably exceeding debt). Despite trading near a 52-week high, the stock’s valuation remains compelling. ConocoPhillips (COP) has streamlined its business through a number of asset sales over the last decade. Now the company is more of a pure play exploration company than most of the other majors. The asset sales have allowed Conoco to strengthen the balance sheet, including the pay-down of some $6 billion in debt. This gives management the flexibility to pursue an active capital investment program while also providing value to shareholders via dividends and share repurchases. Exxon Mobil (XOM), formed via the 1999 merger between Exxon and Mobil, is the world’s largest independent energy company. Its activities are well diversified with oil & gas exploration/production accounting for 64% of 2012 revenues, refining/marketing 28% and chemicals 8%. Exxon is currently the largest producer of natural gas in the U.S., and the bulk of its $38 billion annual capital spending budget is focused on further building its reserves. The balance sheet is strong, cash flow substantial and management is well regarded. Major Oils with High Yields & Low Valuation Company Symbol Recent Price 6-Year Range Market Cap. Mil. Forward P/E Dividend Yield BP BP 43.65 79.77–26.75 139.43 7.64 5.00 Chevron CVX 125.49 127.40–55.50 243.32 10.02 3.20 ConocoPhillips COP 62.78 73.15–26.01 76.76 10.45 4.20 Exxon Mobil XOM 92.08 95.64–56.23 409.42 11.17 2.80
Dunkin' Looks To Upgrade Its Image Beyond Breakfast On The Run
Since eating on the go has become a convenient and an integral part of the American lifestyle, customers have developed a certain image or experience associated with a particular restaurant. For example, Starbucks is seen as a place to go relax at and sometimes get work on your laptop, whereas Dunkin’ Donuts is a place to takeaway your coffee or doughnut. However many well known chains are trying to change diners’ mindsets to attract new customers and ultimately drive incremental sales. A large proportion of Dunkin’ stores are relatively small in area with only a few seats. As a result, once the office goers or the university students are done with their daily round of breakfast coffee/doughnut, the traffic dries up. This is evidenced from the fact that the restaurant generates only 40% of its sales after 11 a.m. To address its afternoon blues, many new Dunkin’ stores will feature sofas and televisions so that diners can enjoy their meal at a slower pace. The management hopes to sell the idea of lunching at Dunkin’ Donuts to the public. Dunkin’ has been trying to boost the sales of its afternoon segment for a while now, and it has added sandwiches like the Roast Beef Bakery Sandwich, Angus Steak and Egg Breakfast Sandwich etc in the past. We expect more product announcements and efforts like this are in the pipeline as well. Similarly, the idea of eating a meal doesn’t occur naturally to customers at Starbucks. Until now, only one-third of the transactions involved a food item at Starbucks. The coffee chain is now expanding its bakery menu to drive more sales, and the company’s La Boulange acquisition was aimed at improving the quality and attractiveness of its food items. These incremental sales can help drive growth and improve profit margins for the company. See full analysis for Dunkin’ Brands Fast Food Chains Go Upscale Fast food chains are also trying to project themselves as more upscale, thanks to the success of fast-casual chains like Chipotle Mexican Grill (NYSE:CMG) and Panera Bread. The success of the fast-casual segment has illustrated that the customers are ready to spend more if they indeed find value in the menu items. The restaurant chain having the lowest prices will not necessarily be the one who will be more successful. The restaurant chains work hard to project themselves in a certain way. The home page of Panera Bread’s website features a picture of a salad prominently, which goes well with its image of a chain serving fresh and healthy food. Similarly, one look at Chipotle’s website will tell you just how seriously they take their commitment in serving organically raised food. This is also a side effect of the general public’s growing predilection towards eating healthier food. If a food is ‘fast,’ it cannot be healthy. That’s why some of the fast food chains are also refurbishing their existing restaurants in order to make them appear more upscale. An upscale environment creates the notion of fresher and better ingredients used. In addition to Dunkin’, some of the remodeled McDonald’s stores feature sofa seating, televisions and free Wi-Fi. It has also added healthier items to their menu in the past. We have a $40 price estimate for Dunkin Brands, which is roughly in line with the current market price. Understand How a Company’s Products Impact its Stock Price at Trefis
Best Buy Partners With Microsoft To Open In-House Stores
After its partnership with Samsung, electronics retailing giant Best Buy (NYSE:BBY) has now teamed up with Microsoft to open the latter’s stores within the company’s brick-and-mortar outlets. Microsoft will be the third tech giant after Apple and Samsung to have a dedicated selling space within Best Buy stores. Also, its stores will be much larger than those of Apple and Samsung. Best Buy seems intent on leveraging the value of its real estate to turn it into an asset. High real estate costs have been the primary reason for the company’s eroding competitiveness in the market with the advent of giant e-commerce players like Amazon. While Amazon can afford to offer products at lower prices to customers, brick and mortar retailers like Best Buy find it difficult to do so in face of high operating costs. The company hopes to increase footfalls in its stores as more people visit to experience gadgets firsthand.
Gold and Silver Outlook: Will the Fed Taper QE3?
Submitted by Trading NRG as part of our contributors program . The prices of gold and silver haven’t done much during last week as they moved in an unclear trend. Next week, however, the precious metal market might stir up as the FOMC will convene and decide to any changes to its monetary policy. Let’s analyze the upcoming events that may affect gold (GLD) and silver (SLV). Will the FOMC taper QE3? This question will be the main issue that could stir up precious metals market this week. The Fed’s attempts to revive the U.S economy seem to have had limited success so far. Since the beginning of the year, unemployment dropped by 0.3 percent points to reach 7.6% in May – more than a one percent point above the Fed’s goal of 6.5%. Inflation is set at 1.1%, which is well below the Federal Reserve’s target of 2%. The GDP rose by only 2.5% in the first quarter of 2013 – lower than what many had anticipated. This means, the Fed’s QE3, in which the Fed is purchasing each month $85 billion long term securities, is having a very limited positive effect on the economic growth of theU.S. If the Fed will taper QE3 this month, precious metals are likely to sharply drop. On the other hand, the Fed is having little help from the government: The IMF recently criticized U.S policy makers for the budget cuts. The budget cuts may have also impeded the progress of the U.S economy. So will the Fed taper its asset purchase program? Last month, the FOMC left it policy unchanged, and in his recent testimony in Congress, Bernanke didn’t offer any insight regarding when the Fed will start tapering QE3. Based on the above, I think it’s still too early for the Fed to start tapering QE3. Nonetheless, I also suspect the Fed will lower its asset purchase pace closer to the end of 2013. Take Away Based on the above, my guess is that gold and silver will fall this week especially if the Fed will announce of any changes to its monetary policy or revise its forecast of the U.S economy. The developments inChinaandIndiacould also pressure down gold and silver prices. Finally, if gold and silver prices will decline, gold producers’ stocks such as Barrick (ABX), Goldcorp (GG), and Newmont (NEM) are likely to trade down. For further reading see: Gold and Silver Monthly Outlook for June Gold and Silver Outlook for June 17-21
Sirius XM Investors Shoudn't Worry About Apple's iTunes Radio Just Yet
Apple (NASDAQ:AAPL) recently announced its Internet radio service iTunes Radio, which will offer several features similar to that of Pandora, including personalized radio stations, a free ad-supported service as well as the option for ad-free subscription. While this implies some serious competition for Pandora, Sirius XM (NASDAQ:SIRI) may not be immune either. Sirius XM is the only satellite radio provider in the U.S. and has done extremely well over the last couple of years on growing automotive sales, improving new car penetration rate and a sustained new vehicle conversion rate. On the surface, it may seem like there is little direct competition between the company and Apple’s iTunes Radio, but it is Apple’s ambition of integrating its services and devices with in-car systems that might be of concern to Sirius XM. The technology giant is in talks with several automotive manufacturers, including Honda, Nissan, Volvo, Mercedes, Jaguar, Hyundai, Kia and others, to integrate its iOS7 operating system. Apple’s service will give its users access to its entire iTunes catalog which boasts of over 26 million songs. In addition, the subscription fee for iTunes Radio (at $24.99 per year) is much lower than that for Sirius XM, which charges $14.49 per month for its basic service. With seamless integration across different iOS devices and strong financial muscle, Apple has the potential to make a dent in Sirius XM’s growth. However, there are certain areas where Sirius XM still has an advantage. Whether that advantage will be good enough to stop Apple or not remains to be seen.
Nokia Faces NSN Conundrum As Siemens Readies To Exit
Siemens seems to be increasing its efforts at finding a suitable buyer for its wireless infrastructure joint venture with Nokia (NYSE:NOK), Nokia Siemens Networks. The German company has reportedly approached a number of private equity players, including Blackstone, TPG and KKR, to see if they would like to buy out either the joint venture completely or possibly only its stake in the company. The talks seem to have followed after a recently amended shareholder agreement allowed both Nokia and Siemens the freedom to do as they wish with their stake without the fear of being vetoed by the other party. Siemens, which has only a non-controlling stake in the JV, has been looking to shed its non-core assets in recent years, and exiting the joint venture fits in well with that strategy. Nokia, on the other hand, faces a tricky situation and may not want to sell out completely given its controlling stake in the venture that is undergoing a successful turnaround in operations currently. See our complete analysis for Nokia stock here Nokia’s dilemma The joint venture has been the lone bright spot for the handset maker over the past year as its smartphone sales plummeted amid a tough transition to Windows Phone. Due to the ongoing restructuring process as well as the transition to 4G LTE taking place in many parts of the world, the venture has managed to not only return to operating profitability in the last few quarters but has also generated cash for six quarters in a row. At a time when Nokia is conserving cash by suspending dividend payouts and leasing its headquarters instead of owning it, NSN is proving highly valuable with its steady cash flows despite not being a core asset. Last quarter, for example, the company managed to generate cash solely because of NSN’s performance. While NSN generated more than 230 million euros in free cash flow last quarter, Nokia Group, as a whole, could manage less than 90 million Euros. As a result, we estimate that NSN is Nokia’s biggest value contributor currently, accounting for almost 40% of our $5 price estimate for the company. This essentially means that Nokia won’t part with such a valuable asset easily. It would look for an enterprise value of around $6 billion for its half of NSN to cash out or reduce its stake in the company. However, given that NSN hasn’t been profitable on an ongoing basis, it might be tough for the JV to command a good valuation right now. And Nokia won’t likely settle for anything less considering the ongoing turnaround at NSN and valuable cash flows it is generating. Therefore, while Nokia will eventually look to exit the JV considering it is not its core focus, we don’t see this happening until the handset business has sufficiently turned around and NSN has achieved sustained profitability for a few quarters. Until these two conditions are met, we expect Nokia to look for a partner to replace or acquire a part of Siemens’ stake in NSN. NSN’s turnaround The likelihood of NSN sustaining profitability is reasonably good. Over the past year, Nokia Siemens Networks has increasingly shown signs of turning the corner as a result of an ongoing restructuring that has not only helped improve its operating margins but also restored focus on its wireless business. As a result, NSN has fast emerged as the leader in the ongoing 4G LTE transition around the world and is taking share away from competitors. As of the third quarter of last year, NSN had succeeded in increasing its market share to about 20% share of the wireless infrastructure industry, only 2% behind #2 player, Huawei. It now expects to reclaim its #2 spot behind Ericsson by the end of 2013. Most of these gains should come on 4G LTE – a market NSN managed to capture almost 22% of in Q3 2012, up from 13% the previous year. Apart from revenue share gains, NSN is also benefiting from the streamlining of operations and the ongoing job cuts. By the end of 2013, NSN aims to cut around 17,000 jobs and achieve a total of $1.35 billion in savings as part of the restructuring initiative announced in late 2011. Simultaneously, NSN has been selling off non-core assets and increasing focus on wireless broadband which has strong long-term growth trends as opposed to the relatively stagnant landline market. As a result of the reshuffle, NSN has performed really well recently, returning to operating profitability in Q4 2012 and managing to turn a small profit in a seasonally weak Q1 as well. We estimate NSN’s EBITDA margins in 2012 to have doubled over the previous year. This is a big positive sign that the company’s cost-cutting initiatives are taking hold – a trend we expect to continue in the coming years as well. Understand How a Company’s Products Impact its Stock Price at Trefis
Long Awaited News Corp Split Is Just Around The Corner
News Corp’s (NASDAQ:NWS) shareholders last week formally approved a plan to split the media giant’s publishing assets from its entertainment division. The split, which will take place on June 28th, 2013, will result in creation of two entities – 21st Century Fox and News Corp. 21 st Century Fox will include the company’s media and entertainment businesses while the News Corp will retain newspaper assets such as the Wall Street Journal and the New York Post. Mr. Murdoch stated that News Corp’s size and complexity made it difficult for investors to understand and properly value the company. While the split is a welcome move for both the units, it will be interesting to see how the publishing unit revives in an age where a shift to the web had cut advertising and circulation revenue. See our complete analysis for News Corp
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