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Trefis Analysis

COMPANY OF THE DAY : NETFLIX

Netflix recently raised subscription prices in Europe, citing the need to continue providing attractive original content. We expect that Netflix will continue raising rates as it has significant pricing power. In a recent note we explain this view in more detail.

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FORECAST OF THE DAY : JUNIPER'S EDGE ROUTER MARKET SHARE

Juniper's edge router market share has been declining of late, primarily driven by competition from Cisco and Alcatel Lucent. Going forward, we expect the downward pressure on Juniper's edge router market share to continue, albeit at a more moderate rate.

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RECENT ACTIVITY ON TREFIS

Credit Suisse Logo
  • commented 8/29/15
  • tags: CS
  • Mortgage Kapital credit is the best loan lender

    Good Day Everyone,
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    Mortgage Kapital credit is the best loan lender Good Day Everyone, I am Nolan Osman, i'm new in here but i like to share my testimony to everyone that has tried everything possible to borrow Money from Bank or seek for a loan to boost your business and had lost hope. You must ignore all these loan lenders, because they are all SCAMS...real SCAMS...i was a victim of which i was ripped thousands of dollars... But my life entirely changed since I met Mortgage Kapital Credit post by chance on internet! and how they are giving good loan online and i decided to ask for a loan as soon as possible. I thought it was a scam just like other post but i got reply and they approved my loan for just 3% within 24 hours after meeting up to their necessary requirements, and my loan was deposited in my bank account without collateral. I advise those who are looking for a reliable lender to contact mortgagekapitalcredit @ gmail.com or Facebook (facebook.com/klement.antonin.7). I completely trust them and please do not hesitate to contact me at nolan.osman @ yahoo.com if you want to know more about them. Nolan Osman sent from my ipad
    DISH Logo
    Weekly Pay-TV Notes: Dish’s Sling TV Flounders During Fear the Walking Dead Premiere, Netflix Collaborates With SoftBank Ahead Of Japanese Launch
  • By , 8/28/15
  • tags: DISH NFLX
  • The pay-TV industry saw significant activity this week, with Dish Network’s Sling TV suffering an outage during Sunday night’s premiere of AMC’s highly-anticipated Fear the Walking Dead . This is the fourth time in the last few months when Sling TV has failed to provide satisfactory service during the telecast of a high profile event. On a separate note, Streaming giant Netflix has decided to partner with Japan’s SoftBank Group ahead of its launch in the Asian country. Netflix has set a September 2 launch date for Japan and teaming-up with local businesses will help the company in reaching out more efficiently to the masses. On that note, we discuss below these developments related to the pay-TV companies over the past few days.
    MSFT Logo
    How Can 75 Million Windows 10 Download Boost Microsoft's Revenues?
  • By , 8/28/15
  • tags: MSFT GOOG IBM
  • Microsoft (NASDAQ:MSFT) posted on Wednesday that over 75 million users have downloaded Windows 10 to their personal computers and tablets in the first month of its release. This signifies that its program to offer free update for users running Windows 7 or Windows 8.1 on PCs or notebooks for the first year has fared well. Furthermore, it is a significant improvement on Windows 8, which sold 40 million licences in its first month. However, the question remains how Windows 10 can help Microsoft to boost its topline and bottomline. In this note, we explore how Windows 10 can boost sale of apps in the Windows store that might boost Microsoft’s revenues. See our complete analysis of Microsoft here Installation of Windows 10 Is Propagating Sale of Ancillary Products The Windows Operating System Division is Microsoft’s third largest and makes up 9.7% of its stock value by our estimates. However, it contributes 15.5% to Microsoft’s top line. One of the primary drivers for Microsoft’s Windows division is global PC sales. Approximately 65% of total Windows Division revenue comes from Windows operating systems purchased by original equipment manufacturers (“OEMs”) and pre-installed on their systems. According to IDC, the global PC sales continue to decline and global shipments were down by 11.8% in Q2. We believe that global PC sales will remain tepid as users continue to adopt Tablets and smartphones as alternates to satisfy their needs. Currently, we forecast that the global desktop sales will decline by 5% to 130 million and global notebook market to remain flat at 180 million units shipped in 2015. However, because the company has offered the free Windows 10 upgrade to the existing users of Windows 7, Windows 8 and Windows 8.1, there has been widespread adoption among users. This has enabled the company to sell more apps on its app store. Windows marketing chief Yusuf Mehdi tweeted that Microsoft’s store has witnessed six times more downloads per device than the previous version of Windows (i.e. Windows 8). Moreover, Xbox One users streamed 122 years’ worth of gameplay to Windows 10 PCs during the last four weeks. We believe that Microsoft is set to become the third platform behind Google’s Android OS and Apple’s iOS on the back of user installs. This can incentivize app development and create a sustainable and profitable ecosystem for developers and users to thrive in. This would not only improve user experience but also boost Microsoft’s topline in the future. We currently have a  $44.46 price estimate for Microsoft, which is 5% above the current market price. Understand How a Company’s Products Impact its Stock Price at Trefis View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research  
    MU Logo
    Weak DRAM Demand & Declining ASPs Is A Temporary Setback For Micron
  • By , 8/28/15
  • tags: MU TXN SSNLF BRCM
  • Leading memory chip maker,  Micron Technology’s  (NASDAQ:MU) stock has been on a downhill trajectory since the start of 2015, mainly on account of: 1) weaker-than-expected PC sales, in advance of the release of Windows 10; 2) adverse currency headwinds, as the company earns a sizable amount of its business overseas, especially Japan; and, 3) Micron’s own admission that its DRAM and NAND output (or “bit”) growth will lag that of the market in calendar year 2015, as it executes on key milestones in technology deployment and product introductions. In the last three months, the company has seen a steeper decline in its valuation, with its stock price declining by almost 45%. In addition to the above factors, which contributed to the weak investor sentiment, Micron has been hit by an oversupply situation and declining prices in the DRAM market. The market for memory products is highly cyclical in nature, and the product prices are heavily dependent on the balance of demand and supply. In addition to the slowdown in PC sales in recent years, DRAM demand has been hit by rising competition and the increasing consolidation in the market. While we agree that the weak PC DRAM demand and the ongoing decline in DRAM pricing will continue to impact Micron’s business in the short-term, we believe that the company’s long-term growth potential remains strong, as it increases its focus on other emerging segments. See our complete analysis for Micron here
    DIS Logo
    Weekly Media Notes: Disney's Push For Star Wars Merchandise, Warner's Efforts In China And CBS Cablevision Carriage Deal
  • By , 8/28/15
  • tags: TWX CBS VIA
  • Global equity markets gained some momentum after last week’s massive sell-off, owing to concerns over China’s macro-economic environment. Media stocks also bounced from their recent lows and most of them were up anywhere between 2% to 5%. The media industry at large remained active this week with Disney announcing the launch of Star Wars merchandise. In another note, Time Warner is eyeing China’s regional movie market to grow its box-office revenues. In yet another, CBS and Cablevision inked a carriage deal, which also includes CBS All Access and Showtime streaming service. On that note, we discuss below the developments related to these media companies over the last week or so.
    CLF Logo
    The Impact Of Economic Turbulence In China On Metals And Mining Stocks
  • By , 8/28/15
  • tags: CLF VALE RIO MT X FCX AA NEM ABX
  • The past few days have seen a sharp decline in the U.S. stock markets with the S&P 500 down nearly 8% over the course of the last ten days at the close of trading on August 26. Fears of an economic slowdown in China, the devaluation of the Yuan, and the potential impact of these events on U.S. equities have weighed heavily on investor sentiment. The recent sell off in the stock markets has certainly negatively impacted metals and mining stocks. China is the world’s largest consumer of nearly all metals and fears of weakening demand from China is certainly material to the fortunes of these companies. In this article, we will take a look at the implications of the weakening Chinese economic prospects for metals and mining companies. Macroeconomic Situation in China As per forecasts made by the IMF in July, Chinese economic growth is expected to slow to 6.8% and 6.3% in 2015 and 2016, respectively, from 7.4% in 2014. Slowing Chinese economic growth is particularly evident in the manufacturing sector, as indicated by the Manufacturing Purchasing Managers Index (PMI). The Manufacturing PMI measures business conditions in the manufacturing sector of the concerned economy. When the PMI is above 50, it indicates growth in business activity, whereas a value below 50 indicates a contraction. The following chart illustrates the weakening prospects of the Chinese manufacturing sector.     In an attempt to revive growth through boosting exports, the Chinese central bank devalued the Yuan by around 2% against the Dollar earlier in the month. This move will make Chinese exports cheaper in Dollar terms. The move was also viewed as a confirmation of weakening Chinese economic growth, which has negatively impacted most metal and mining stocks. Starting with iron ore and steel, we will take a look at the implications of these events for prices of various metals and related stocks. Iron Ore and Steel The markets for iron ore are characterized by an oversupply situation, with global iron ore majors such as Rio Tinto (NYSE:RIO) and Vale (NYSE:VALE) continuing to ramp up production in the face of weak demand. Since iron ore is the chief raw material for the steel industry, demand for the commodity by the steel industry plays a major role in determining its prices. Benchmark international iron ore prices are largely determined by Chinese demand, since Chinese steel mills purchase nearly two-thirds of the world’s seaborne iron ore supply. As per estimates made by the World Steel Association (WSA) earlier  in the year, Chinese steel demand growth is expected to decline by 0.5% in 2015, following on from a 3.3% decline in 2014. With the prospects of the Chinese manufacturing sector continuing to weaken, as indicated by the manufacturing PMI numbers shown earlier, Chinese demand for steel may decline faster than WSA estimates. Weak demand for steel indirectly results in weak demand for iron ore. The devaluation of the Yuan has further dented the prospects of iron ore companies, making Dollar-denominated iron ore dearer in Yuan terms, which is likely to weaken Chinese demand for the commodity even more. This is reflected by the decline in iron ore stocks post the announcement to devalue the Yuan on August 11. The exception is Cliffs Natural Resources (NYSE:CLF), since the majority of the company’s revenues are derived from the North American steel industry and a weakening of Chinese demand for iron ore does not directly impact it. Further, Cliffs’ stock has already fallen considerably over the last year or so. The devaluation of the Yuan has given a fillip to Chinese steel exports, making them cheaper in Dollar terms. This has negatively impacted the prospects of steel producers such as ArcelorMittal (NYSE:MT) and U.S. Steel (NYSE:X). The North American operations of both these companies were already suffering from rising steel imports from China, competition from which has negatively impacted steel shipments, pricing, and margins for the North American operations of these companies. Domestic steel producers claim that steel imports from China are priced unfairly low and have filed anti-dumping duty petitions against them. In the absence of anti-dumping duties against these steel imports, cheaper steel imports driven by a weaker Yuan are likely to further worsen the prospects of steel producers. The stock prices of both ArcelorMittal and U.S. Steel have declined considerably post the announcement to devalue the Yuan on August 11. Copper, Aluminum, and Oil China is the largest consumer of copper, aluminum, and the second largest consumer of crude oil in the world. Copper and aluminum are metals with diverse industrial applications. Weakening Chinese manufacturing growth has negatively impacted the demand for these metals. In addition, a slowing Chinese economy has dampened Chinese demand for crude oil, the prices of which have tumbled over the last twelve months due to oversupplied global markets. Pricing for all of these exchange traded commodities is denominated in Dollars, with sales contracts linked to exchange traded prices. The devaluation of the Yuan is expected to negatively impact Chinese demand for all of these commodities and consequently, their prices. This has negatively impacted the prospects of Freeport McMoRan Inc. (NYSE:FCX), which sells copper and oil and gas products, and Alcoa (NYSE:AA), which sells aluminum based products, as indicated by the sharp decline in their stock prices post the announcement of the devaluation of the Yuan on August 11. Gold Gold prices have been under pressure over the course of 2015 due to expectations of an interest rate hike by the Federal Reserve. An interest rate hike is likely to reduce the investment demand for gold as investors shift towards interest bearing assets. China is the world’s largest consumer of gold. A weakening Chinese economy has tempered the consumer demand for gold in China. Jewelry demand for gold fell 5% year-over-year in China in Q2. Weakness in GDP growth has retarded the expansion in networks of jewelry retail chains into smaller Chinese cities. Further, stock market turbulence in China has also dampened the demand for gold. Investments into a booming Chinese stock market reduced discretionary spending on gold jewelry in the early part of Q2. Moreover, the sharp correction in the Chinese stock market in June wiped out capital gains made by investors, damaging consumer sentiment and reducing discretionary spending on precious metals. As discussed previously in the article, macroeconomic weakness in China, and the devaluation of the Yuan, have weakened the demand and pricing environment for most metals. Cheaper commodities, a stronger Dollar, and a weaker Yuan, have put downward pressure on imported inflation in the U.S., developments that may delay or moderate the Fed’s decision to raise interest rates. As mentioned previously, gold prices have been under pressure due to expectations of an interest rate hike by the Fed. A delayed or moderated interest rate hike would boost gold prices. In light of recent events, it remains to be seen whether, and by what amount, the Fed raises interest rates in 2015. Conclusion The recent stock market turbulence and devaluation of the Yuan are symptomatic of a slowing Chinese economy. Weak Chinese demand for copper, aluminum, steel, and oversupplied global markets for iron ore and crude oil, were already negatively impacting pricing for these commodities before the latest bouts of economic turbulence from China. However, a weaker Yuan and a further slowdown in Chinese growth will worsen the demand-supply dynamics of these commodities, negatively impacting pricing. Copper, aluminum, iron ore, and crude oil are currently trading at multi-year lows, and prices are close to, or have approached, production costs. Pricing for these commodities may deteriorate further, but with prices having fallen considerably over the last twelve months and approaching production costs, any further declines in pricing are likely to be muted. The recent sell off in metals stocks may have been slightly exaggerated, since a slowdown of the Chinese economy was already factored into stock prices. It is perhaps the uncertainty about the extent of the slowdown that has created the latest bout of panic. However, regardless of the extent of the slowdown, with economic growth floundering in China, a significant improvement in the prospects of metals and mining companies looks unlikely in the near future. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research  
    CVS Logo
    Can Pharmacy Retailers Finally Stop Worrying About Generic Price Inflation?
  • By , 8/28/15
  • tags: CVS RAD WAG
  • Drug retailers have had to deal with thin margins for a while now, owing to a combination of factors. As generic drug prices have inflated and reimbursement rates have remained flat, pharmacy chains have posted lower profits. A building backlog of generic approvals at the FDA kept new suppliers away for longer and resulted in a sustained price increases. Even lobbying with the legislation for faster updates to the generic reimbursement limits doesn’t seem to be working. Meanwhile, most pharmacy chains have shifted focus on to other segments such as beauty products and retail clinics in search of profitability. The tide seems to be turning, however, as indicated by latest data on generic prices and FDA approvals. While generic prices are still increasing, fewer drugs have increased in price and also by lower amounts in Q2 2015 than they did an year ago. The pace of FDA approvals for generic drugs has also picked up in 2015 and could ease the inflation if the trend continues. It is an encouraging sign for all the pharmacy chains, especially Rite Aid (NYSE: RAD), whose margins are much lower than key competitors, Walgreens (NASDAQ:WBA) and CVS Health (NYSE:CVS), mainly due to smaller scale and lower bargaining power with drug manufacturers. Additionally, given Rite Aid’s high investments in store remodels and acquisitions, its need for capital is higher and a decline in margin pressure will be a welcome relief. Lets take a closer look how trends have changed in the last few quarters leading to the decrease in price inflation. Fall In Drug Acquisition Costs The Drug Channels Institute conducted a study using the drug acquisition cost data, which the Centers for Medicare & Medicaid Services (CMS) collect and publish. Similar to what was seen an year ago, half of the generic drugs in the sample increased in cost and the other half decreased. However, the average increase was a mere 2.6% this year (Q2 2015) compared to a 25.7% increase in the same period an year ago. More than 70% drugs had increases of less than 10% in Q2 of this year, compared to under 50% drugs an year ago. Considering multi-fold price increases seen last year, this is a significant slowdown in the price inflation. More detailed analysis of the price changes can be found here . Generic Approvals By FDA Have Accelerated in 2015 Price increases in a particular industry usually attract new suppliers resulting in an increased competition, thereby bringing the prices back down. This wasn’t the case with generics because stricter regulation by the FDA limited the supply. In the past few years, FDA has been slow on granting approvals for generic manufacturers which led to a build up of applications. According to an analysis done by Randall Stanicky at RBC Capital Markets, the backlog at FDA grew from 2,866 ANDAs (Abbreviated New Drug Applications) in 2012 to about 4,000 by 2014. More recent observations, however, indicate that the pace of approvals has picked up in 2015 and if sustained for the rest of the year or beyond, could resolve the supply issues and ease pricing pressure. Furthermore, faster approvals are likely to draw more suppliers, accelerating the deflation. While the FDA does its job, pharmacy retailers are busy doing theirs, as they continue to aggressively lobby for changes in legislation related to reimbursement rates. Either way, the pharmacy industry has seen the worst of price inflation and it is only going to get better with time. Refer to our posts on generic price inflation and reimbursement rates for more detail on the topics. View Interactive Institutional Research (Powered by Trefis) Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research Sources: Drug Channels Institute
    MCD Logo
    Is Japan Situation A Warning Sign For McDonald's?
  • By , 8/28/15
  • tags: MCD DNKN QSR SBUX CMG
  • Can McDonald’s  (NYSE:MCD) defend its dominance in the fast-food industry? It is a question that has been hovering in the minds of investors lately. After the unfortunate headwinds faced by the company last year, many speculated that the company would lose share in the industry, and the gap in the market share figures between McDonald’s and its closest competitors might just shrink. The most hard-hitting blow to the company came from its Asian markets, where the meat scandal of July 2014 negatively affected the company’s operations in China and Japan, with declining customer traffic and customer trust. Now the more important question is whether McDonald’s can turn around its present position in the Asian markets in the near future. For the past 12 months, MCD’s stock has been fluctuating between $90 and $100, with the turnaround plans of the new CEO, Steve Easterbrook, providing stability during the last 3 months. Interestingly, the company’ stock has been trading in direct correlation with the S&P 500 index over the last one year. With a current dividend yield of 3.54%, the stock is currently trading at around $96. However, before the recent cut in Chinese interest rates, the stock was stably trading close to $100, all thanks to positive overall guidance for the third quarter. With a current market cap of $90 billion, and annual revenues of $27 billion in 2014, the stock is trading at 3x revenues and has a P/E ratio of 20x for 2015. We have a  $99 price estimate for McDonald’s, which is slightly above the current market price. See Our Complete Analysis For McDonald’s Corporation Should McDonald’s Still Worry About Japan & China? Are Recovery Efforts Too Slow? Since the start of this year, the company has been trying to revive customer trust in Japan through strict recovery efforts, such as changes in cooking techniques to improve taste and hygiene, introduction of promotional offers, and the use of better cooking ingredients. Nevertheless, the food safety scandal and supplier issues have significantly dented customers’ perception of the hygiene and quality of the food prepared by McDonald’s. Moreover, with many fast food brand substitutes, the food lovers in Japan and China opted for other fast food options. As a result, the customer decline in these two nations, which collectively account for roughly 10% of the company’s system-wide sales, led to a major decline in comparable store sales in the Asia/Pacific region. McDonald’s comparable sales in Asia/Pacific, Middle East, and Africa (APMEA) declined 12.6% and 4.4% in January and February 2015 respectively. Despite the company’s claim that the recovery efforts in these regions are proving to be productive, the comparable sales growth in the Asia-Pacific region is still on the negative side of the spectrum. Evident from the fact that McDonald’s comparable sales in Japan decreased 23.4% in June 2015 (down for the 17 th consecutive month) after a 22% decline in May, the situation in Japan does not seem to be getting any better in the near term. The decline in customer traffic in Japan slowed to just 10.4 % in June compared to a 14.2% decline in May. However, it was offset by a faster decline in sales per customer. Full Year Guidance Paints A Clearer Picture In the first half of 2015, McDonald’s Japan reported 85.28 billion Yen in sales, down nearly 30% over the same period last year. The recovery efforts in Japan were unable to revive the guest count, which was down 18.8% year-over-year (y-o-y) for the first half of 2015. Consequently, comparable store sales for the first half of 2015 slumped 27.7% over the same period in 2014.   McDonald’s Japan Jan-Jun 2015 Jan-Jun 2014 Net Revenue 85.28 billion Yen 121 billion Yen Operating Profit -18.2 billion Yen 3.5 billion Yen Gross Profit -26.22 billion Yen 1.85 billion Yen   With more than 3,100 restaurants, most of which are company owned, Japan is the company’s second largest market after the U.S. Hence, the financial performance by Japan in the first half is a serious topic of concern for the company. For the fiscal year 2015, McDonald’s expects its Japan unit to post a net loss of 38 billion Yen, with an operating loss of 25 billion Yen, which in any scenario is still a huge setback for the company. Considering the fact that McDonald’s expects this performance after claiming the success of its recovery efforts, one can estimate the gravity of the company’s present perception among Japanese food lovers, and the effort the company needs to put in. Trefis estimates the net revenue from McDonald’s company-operated restaurants to decline nearly 3% y-o-y to $17.6 billion in 2015, with most of the expected decline attributed to the Japan unit. Has The Market Factored In All The Drivers? Despite the disappointing end to the last fiscal year, and unfavorable top-line performance, MCD’s stock was not as bearish as expected. Moreover, the investors were content with the company’s full year guidance, and the stock price took a major U-turn, rising 12% within a gap of one month from $88 to $99. Since March 2015, the stock has been fluctuating between $94 and $100, and didn’t see any major drop despite a poor comparable sales report every month. Analysts were then speculating that the market might have factored in all the possible scenarios, and even a slightly better report might just provide a push to the stock price. This speculation was further strengthened when the stock gradually jumped more than 5%, breaking the barrier of $100, after Steve Easterbrook announced the company’s new turnaround plan in May. The September-ended quarter will be the first quarter after the turnaround plan, and it will further confirm whether the new reporting structure did have any positive impact. Additionally, it is possible to believe that any small good news, whether in terms of financial performance or in terms of positive customer response in Japan, might be a power-booster for the stock. If in that case, McDonald’s beats its guidance numbers for Japan at the end of fiscal 2015, we might possibly see a 5% to 8% upside in the stock. However, factoring in the market estimates for the entire fiscal year 2015 and the stagnant growth in customer traffic in the Asian markets, we can clearly state that the company needs to gear up its revival efforts in order to meet its minimum basic target numbers for its Japan unit. The Comeback Strategy Clearly, the recovery efforts have not been strong enough thus far for McDonald’s. Furthermore, the stiff competition in the U.S. among fast food restaurants, as well as from the fast casual segment, is having an impact on McDonald’s. Since the situation in the domestic market is a long-term headwind, the company needs to pay most of its attention to the Japan turnaround. Other strong players in the industry, such as Yum! Brands, Subway, and Restaurant Brands International Inc  (NYSE:QSR), have capitalized on this opportunity and attracted more customers in the Asian markets, stealing the market share; however they are still far behind McDonald’s in terms of the number of stores. McDonald’s can use the fact that it has more presence in the region in its favor. First, the primary aim of the company is to regain the lost trust and bring back the large customer footfall that it enjoyed a couple of years back. No doubt, the burger giant is working on this strategy, but clearly it is taking much more time than it hoped. McDonald’s not only needs to pace up, but reinforce its campaigns regarding the use of hygienic and fresher ingredients in food items. Secondly, the company surely needs to lure its customers using innovative and tempting offers, in spite of the fact that it might hamper the margins. This is one of the trade-offs that the company has to do, in order to enjoy a slightly better period next year. Finally, as we have discussed earlier, Japan and China have entirely different food trends than some of the biggest markets. In these countries, apart from other international fast food brands, local fast food brands and street-side vendors enjoy a huge portion of the customer traffic; the differentiating factor is the use of local ingredients and tastes by these local brands in their food items. McDonald’s has already recognized this trend in other nations, such as Australia, and has come up with ‘Create Your Taste’ initiatives, which is reaping greater profits for the company from that segment. A similar strategy in China and Japan might be a huge hit. These are some of the strategies that can help McDonald’s reposition itself  in the Asian markets, leading to better revenue growth and strong comparable store sales growth in the next fiscal year.   See the links below for more information and analysis: McDonald’s confident on positive comp. sales in third quarter, after beating market expectations in Q2 Fifth consecutive negative comp. sales quarter looming over McDonald’s McDonald’s: Better days ahead? Trefis Analysis: Average customers per restaurant annually at McDonald’s Trefis Analysis: Average spend per customer visit at McDonald’s franchised restaurants Trefis Analysis: Average spend per customer visit at McDonald’s company operated restaurants View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
    AMTD Logo
    Rise In Trade Volumes For TD Ameritrade In July, Asset Base Sustains Growth
  • By , 8/28/15
  • tags: AMTD ETFC SCHW
  • TD Ameritrade (NYSE:AMTD) revealed its plans for 2016 to attract more high net worth clients on its trading platforms earlier this year. The company will take initiatives to offer better personalized services and investment consultants to individuals with $1 million or more in their accounts. The brokerage firm has added over a million net new brokerage accounts in the last five years on the back of competitive pricing on brokerage fees and trading commissions, while keeping its minimum account balance requirements at reasonable levels. The company recently reported a sustained rise in trade volumes for July, while total client assets continued to improve. Below we take a look at some of Ameritrade’s key metrics and our full-year forecasts for these metrics.
    United Technologies Logo
  • commented 8/28/15
  • tags: UTX
  • Forecast On Meat Packaging Market: Global Industry Analysis and Trends till 2025 by Future Market Insights

    Demand for meat packaging is projected to witness single digit growth during the forecast period. This growth is attributed to the increased production of meat in the global market. Packaging is anything which is used to contain, handle, protect, and deliver raw material and processed goods. The main purpose of packaging is to provide products to consumer in perfect condition i.e, in intact form of food without spoilage. In addition, the advantages of packaging includes providing space for sharing information about the product such as nutrition, usage and direction.

    Browse Full Report@ http://www.futuremarketinsights.com/reports/meat-packaging-market

    Meat Packaging Market: Drivers and Restraints

    Meat packaging market is flourished worldwide due to various factors such as urbanization especially in developing economies such as India, Russia, Brazil and China, increase in demand of convenience products due to the time constraint. However, some of the factors which are restraining the market growth of meat packaging includes environment issues such as recyclability and sustainability coupled with hygienic packaging and rising concern regarding the health. The major trends of global meat packaging market are demand for smaller packaging size, new packaging material development and increase awareness towards environmental issues. Nano packaging also plays an important role in meat packaging as meat needs an aseptic packaging that lasts for maximum days for extended shelf life.

    Meat Packaging Market: Segmentation

    Meat packaging market is segmented on the basis of type, material, distribution channel and region. On the basis of type meat packaging market is segmented into On the basis of material meat packaging market is segmented as plastic wraps and storage wrap which includes three major categories of plastics: polyethylene (PE), polyvinylidene chloride (PVDC) and polyvinyl chloride (PVC), oven cooking bags which are made from heat-resistant nylon, aluminium foil which primarily is made from iron and silicon, freezer paper which is white paper coated on one side with plastic to help keep air out of frozen foods, parchment paper made from cotton fibre and/or pure chemical wood pulps and wax paper made with a food-safe paraffin wax. Further on the basis of distribution channel it is segmented into hypermarket/supermarket, grocery stores, online retailing, departmental stores and others. Lastly, on the basis of region the market is segmented into North America, Latin America, Western Europe, Eastern Europe, Asia-Pacific, Japan and Middle East and Africa.

    Meat Packaging Market: Regional Overview

    North America is the largest market for meat packaging followed by Europe and Asia-Pacific. China meat packaging is expected to show a significant growth due to rise in personal disposable income coupled with rise in consumption of beef, pork and other meat. Developed market such as North America, Europe are expected to exhibit faster growth rate by 2025.

    Request Report TOC@ http://www.futuremarketinsights.com/toc/rep-gb-710

    Meat Packaging Market: Key Players

    The major players in the meat packaging market Amcor Ltd, Crown Holdings, Dupont, Nuconic Packaging Llc, Tetra Pak International S.A., Silgan Holdings, Inc., Reynolds Group and Toyo Seikan Group Holdings, Ltd to name a few. The big multinational companies in this category are investing heavily in the expansion development of product portfolio in meat packaging material in order to maintain a position in the packaging market. The companies are also focusing on merger and acquisition as strategies to enhance their production facilities and expand its global presence. For instance, in 2013, Crown holding acquired Mivisa Envases, SAU, a Spanish two- and three-piece food cans and ends manufacturing company.
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    Forecast On Meat Packaging Market: Global Industry Analysis and Trends till 2025 by Future Market Insights Demand for meat packaging is projected to witness single digit growth during the forecast period. This growth is attributed to the increased production of meat in the global market. Packaging is anything which is used to contain, handle, protect, and deliver raw material and processed goods. The main purpose of packaging is to provide products to consumer in perfect condition i.e, in intact form of food without spoilage. In addition, the advantages of packaging includes providing space for sharing information about the product such as nutrition, usage and direction. Browse Full Report@ http://www.futuremarketinsights.com/reports/meat-packaging-market Meat Packaging Market: Drivers and Restraints Meat packaging market is flourished worldwide due to various factors such as urbanization especially in developing economies such as India, Russia, Brazil and China, increase in demand of convenience products due to the time constraint. However, some of the factors which are restraining the market growth of meat packaging includes environment issues such as recyclability and sustainability coupled with hygienic packaging and rising concern regarding the health. The major trends of global meat packaging market are demand for smaller packaging size, new packaging material development and increase awareness towards environmental issues. Nano packaging also plays an important role in meat packaging as meat needs an aseptic packaging that lasts for maximum days for extended shelf life. Meat Packaging Market: Segmentation Meat packaging market is segmented on the basis of type, material, distribution channel and region. On the basis of type meat packaging market is segmented into On the basis of material meat packaging market is segmented as plastic wraps and storage wrap which includes three major categories of plastics: polyethylene (PE), polyvinylidene chloride (PVDC) and polyvinyl chloride (PVC), oven cooking bags which are made from heat-resistant nylon, aluminium foil which primarily is made from iron and silicon, freezer paper which is white paper coated on one side with plastic to help keep air out of frozen foods, parchment paper made from cotton fibre and/or pure chemical wood pulps and wax paper made with a food-safe paraffin wax. Further on the basis of distribution channel it is segmented into hypermarket/supermarket, grocery stores, online retailing, departmental stores and others. Lastly, on the basis of region the market is segmented into North America, Latin America, Western Europe, Eastern Europe, Asia-Pacific, Japan and Middle East and Africa. Meat Packaging Market: Regional Overview North America is the largest market for meat packaging followed by Europe and Asia-Pacific. China meat packaging is expected to show a significant growth due to rise in personal disposable income coupled with rise in consumption of beef, pork and other meat. Developed market such as North America, Europe are expected to exhibit faster growth rate by 2025. Request Report TOC@ http://www.futuremarketinsights.com/toc/rep-gb-710 Meat Packaging Market: Key Players The major players in the meat packaging market Amcor Ltd, Crown Holdings, Dupont, Nuconic Packaging Llc, Tetra Pak International S.A., Silgan Holdings, Inc., Reynolds Group and Toyo Seikan Group Holdings, Ltd to name a few. The big multinational companies in this category are investing heavily in the expansion development of product portfolio in meat packaging material in order to maintain a position in the packaging market. The companies are also focusing on merger and acquisition as strategies to enhance their production facilities and expand its global presence. For instance, in 2013, Crown holding acquired Mivisa Envases, SAU, a Spanish two- and three-piece food cans and ends manufacturing company.
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    Revlon's Growth Story: Can The Small Not Only Survive, But Also Thrive?
  • By , 8/28/15
  • tags: REV LRLCY EL AVP
  • “It is not the strongest or the most intelligent who will survive but those who can best manage change.” ― Leon C. Megginson These words seem to be the driving force for the prominent beauty and cosmetics player, Revlon  (NYSE:REV). Revlon, with its $2 billion in revenues (in 2014) is like the David to the Goliaths in the beauty industry such as L’Oreal (over $30 billion revenues) and Estee Lauder (over $10 billion revenues). However, the company seems to know how to survive in the cut-throat beauty industry, that recently forced a behemoth like P&G  to sell-off a part of its beauty business . The business of beauty is currently about understanding the consumers’ psyche, adapting to the changing consumer demands, and continuous innovation and strategic moves. Revlon clearly understands these rules. A couple of years ago Revlon was focused on color cosmetics and then it realized the potential for growth in the professional segment, and hence acquired The Colomer Group (TCG) in mid-2013. Understanding the need to continuously shuffle its brands to suit the ever-changing beauty market, Revlon launched a Brand Renewal program in 2014, that will help it in introducing, retaining, or eliminating brands from its basket as per their user appeal and profitability contribution. On a similar note, Revlon recently exited its unprofitable Venezuela business in order to concentrate on more profitable geographies. Finally, Revlon acquired a fragrance business in the U.K. in 2015 and aims to carve up a significant position for itself in the (so-far) fragmented but lucrative European fragrance business. These moves suggest that Revlon is a dynamic shape-shifter that is ready to alter its portfolio of products, market focus, and strategic investments according to suitable market opportunities. Therefore, even though it is small compared to some of its well-known peers, we believe Revlon has what it takes to fight back and survive. Revlon’s focus on the power of change and adaptability is what makes it a strong contender in the beauty business. Our  current price estimate of $34 for Revlon’s stock  is slightly over the current market price. See Our Complete Analysis For Revlon Here TCG Acquisition: Portfolio and Geographic Diversification  In 2013, Revlon acquired The Colomer Group (TCG), a privately held beauty group that is focused on the professional beauty channel. The acquisition successfully diversified not only Revlon’s product portfolio but also its geographical spread. Prior to its TCG acquisition, Revlon was a specialty color cosmetics manufacturer deriving over half of its revenues from color cosmetics. Revlon’s 2011 and 2012 acquisitions of Sinful Cosmetics and Pure Ice expanded the color cosmetics revenue contribution to over 60%. Post its TCG acquisition, the proportion of color cosmetics revenues declined to 54% in Q1 2014, from 67% in Q1 2013. Given TCG’s higher growth rate as compared to Revlon’s core products, the share of color cosmetics should continue to decline further, thereby diversifying its overall product portfolio. TCG helped expand Revlon’s geographic spread, as well. While, in 2013, 56% of its revenues came from the U.S., the contribution declined to 53% in 2014. This is because over half of TCG’s revenues come from the EMEA region Going forward, this revenue distribution between the U.S. and international markets is expected to normalize close to the half-way point. This is because TCG’s revenues are growing at a much faster pace than Revlon’s core business. The acquisition provided greater bargaining power to Revlon as TCG products are sold through professional salon channels with niche buyers, rather than large retail chains that tend to have a higher bargaining strength. As a result of the acquisition, Revlon’s professional segment witnessed impressive growth in 2014 by clocking in over $500 million in net sales, thereby reflecting an 8% year-on-year growth in the proforma basis. Professional segment profit in 2014 was $104.8 million with a 49.5% year-on-year (constant currency) growth rate. Below, we show Revlon’s revenue growth in the color cosmetics and hair color segments (since TCG has a major presence in hair color). Brand Renewal Program: Creating A Tailormade Portfolio To Suit Changing Beauty Needs In its Q3 2014 earnings call, Revlon’s management stated that the company wishes to reach its desired rate of innovation in terms of quality and quantity over the next two to three years. The company’s new strategy is to use individual performances of specific stock-keeping units (SKU) to either reset the SKU or keep it on retailer shelves. This, in turn, will streamline its portfolio to suit market needs. Hence, Revlon will review the returns from retailers quarter by quarter to assess SKU performance and replace underperforming brands and products with new and innovative products to accelerate sales growth. Though its near-term sales can be adversely impacted due to these alterations, Revlon might be able to achieve higher growth in the long run with a portfolio that is customized to fulfill market requirements. CBB And SAS Acquisition: Growing Its Market Share In The Fragrance Business Revlon acquired U.K. based fragrance company CBBeauty (CBB) and its U.K. distributor, SAS & Company in the second quarter of 2015. With a presence in over 80 countries, CBB also provides sales and strategic services to select celebrity and fashion fragrance brands. SAS & Company distributes and markets perfumes and beauty products from leading brands such as Burberry, Carven, One Direction, and Rihanna. This acquisition, like TCG, will help the company further diversify its portfolio. Revlon chiefly operates in the professional and consumer beauty segments. Prior to the acquisition, its consumer segment was dominated by color cosmetics with its fragrance segment displaying fragmented growth; hence, CBB will provide it with newer opportunities for business growth. Additionally, by acquiring SAS & Company, Revlon aims to enter into the fragrance licensing business in the U.K. After receiving the licensing capability, Revlon plans to pursue further acquisitions in this segment and hence expand its fragrance selection, even further. In its Q2 2015 earnings call, Revlon’s management stated that the fragrance industry is largely fragmented and therefore not intensely competitive. This provides Revlon with the golden opportunity for licensing smaller brands and developing those into bigger brands. Revlon’s fragrance business is poised for significant growth with the successful implementation of these strategies. Revlon’s Exit From Venezuela Revlon exited its Venezuela business in Q2 2015 and will henceforth operate only under a distributor model in the region. Revlon had been incurring losses due to the slowdown of the Venezuelan economy. In Q2 2015, Revlon’s international net sales in the consumer division were $215.4 million reflecting a year-on-year growth of 1.2% growth on an XFX basis. However, excluding Venezuela the growth figure was 4.8% on an XFX basis. The volatility of the Venezuelan economy, coupled with the Bolivar’s devaluation, had severely impacted a number of international businesses. The latest devaluation in February 2015, caused losses to the tune of $7 billion for the top ten U.S. companies operating in the region. In conclusion, we believe Revlon’s adaptable nature will help it sustain in the long run. Instead of getting into a headlong war with its bigger competitors, Revlon is searching for niche opportunities and building a presence for itself. This constant urge to innovate and grow makes Revlon a valued contender that, with time, will be a formidable force to reckon with. Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
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    Q2 2015 U.S. Banking Review: Mortgage Originations
  • By , 8/28/15
  • tags: BAC C JPM USB WFC
  • The U.S. mortgage industry witnessed an exceptionally strong level of activity over the second quarter of the year, with data compiled by the Mortgage Bankers Association showing that $395 billion in mortgages were originated over the period. This compares to origination figures of $330 billion for the previous quarter and $297 billion for the year-ago period, and makes Q2 2015 the best quarter for the industry since Q3 2013. Notably, the $225 billion in fresh mortgage originations for the quarter was the highest figure for any quarter since Q4 2007. An increase in mortgage activity is good news for the country’s biggest banks – especially for  Wells Fargo (NYSE:WFC) and  U.S. Bancorp (NYSE:USB), who bulked up their mortgage banking businesses considerably after the economic downturn. In this article, we highlight the changes in mortgage origination volumes for each of the country’s five largest commercial banks over recent years.
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    China Seems Kinder To Mercedes-Benz
  • By , 8/28/15
  • tags: DAI VLKAY TM TTM F GM
  • It’s been a slow year for most automakers who depend on their sales in China, considering how the country had been a cash cow over the last few years. The world’s largest automotive market has suffered a substantial hit this year, with sales of passenger vehicles declining in both June and July by 3.4% and 6.6%, respectively. Overall, automobile sales are up only 0.4% year-over-year through the first seven months. The slowing economic conditions and the stock market crash in China have had a contagion effect on the rest of the world too, especially emerging economies that export to the country, and multinationals who have for long looked at China for growth. We have a  $91 price estimate for Daimler AG, which is above the current market price. See Our Complete Analysis For Daimler AG   Luxury automakers haven’t been aloof to this downtrend either. Audi and BMW — the leading premium automakers in China — have witnessed profit declines in the country in Q2. But amid the normalization of the Chinese automotive market, one foreign player has remained steady on its growth path in the country.  Daimler AG ‘s Mercedes-Benz has defied the China slowdown and posted a 14.7% year-over-year rise in global vehicle deliveries through July, with a solid 22.7% rise in deliveries in China.     Mercedes Set To Overtake Audi By Next Month? Mercedes lost its global premium vehicle sales lead to BMW in 2005, and then the second place to Audi in 2011. But it looks like the German number three is on its way to regaining the second spot this year, and this could in fact happen as soon as next month. Mercedes is merely 272 units away from overtaking Audi, and could carry this momentum through the end of the year.   China has been a key growth driver for Mercedes this year, while its chief competitors have suffered. BMW’s joint venture in China contributed €156 million ($177 million) to the group’s earnings in Q2, down 22.8% year-over-year. Operating margins fell to 8.4% in the last quarter for BMW, lower than the previously achieved 9-10% margins, and much lower than Mercedes’ 10.5% operating margins. The tough pricing environment in China forced the automaker to lower its prices, impacting net profits, even as revenue growth remained strong. On the other hand, net profit for Volkswagen, which owns Audi, declined to €2.67 billion ($2.95 billion) in Q2, impacted by the weakness in China — its single largest market. Although Audi’s margins remained solid at 9.7%, this figure doesn’t include the China business, which is recorded in the financials using the equity method of accounting. On the other hand, aided by the solid growth in China, Mercedes reported a 19% rise in revenues in Q2, over the previous year, and a whopping 58% rise in operating profits. The brand’s EBIT margins have reached 10.5%– more than that at BMW and Audi. Remember when one-time costs associated with the launch of new/refreshed models had lowered operating margins to around 3% in the first quarter of 2013? Mercedes seems to have recuperated well.     China is the world’s second largest premium vehicle market, and the downturn in this market has impacted both Audi and BMW. However, it seems like Mercedes is now reaping the benefits of its large investments, and with the massive jump in China, the brand is now well placed, considering the large demand for SUVs that persists in the market. Sales of SUVs are up approximately 45% in China through July, even as the rest of the market crumbles around it. Audi sells 1.5x the vehicles sold by Mercedes in China presently, but the latter seems better placed in the market, also, with better profitability. Is Mercedes now the choice luxury vehicle in China? See the links below for more information and analysis: Mercedes-Benz is catching up with competition in China Who will gain most from the large SUV/Crossover demand in the U.S.? Trefis analysis: Mercedes-Benz Cars and Vans Revenues Trefis analysis: Daimler North America Revenues Trefis analysis: Daimler International Revenues View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research  
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    Why Is Alaska Air Ahead Of Its Peers? – Part 1
  • By , 8/28/15
  • tags: ALK UAL AAL DAL JBLU LUV
  • Alaska Air Group (NYSE:ALK), which almost doubled its profits in the second quarter due to significant fuel cost savings, reached a new 52-week high of $81.75 per share recently. While most of the airline stocks have been soaring over the last one year on the back of plummeting crude oil prices, Alaska Air has outperformed all its peers (except JetBlue) by growing more than 67% since last July and by more than 33% since the beginning of the year. Interestingly, the airline’s out-performance is not solely driven by the depressed oil prices. There are multiple quantitative as well as qualitative factors, apart from the sluggish oil prices, that have enabled the Seattle-based airline to deliver industry leading operating margins over the last 10-12 quarters and remain resilient even when the rest of the airline stocks were knocked down by investors due to fear of an overcapacity  in the market. Source: Google Finance In this series of articles, we will discuss each of these factors in detail and how they drive the airline’s stellar performance. However, in this note (Part 1 of the series), we will analyze only the quantitative factors, such as diverse revenue base, focus on operational excellence, and a low cost structure, that influence Alaska Air’s performance. Look out for Part 2 of the series to read about the qualitative factors that are driving the airline’s current market price. We have a price estimate of $81 per share for Alaska Air, which is 6% ahead of its current market price. See Our Complete Analysis For Alaska Air Group Here Diversifying Revenue Base Alaska Air does not believe in putting all its eggs in one basket . The airline considers itself a growth company and thus, it has been diversifying its operations over the years in markets which have a strong demand, and is exiting the ones which are not economically sustainable in the long term. The chart below depicts how Alaska Air has ventured into Hawaii and Transcontinental markets over the last decade, while optimizing its operations in other markets. Source: Bank of America Merrill Lynch 2015 Transportation Conference Over the last one year, the airline has launched services in 18 new markets, and has exited five existing markets that were not commercially viable. Of these new markets, at least 13 markets have become profitable in their first year of operation and at least 9 of them would be sustainable even if the fuel prices rise back to $3 per gallon. In addition, the airline has plans to re-launch 18 new markets in the second half of this year. This proactive approach of the airline to diversify its operations has enabled it to double its revenues from $2.7 billion in 2004, to $5.4 billion in 2014 in the last 10 years, growing at a CAGR of 7.2% annually. Source: Second Quarter 2015 Results, Alaska Air Apart from diversifying its operations, Alaska Air has introduced a number of new revenue streams, the latest one being the preferred seating program. While the customer satisfaction is likely to go up due to the additional legroom and complimentary drinks offered under this program, the airline is expected to generate additional revenue of $15 million annually. While this might appear to be a meager figure on a standalone basis, but when we combine this with the revenues coming from the various other initiatives undertaken by the airline during 2014 and 2015, this is expected to add more than $100 million in the airline’s overall revenue in 2015 and beyond. Thus, the airline’s strategy to diversify its revenue base will allow the airline to offset a  weakness in its passenger yields and augment its top line growth in the coming quarters. Source: Investor Presentation, 6th April 2015, Alaska Air Focus On Operational Excellence                                                                                                   A happy customer is the backbone of a successful business. The management of Alaska Air truly understands this and has strongly etched this strategy into the airline’s business model. It has been diligently working over the years to consistently improve and maintain high standards for customer service through an exceptional operational performance. As a result, the airline has been recognized as the “ highest in customer satisfaction among traditional carriers” by J.D. Power for eight consecutive years. The satisfaction of Alaska Air’s customers is clearly evident from the upsurge in the cash generated from the airline’s loyalty program. Despite winning this award, the airline recently launched a new “Beyond Service” workshop which is aimed at training over 8,000 employees, including senior executives, on how to further enhance their customer service. Source: Bank of America Merrill Lynch 2015 Transportation Conference On the operational front, the airline has been leading its peers on a majority of the performance metrics. For instance, so far in 2015, Alaska Air has an on-time arrival rate of 86.6%, one of the highest in the industry, compared to its closest competitor Delta Air Lines with 84.2%. The carrier has also managed to curb its cancellation rates to under 0.5% as opposed to American Airlines and JetBlue who reported a cancellation rate of 2.5% for the first half of 2015. This remarkable performance, built by the determination and persistence of the management over the years, differentiates the airline from its competitors. Consequently, the airline has become a preferred choice of its customers. Source: Bank of America Merrill Lynch 2015 Transportation Conference A Low-cost Structure Alaska Air is neither a full-blown legacy carrier such as United, nor a low-cost carrier (LCC) like JetBlue . Thus, it is well placed to take advantage of the benefits offered by both the worlds. To leverage this, the airline has been taking initiatives over the years to improve its efficiency and productivity and bring down its unit costs (excluding fuel costs) to resemble the cost structure of the LCCs. In 2014, Alaska Air reduced its non-fuel costs by 1.3% on a consolidated basis, which marked the fifth consecutive year of unit cost reduction. The airline targets to further lower its unit costs by 0.5% in 2015 by replacing its older, smaller 737-400 airplanes with 737-900 and 737-MAX airplanes to gain efficiency from flying larger and more-fuel efficient aircraft. In addition, the airline is adding split-scimitar winglets to some of its aircraft, which can bolster the fuel efficiency by 1.5% per aircraft. Currently, Alaska Air has a fuel efficiency of 77 available seats per mile per gallon (ASM/gallon), which is remarkably high compared to the legacy carriers. Since the phasing out of these smaller planes will take another two years, the airline’s fuel efficiency is likely to reach new heights by 2017. Source: Bank of America Merrill Lynch 2015 Transportation Conference Further, the airline has long-term labor contracts which link the incentives of the employees to their performance. These techniques reduce employee turnover and ensure better productivity from the employees. Alaska Air has been able to enhance its overall productivity by more than 3.5% annually over the last 7 years. According to the airline’s latest presentation, 1% improvement in productivity is equivalent to savings of approximately $11 million annually. So to do a quick back of the envelope calculation, Alaska Air has saved, or rather earned, over $270 million (without considering the time value of money) due to productivity enhancement in the last 7 years. Source: Bank of America Merrill Lynch 2015 Transportation Conference Clearly, the airline is not just relying on weak crude oil prices to boost its profits, but is rather working towards reducing its unit costs on a sustainable basis. In fact, the airline has been successful in bridging the gap between its own cost structure and that of the LCCs. This implies that the airline still has a potential to expand its operations without worrying much about straining its pricing power. Source: Bank of America Merrill Lynch 2015 Transportation Conference Driven by its low cost structure and extraordinary operational performance, Alaska Air has been delivering industry leading operating margins over the last few years. In the June 2015 quarter, the airline generated an operating margin of approximately 26%, which is almost 7% higher compared to the same quarter in 2014. One may be tempted to argue that the spike in the airline’s operating margin is primarily driven by the fuel cost savings. While we agree that the weak oil price scenario is playing a major role in the earnings of the Seattle-based airline, it is worth noting that it is a global phenomenon. However, only Alaska Air has managed to create a mark by growing its margins more than 7% higher than the industry average through its well-managed cost structure. In addition to this, the airline delivered a return on invested capital (for the trailing twelve months) of 22% in the June 2015 quarter, compared to 16% in the 12-month period ending June 2014. This return is more than double of the cost of the capital of the airline, which means that the airline is generating sufficient returns for its shareholders as well as to plow back into its business. Thus, from an investor’s perspective, Alaska Air is a lucrative bet. Operating Margins – Comparison Source: Company Filings We conclude this note by saying that Alaska Air’s focus on operational excellence, along with a low-cost structure and diverse operations, has distinguished the airline from its counterparts and will enable it to growth and outperform its peers even in the future. Stay tuned for “Why Is Alaska Air Ahead Of Its Peers? – Part 2″ to understand more about the qualitative factors influencing Alaska Air’s extraordinary performance. Source: Google Finance View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
    Wall Street’s Most Hated Stock is About to Break Out
  • By , 8/28/15
  • tags: SPY GME
  • Submitted by Wall St. Daily as part of our contributors program Wall Street’s Most Hated Stock is About to Break Out By Jonathan Rodriguez, Senior Analyst GameStop Corp. ( GME ) has been a thorn in the side of analysts for years. Indeed, Wall Street has been calling for GameStop’s death for what seems like an eternity, all while the company has continued to thrive. In fact, it appears investors still haven’t learned their lesson. GameStop is currently the most-shorted stock in the S&P 500, with short interest at 42% of float. That could prove to be a costly mistake. You see, in spite of Wall Street’s pessimism, GameStop’s chart shows that a breakout to the upside could happen as early as this week. Unloved and Undaunted For over 15 years, GameStop has been the undisputed leader in retail gaming, and it has captured the majority of the industry’s revenue. Now, avid gamers are quick to say how much they hate the store. The reasons are multiple: too mainstream, too overpriced, etc. But here’s the thing – they continue to shop there. And the reason why is simple: convenience . More often than not, gamers can find what they’re looking for or they can have the store order it for them. Plus, when they’re done with a game, they can sell it right back to GameStop. The previously-played game market has been, and continues to be, a key source of sustained revenue. Meanwhile, when friends and family buy gifts for a gamer, they rely on the deep expertise of GameStop employees to help them make purchases. The floor staff are almost always seasoned experts, and it gives the company a huge edge over the competition. Going By the Numbers The video game business is booming and is showing no signs of slowing down. According to research firm Newzoo, the gaming industry is worth $83.6 billion dollars. In the United States alone, the industry is projected to grow 30% by 2019 to more than $100 billion. Meanwhile, GameStop has handily outperformed both the consumer discretionary sector and the broad market over the last five years. To be fair, the stock fell to $31.92 in December 2014 from a 2013 high of $57.59. But shares have roared back with a vengeance and are up 38% since January. Compare that to its brick-and-mortar competitors: Target Inc. ( TGT ) is up just 6% over the same period, while Wal-Mart ( WMT ) and Best Buy ( BBY ) are down 19% and 16%, respectively. GameStop also trades at attractive valuations. Shares trade at just 11.2 times forward earnings, which represents a 43% discount to its peers. Better still, GameStop has an EV/EBITDA ratio of just 5.3. And with nearly 70% of total sales generated in the red-hot U.S. market, GameStop is largely insulated from currency headwinds. Why You Should Buy GameStop Now As strong as the company’s fundamentals look, it’s really the technical chart that commands urgency. You’ll recall that the stock is up 38% since January. Right now, shares are in an ascending triangle pattern. Take a look: From a technical point of view, an ascending triangle pattern shows that two things are happening: Shares are testing resistance, and The support level is rising. This indicates that share demand is increasing against resistance, and the potential for a breakout to the upside is high. Once shares break through resistance under the increased momentum, the resistance level often becomes support. Plus, short interest is so high that a squeeze is becoming more likely, which would accelerate the breakout even further . Bottom line: Now’s the perfect time to buy. On the Hunt, Jonathan Rodriguez The post Wall Street’s Most Hated Stock is About to Break Out appeared first on Wall Street Daily . By Jonathan Rodriguez
    Q&A: Why Did You Buy THAT?
  • By , 8/28/15
  • tags: MCD SPY
  • Submitted by Sizemore Insights as part of our contributors program Q & A: Why Did You Buy THAT? by  Charles Lewis Sizemore, CFA Once in a while, I have a client ask why I bought a particular stock. While that kind of question might make some managers defensive, I welcome it. It keeps me sharp, and it give me an opportunity to reevaluate the investment. If I can’t answer the question effectively… well… perhaps that’s not a stock I should own after all! A client wrote in with the following question about McDonalds ( MCD ): “ Hi Charles, regarding your McDonalds stock purchase, all that I have read is that this is not a great stock.  At $97.00 I am sure you could have bought something far better. Please explain your thinking. Thank you.” Very valid question. McDonalds is not a popular stock right now, and the company has been getting terrible press. Here is my response: Regarding McDonalds, there are a few things to keep in mind. By all means, there is always “opportunity cost,” or the risk that we could have made more money buying something else. We run that risk with anything we buy, though we certainly try to keep it to a minimum by being selective and buying quality stocks at good prices. In the case of McDonalds, I believe we are actually getting a very good price on a very good company. McDonalds is going through a transition right now, just as they have multiple times in their multi-decade past. In the early 2000s, you heard a lot of the same arguments you hear today: That McDonalds is an old company with a tired menu that has fallen behind the times.Well, from 2003 to 2011, McDonalds made improvements to its business and the stock went from $14 per share to over $100 per share. The stock hasn’t budged since 2011, as investors have grown cold towards it again. As a value investor, I like to see that. At current prices, we’re getting one of the most adaptable companies in US history trading at a nice 3.5% dividend yield. And while I don’t expect McDonalds’ dividend growth to be as aggressive as it was in the last decade given its current payout ratio, it’s worth noting that McDonalds is one of the most shareholder friendly stocks in America with a long history of rewarding its shareholders with very handsome dividend hikes. And finally, I consider MCD a nice diversifier. In a portfolio that is heavily invested in real estate and pipelines, a consumer-focused, recession-resistant stock like McDonalds is a nice complement. Thank you, Charles This article first appeared on Sizemore Insights as Q&A: Why Did You Buy THAT?
    Should We Really Worry About Killer Robots?
  • By , 8/28/15
  • tags: GOOG NOC
  • Submitted by Wall St. Daily as part of our contributors program Should We Really Worry About Killer Robots? By Tim Maverick, Senior Correspondent Back in 1942, science fiction writer Isaac Asimov published a short story entitled Runaround . Some believe it was the first time that the term “ robotics ” was used – and certainly the first time that the idea of robots killing humans was introduced. Fast-forward to today, and some of the most renowned and respected names in science and technology are issuing stark warnings about the progress of robotics and artificial intelligence (AI). They include Bill Gates, Stephen Hawking, Elon Musk, and Steve Wozniak. In fact, some of the predictions from these brilliant minds are reminiscent of the Terminator movies. A recent open letter signed by them and over 1,000 other leading experts in the field of AI spelled out the dangers of an arms race to build lethal autonomous weapons systems (LAWS). In other words, killer robots. But how seriously should we take their warnings? Fantasy Is Fast Becoming Reality Many scoff at such a forecast, saying that Terminator robots are still science fiction. They’re right – for now, at least. Such advances in AI are probably still decades away. But nevertheless, technology is moving faster than many think… British-based BAE Systems ( BAESY ) has developed an unmanned combat air vehicle called Taranis. It flies autonomously and identifies targets. Israel goes a step further with its Harpy anti-radar drone, which loiters in the sky before identifying and then destroying targets. Northrop Grumman ( NOC ) developed an autonomous drone that can land on an aircraft carrier. The goal is to turn it into a type of strike aircraft. And let’s not forget about Google ( GOOGL ). At the end of 2013, it bought military robot-maker, Boston Dynamics . Maybe Google will weaponize its self-driving cars ! In addition, it’s no secret that militaries around the world are actively working on more advanced robotic technology. Indeed, the Defense Advanced Research Projects Agency (DARPA), the Pentagon’s research division, organizes the annual Robotics Challenge – the world’s biggest robotics competition. Heck, DARPA itself is working on two projects that one day may lead to killer robots. The first is Fast Lightweight Autonomy (FLA) – a tiny “robocraft” that will maneuver autonomously at high speed in urban areas and inside buildings. The second is Collaborative Operations in Denied Environment (CODE) – autonomous aerial vehicles that will be able to carry out “all steps of a strike mission” when communication with human commanders is impossible. Despite the ominous predictions of doom, there’s logic in the Pentagon’s thinking. After all, the advantages of robots over human soldiers are obvious. The Pros and Cons of Military Robots For a start, robots don’t need food, clothing, or sleep. There are no human emotions involved, either, such as fear or rage. They can move faster and be more accurate. And, most importantly when it comes to the military, it would reduce human casualties. The destruction of a robot means nothing when compared to a human life. But of course, there’s the other side of the equation . . . For instance, robots can malfunction. When this happens during a mission, the consequences could be unfortunate. But what happens if a malfunctioning robot kills innocent civilians? Talk about opening an ethical can of worms. Then there’s the other robot arms race that’s well underway – the defense against robots. Unlike human soldiers, robots may be stopped by an electronic pulse bomb, a computer virus, or other novel defenses being developed. Ultimately, there’s no need to worry about robots slaying you in the middle of the night anytime soon. For the foreseeable future, this fear is likely to remain in the world of science fiction, as we continue to see more robots created for good, rather than evil. But in light of the fears of many scientists and tech experts, it makes sense to keep tabs on developments as robotic technology and LAWS continue to advance. Good investing, Tim Maverick The post Should We Really Worry About Killer Robots? appeared first on Wall Street Daily . By Tim Maverick
    What Just Caused Outrage Among Spotify Users?
  • By , 8/28/15
  • tags: SPY TLT
  • Submitted by Wall St. Daily as part of our contributors program What Just Caused Outrage Among Spotify Users? By Greg Miller, Senior Technology Analyst As seedy businesses go, you’d be hard-pressed to find many that top Ashley Madison. While traditional dating sites allow people to find dates, relationships, and even marriages, Ashley Madison’s version of “dating” caters to people who want to fly under the radar and cheat on their spouse. “Life is short, have an affair,” as the company’s tagline says. Except it’s no longer under the radar. Ashley Madison’s website recently suffered a major cyber attack, with the hackers downloading an enormous amount of users’ data for the public to see. Names, email addresses, credit card numbers – basically, crucial information that users very much wanted to stay private. After all, cheaters hardly wish to be exposed! Two users even committed suicide after their details were leaked. The lesson from this breach is simple: Once your information goes online, it’s no longer guaranteed to be private. Yes . . .  even if the company taking the information promises to keep it safe. Yes . . .  even if you didn’t give the information voluntarily. And yes . . .  sometimes, even if it’s illegal to disclose the information. For every advance in cyber security, cyber thieves are just as determined to access data, which then either becomes widely available or can cause you serious harm. Right now, nobody has an answer to this global epidemic. Your health insurance company can’t keep your data safe. The IRS can’t keep your data safe. Even the National Security Agency – the world’s foremost experts in cyber security – can’t keep its data safe. Amid such concern, then, Spotify just compounded the issue with the muddled announcement of planned changes to its privacy policy . . . Much Ado About Nothing Over Spotify’s Snooping Spotify, the hugely popular music streaming service, recently changed the privacy policy that governs its mobile app. Privacy activists and the internet went insane! It looked like Spotify was going to collect an enormous amount of information that had nothing to do with what music you listen to. Was the company going to sell its listeners’ profiles to marketers? Was it going to use the data to create another service? Or was the company just nosy? The truth was benign – the additional data that Spotify wanted to access was in order to help the company provide better service. Trouble is, the company did a terrible job of explaining that! Here are two examples  . . . Move to the Music: Spotify wanted more information on its users’ movements, not so it could stalk them, but for greater customization. When someone is walking, running, driving, or on the train, what could Spotify do with this information? Well, one of its features is to tailor music to what its users are doing. For example, based on your listening preferences, it can chose songs that match up with a user’s running cadence. Personally, I think a music stream that would change when I move from a traffic jam to highway speeds would be pretty neat! Smile for the Camera: Spotify also wanted to look at its users’ photos. Why? So it could create personalized cover art for albums and use a picture of the user for a profile image. But only if a user actually wanted to do those things. So the truth is, Spotify wasn’t doing anything nefarious at all, as CEO Daniel Ek explained in a subsequent blog post. But why the huge outrage? Information Angst There are three reasons: Information Abuse: We’re all understandably wary about the information we give to companies – especially now that it’s all stored online. We fear companies will abuse our privacy rights, or that it will be stolen as in the Ashley Madison case and numerous others. The more data we put out there – and the more places we put it – the more likely it is that something will be stolen. It’s bad enough when you provide health information to your insurer and it gets stolen – but at least the information was relevant to something you wanted to do. But with Spotify, nobody wants their private pictures published in some hack attack just because they wanted to listen to music! Corporate Ignorance . . . or Arrogance? Many companies simply don’t understand how wary their customers are these days and refuse to believe that their users don’t fully trust them – even though they can’t give ironclad assurances over their data security. It likely means that companies’ top management don’t pay enough attention to their own privacy agreements. For example, product designers will come up with a cool new way to use data and then lawyers will rewrite the privacy agreement to allow access to that data – except they do it in the most sweeping terms possible. That’s good lawyering, but terrible business. Why Do You Want My Data? There’s plenty of confusion about why companies might want access to your data, particularly when they share it with third parties. The Spotify example provided another good example of this. When it shares information with other parties, how much are they sharing and why? Obviously, they have to share information with mobile providers, just to make sure the right music goes to the right person. But when are they using it to create personalized ads, to whom are they selling the information, and when is that information specific to a user? A personalized ad based on location and behavior, but without knowing the actual identity of the user, is different from a personalized ad that goes to a specific user and is based on peeking at that user’s personal information. These last two issues should be pretty easy to fix – and may actually go a long way toward alleviating at least some of the concerns of the first point. Ultimately, companies like Spotify must do a better job of understanding their users’ concerns. And they must certainly do a better job of explaining why they need any given piece of information. Or, alternatively, they can haul out their CEO to apologize after the damage to their reputation has been done. To living and investing in the future, Greg Miller The post What Just Caused Outrage Among Spotify Users? appeared first on Wall Street Daily . By Greg Miller
    UnitedHealth Group Logo
  • commented 8/27/15
  • tags: UNH
  • Automated Breast Ultrasound System (ABUS) Market to Grow at a CAGR of 8.1% between 2015 and 2025

    Future Market Insights (FMI) delivers key insights on the global ABUS market in its upcoming outlook titled, "Automated Breast Ultrasound System (ABUS) Market: Global Industry Analysis and Opportunity Assessment, 2015 - 2025". In terms of value, the global ABUS market is projected to register a healthy CAGR of 8.1% during the forecast period due to various factors, regarding which, FMI offers vital insights in detail. The global ABUS market is projected to register a CAGR of 8.5% in terms of volume during the forecast period.

    On the basis of end user, the market has been segmented into hospitals and diagnostic imaging laboratories. The hospitals segment is estimated to account for 54.2% share in the global ABUS market by 2015 end, and is expected to register healthy CAGR of 8.2% in terms of value over the forecast period. In addition, in terms of volume, the segment is expected to record a CAGR of 8.7% during the forecast period. In terms of revenue, the hospitals segment is currently witnessing major contribution from Asia Pacific, North America and parts of Western Europe. Moreover, research and development on ABUS is likely to further fuel market growth during the forecast period. The diagnostic imaging laboratories segment is expected to record a CAGR of 8.1% and 8.5% in terms of value and volume respectively during the forecast period.

    Growth of the global ABUS market is mainly driven by increasing prevalence of breast cancer, growing radiology market, government advocation for breast cancer awareness and extensive research and development for enhanced imaging techniques. Other trends driving market growth include strategic alliances among key players in the market, manufacturers eyeing mammography market share and expansion of healthcare sector in developing countries due to growing investments by major players. In addition, surge in demand for advanced medical devices owing to increasing health awareness and growing disposable income is cumulatively anticipated to result in increased spending on enhanced medical services. This in turn, is anticipated to bolster ABUS market growth during the forecast period (2015–2025).

    Browse Full: "Automated Breast Ultrasound System (ABUS) Market: Global Industry Analysis and Opportunity Assessment, 2015 - 2025" Market Research Report at http://www.futuremarketinsights.com/reports/automated-breast-ultrasound-system-market

    This report covers trends driving each segment and offers analysis and insights into potential of the ABUS market in specific regions. North America is estimated to dominate the ABUS market with 42.0% market share by 2015 end, and is anticipated to remain dominant by 2025. North America and Western Europe collectively are expected to account for over 74% in the total ABUS market share in terms of value by 2015 end.
    Among all the regions, Japan is anticipated to register the highest CAGR in terms of value and volume respectively between 2015 and 2025, followed by North America due to increasing installations of ABUS owing to breast cancer prevalence and consumer concerns for early detection of breast cancer in these regions. Mammography X-ray is preferred as a gold standard technique for breast cancer detection among consumers especially in Asian countries. This lowers adoption of automated techniques used for detecting breast cancer and hence, offers opportunities for multiple modalities primarily for automated breast ultrasound system supported by regulatory approval for the same and offering additional diagnostic confidence to the patient as well as the radiologist.

    Key players in the global ABUS market such as General Electric Co., Siemens A.G., Hitachi Ltd. and SonoCiné Inc. focus on making substantial investments in research and development activities to enhance product portfolio to offer competitive advantage and in turn, create high entry barriers for players entering ABUS market.

    For more insights on Global Automated Breast Ultrasound System (ABUS) Market, you can request a sample report at http://www.futuremarketinsights.com/reports/sample/rep-gb-606
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    Automated Breast Ultrasound System (ABUS) Market to Grow at a CAGR of 8.1% between 2015 and 2025 Future Market Insights (FMI) delivers key insights on the global ABUS market in its upcoming outlook titled, "Automated Breast Ultrasound System (ABUS) Market: Global Industry Analysis and Opportunity Assessment, 2015 - 2025". In terms of value, the global ABUS market is projected to register a healthy CAGR of 8.1% during the forecast period due to various factors, regarding which, FMI offers vital insights in detail. The global ABUS market is projected to register a CAGR of 8.5% in terms of volume during the forecast period. On the basis of end user, the market has been segmented into hospitals and diagnostic imaging laboratories. The hospitals segment is estimated to account for 54.2% share in the global ABUS market by 2015 end, and is expected to register healthy CAGR of 8.2% in terms of value over the forecast period. In addition, in terms of volume, the segment is expected to record a CAGR of 8.7% during the forecast period. In terms of revenue, the hospitals segment is currently witnessing major contribution from Asia Pacific, North America and parts of Western Europe. Moreover, research and development on ABUS is likely to further fuel market growth during the forecast period. The diagnostic imaging laboratories segment is expected to record a CAGR of 8.1% and 8.5% in terms of value and volume respectively during the forecast period. Growth of the global ABUS market is mainly driven by increasing prevalence of breast cancer, growing radiology market, government advocation for breast cancer awareness and extensive research and development for enhanced imaging techniques. Other trends driving market growth include strategic alliances among key players in the market, manufacturers eyeing mammography market share and expansion of healthcare sector in developing countries due to growing investments by major players. In addition, surge in demand for advanced medical devices owing to increasing health awareness and growing disposable income is cumulatively anticipated to result in increased spending on enhanced medical services. This in turn, is anticipated to bolster ABUS market growth during the forecast period (2015–2025). Browse Full: "Automated Breast Ultrasound System (ABUS) Market: Global Industry Analysis and Opportunity Assessment, 2015 - 2025" Market Research Report at http://www.futuremarketinsights.com/reports/automated-breast-ultrasound-system-market This report covers trends driving each segment and offers analysis and insights into potential of the ABUS market in specific regions. North America is estimated to dominate the ABUS market with 42.0% market share by 2015 end, and is anticipated to remain dominant by 2025. North America and Western Europe collectively are expected to account for over 74% in the total ABUS market share in terms of value by 2015 end. Among all the regions, Japan is anticipated to register the highest CAGR in terms of value and volume respectively between 2015 and 2025, followed by North America due to increasing installations of ABUS owing to breast cancer prevalence and consumer concerns for early detection of breast cancer in these regions. Mammography X-ray is preferred as a gold standard technique for breast cancer detection among consumers especially in Asian countries. This lowers adoption of automated techniques used for detecting breast cancer and hence, offers opportunities for multiple modalities primarily for automated breast ultrasound system supported by regulatory approval for the same and offering additional diagnostic confidence to the patient as well as the radiologist. Key players in the global ABUS market such as General Electric Co., Siemens A.G., Hitachi Ltd. and SonoCiné Inc. focus on making substantial investments in research and development activities to enhance product portfolio to offer competitive advantage and in turn, create high entry barriers for players entering ABUS market. For more insights on Global Automated Breast Ultrasound System (ABUS) Market, you can request a sample report at http://www.futuremarketinsights.com/reports/sample/rep-gb-606
    LEA Logo
    Lower Automotive Sales Growth Could Hurt Lear Corporation
  • By , 8/27/15
  • tags: LEAR LEA JCI GM F VLKAY TTM
  • Lear Corporation  (NYSE:LEA), which supplies automotive seating and electrical interiors to some of the leading automakers in the world, is likely to feel the impact of a softer progression of the global economy. Lear’s business effectively depends on global demand for vehicles, and with slowing economic conditions in China — the world’s largest automotive market, continual emerging market volatility, and slower than expected growth in the U.S., growth in global automotive volumes is expected to slow down this year. We estimate a $108 price for Lear Corporation, which is above the current market price. See our full analysis for Lear Corporation Lear has consistently outpaced growth in the global vehicle production levels, but the growth rate for Lear has slowed down. Weaker global economic conditions and softer vehicle demand could reduce Lear’s future business volumes. In addition, what’s been the biggest downer for the company this year is the appreciation of the U.S. dollar against certain crucial currencies. Net sales were up only 1% year-over-year in Q2, with unfavorable foreign exchange dragging down the top line by 9 percentage points. With the devaluation of the Chinese Renminbi, Lear’s revenues from China are also set to take a hit. Apart from unfavorable currency translations, Lear could be impacted by slowing vehicle sales around the world. China, which contributed 12% to the company’s net sales in 2014, is going through a slowdown. Weaker economic conditions, affected by the fall in the stock market, industry overcapacity, and negative customer sentiment, have hurt automotive demand, so much so that passenger vehicle sales fell in each of the last two months in China on a year-over-year basis. July sales were down 6.6%. The advantage that Lear has over individual automakers is that it caters to a number of clients. GM, Ford, and BMW together formed 54% of the company’s net sales last year. In addition, the company also supplies automotive interiors to Daimler AG, Fiat Chrysler Automobiles, Hyundai Motor Company, Jaguar Land Rover, Peugeot S.A., Renault-Nissan Alliance, and the Volkswagen Group. And in China, a considerable 40% of its seating business is with major domestic automakers. So, one could think that even if one automaker, or if foreign automakers aren’t faring well in the country, Lear could make up sales from another automaker, due to the growth in business at some other automaker. And considering that Lear has a strong brand recognition and ranks among the top seating and electrical automotive interior businesses, its strong relationships with automakers could mean that despite a declining market size, it could achieve growth by growing market share. But if growth stagnates for most of the automakers, Lear will feel the heat, too. The other downer for Lear could be the fall in average content per vehicle. Growing sales of premium and larger vehicles, which require more seating and electrical content, have been fueling growth in average content per vehicle in the past. However, with substantial erosion of disposable incomes in China, the precipitous fall in the stock market, and devaluation of the Renminbi, the increased price sensitivity of consumers has resulted in higher sales of budget vehicles. This segment shift could impact Lear, lowering the average content revenue per vehicle, which essentially means that even if vehicle volume sales maintain growth, lower average content per vehicle will dent Lear’s top line growth. The situation becomes worse when we take into consideration the expected fall in volume sales growth this year. Following a 3.6% year-over-year rise in 2014, global car sales growth is forecast to grow by a slower 2.5% this year. There is much speculation about the contagion impact of China’s devaluation of the Renminbi and following interest rate cut on the rest of the world, including the U.S. With slower-than-expected growth in the U.S., inflation not high enough to justify an increase in interest rates, and the recent decline in the stock market, the Federal Reserve might now look to delay the anticipated increase in interest rates. Softer global economic conditions will also trigger a slowdown in automotive sales. But, on the other hand, one might think that with oil prices remaining historically low, disposable incomes might get a boost. The job market continues to do well and the housing sector has also seen growth this year. So, could this downturn be just near term? That is one question that we will have to wait to find out the answer. Automotive sales growth is expected to slow down this year, hurt by the slowdown in China, and some other crucial emerging markets such as Brazil and Russia. This is, in turn, expected to dent Lear’s business. See the links below for more information and analysis: Lear’s Q2 results review: profits grow despite currency pressures Large demand for SUVs bodes well for Lear’s seating business Lear’s strong growth momentum continues into Q1 Trefis analysis: Lear Corporation Seating Revenues Trefis analysis: Lear Corporation EPMS Revenues View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research    
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    Guess Resolves To Make A Turnaround With The Help Of Its Newly Appointed CEO
  • By , 8/27/15
  • tags: GES GPS LB URBN ANF
  • Guess   (NYSE:GES) released its second quarter fiscal 2016 results on August 26th. The highlight of the earnings call was the appointment of Victor Herrero as the Chief Executive Officer of Guess Worldwide in July 2015. This is the first time in the company’s history that someone outside the Marciano family will be assuming the position. The criteria for selecting Mr. Herrero was his success in Inditex, a Spanish multinational clothing company, where he built a $4 billion business in Asia after starting from scratch. The 35-year-old Guess brand, with a presence in over 90 countries, is in dire need of major strategic changes. The specialty apparel retailer has been struggling with its performance, lately. Like other players in the retail industry, macroeconomic challenges in its major regions of its operations had hit Guess’s sales. Currency headwinds from its international regions and declining store traffic in North America are two significant challenges that had been crippling Guess’s growth in recent times. The appointment of a new CEO can be seen as a remedial measure for the company in an effort to make a turnaround in its performance. According to Guess’s management, Victor Herrero had been one of the instrumental personnel behind the disruptions observed in the fast fashion industry, hence it believes Victor Herrero might have what it takes to revive the ailing retailer. Guess’s revenues for the quarter stood at $546 million depicting a 10% year-on-year decline (1% decline in constant currency terms). The company’s net earnings for the quarter stood at $18.3 million reflecting around a 17% year-on-year decline. The company’s diluted earnings per share decreased by 19.2%, or 5 cents, to $0.21, with currency headwinds accounting for an erosion of around $0.10. We’ll revise our $25 price estimate for Guess, shortly. See our complete analysis for Guess Victor Herrero’s 5-Pronged Strategy To Revive Guess  The Sales And Merchandising Strategy The sales force should have a thorough knowledge of the products sold and how those are unique from their competitors. The managers are expected to transform into product experts with an exhaustive knowledge of latest trends, product composition, and the most crucial selling items. The goal of this strategy is to feel the consumer’s pulse and understand what he or she truly desires. Instead of a push- based strategy of supplying whatever the company currently produces, Guess will henceforth rely more on a pull or demand based strategy by aiming to provide what the customer really wants. Digital Marketing Strategy The brand will be portrayed as a unique lifestyle concept and the average age of its target audience will be lowered. Digital marketing and social media will play an important role in spreading the new brand  image and in connecting with the millennials via fashion bloggers, social media, etc. The company is on the lookout for a digital marketing officer to conceptualize these visions. Store Strategy After reviewing the store structures, Guess will invest in the commercially important stores to project the company’s new brand image. The stores will be categorized into three segments based on their level of performance and then a roadmap for improvement will be strategized for each category. There will also be a rigorous check kept on the level of stocks so as to gauge the performance in a  more quantitative manner and also to effectively replenish stocks whenever required. Yearly Retail Calendar Guess will maintain a yearly retail calendar for all its stores so that it can capture all the selling opportunities such as mall events, promotions, holidays, in a more effective manner. Increase Stock Keeping Units (SKUs) In Stores The increased number of SKUs will give an idea about what’s working and what isn’t and hence, help in building a better collection of products, with a focus on the newer and faster-growing categories.  The Top Initiatives That Guess Plans To Undertake Phase I The product pricing will be periodically reviewed and revised according to the market sentiments. The company plans on achieving a better synchronization between the market environment and its pricing strategies in this manner. The company will increase its focus on Asia. Since Victor had been highly successful with the Inditex Asia business, he aims to replicate the success with Guess. Currently, Guess’s Asia business contributes around $250 million in revenues accounting for over 10% of the company’s revenues. Victor plans to increase the revenue contribution to around $750 million (or around 25% of the company’s total revenues). Guess started losing its stronghold in Asia since 2013 prior to which it experienced impressive growth in the region. The company is still grappling to recover its former position in Asia. Currently, the economic slowdown in China and Korea, along with the currency headwinds, have been Guess’s major roadblocks in Asia. The company will transition towards a flat and centralized structure, where corporate decisions such as logistics, finance, communications, and stock allocations, will be centralized in its headquarters. This will help enhance the firm-wide synergy between various operations. Phase II In the second phase of the growth initiatives, the company will focus on streamlining costs and enhancing the wholesale business. Guess’s Regionwise Performance In The Second Quarter Americas Though Guess’s revenues in the Americas (erstwhile this division was known as North America, the name was changed to emphasize the growing representation of South and Central American countries in Guess’s business) Retail segment declined by 2% in constant currency on a year-over-year basis, however, there was a sequential improvement in both store traffic and comparative store sales, versus Q1 2016. The company’s sales through the e-commerce channel improved by 20% year-on-year. From a brand perspective, the Marciano product line displayed double-digit growth and there was also a sequential improvement in the Guess brand of product sales. With respect to store closures, the company had revised its estimates based on improving trends in the second quarter and expects to close roughly 40 stores for the full year (as against its earlier estimate of 60 store closures). Europe The revenues in Europe experienced a 4% year-on-year constant currency growth. The quarter was positively impacted by $15 million worth of earlier than expected shipments. The sales growth was impressive in Italy, Iberia, and Germany. Guess, like other retailers, is facing problems in Europe due to weak macroeconomic conditions. To exacerbate the situation, Guess’s presence is concentrated towards Southern Europe (Spain, Italy, France, and Greece) which had been the worst affected by the recession. Asia The Q2 revenues in Asia declined by 6% in constant currency terms. The performance in China had significantly improved with double-digit growth in comparative store sales. However, this was more than offset by the slowdown in Hong Kong, Macau ( decline in tourist traffic), and Korea (post the MERS crisis). Guidance For Full Fiscal 2016 Net revenues: 0.5% to 1.5% decline in constant currency and an additional 7.5% decline due to currency headwinds Operating Margin: 5% to 6% (including currency headwinds of 130 basis points) Diluted EPS: $0.89 to $1.02 (with a currency headwind impact of around $0.40) View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap |  More Trefis Research
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    Disney's To Push Star Wars Merchandise, So As To Drive Double Digit Segment Growth Near Term
  • By , 8/27/15
  • tags: DIS TWX CMCSA FOX
  • Disney’s  (NYSE:DIS) plans to aggressively push Star Wars merchandise points towards potential success. The media giant saw massive benefits from Frozen merchandise last year, which led to a double digit growth in the segment revenues. However, the dynamic with Star Wars will differ, despite its massive fan following . The reason is the target demographics. Frozen connected well with kids, but Star Wars is not that popular with the youngest generation who predate its blockbuster movies. Remember, the first movie in this series was released more than three decades ago. Disney realizes this issue and it is thus going to be aggressive in marketing   Star Wars  merchandise and using different platforms, such as YouTube (Maker Studios) and ABC, to promote new toys. This is important for Disney as the   merchandise will not only aid the consumer products revenue growth but also create more visibility and hype for the movie, which will release in December. We currently  estimate consumer products revenues of around $4.75 billion in 2015, also reflecting the contribution from the newly opened Shanghai store. In the coming years, we estimate revenues to be north of $7 billion, primarily reflecting the benefits of international expansion, Star Wars and Frozen 2, among other factors. The  EBITDA margins associated with consumer products business  are also higher at around 45%, according to our estimates. This will translate into EBITDA of $3.4 billion by the end of our forecast period, representing 12% of the company-wide EBITDA. Understand How a Company’s Products Impact its Stock Price at Trefis Expect Solid Growth In Consumer Products Revenues In The Near Term Disney acquired Maker Studios last year for $500 million and now it is putting it to use with various creators lined up to promote the new Star Wars merchandise. This, among other benefits, is why Disney acquired Maker at first place – to cross-market its various products and services. While the event on YouTube will reveal different products on September 3rd, more than 1,000 stores will open the next midnight to sell the Star Wars products. If Disney succeeds in its attempts to create massive demand with the younger generation, it will be a significant achievement for the company. Firstly, it will create more hype and demand for the movie, which is scheduled to release around Christmas.  Secondly, it will go well with its plans for a new Star Wars attraction in its theme parks.   Thirdly, it will significantly boost the consumer products segment revenues.  Fianlly, we note it establishes a platform to be leveraged by subsequent movies lined up in this series. The consumer products division is anyways trending well for Disney. Revenues have almost doubled in last five years to $4.25 billion in 2014, partly reflecting the benefits of Marvel acquisition. The segment saw a solid growth last year with the success of Frozen merchandise. The stores were unable to meet the demand for  Frozen  merchandise and even restricted customers to buying a maximum of two items per order for some time. Stores across the U.S. were sold out on  Frozen  costumes for most of the first half last year. Frozen connected well with younger generation and that’s what Disney is now trying to do with Star Wars (also see – Disney Lowers FY 16 Guidance, Though Star Wars And Shanghai Are Key Factors To Driving Future Growth ). Apart from Star Wars, the segment will see revenue growth from its Playmation series in the near term. Playmation is a line of toys that combines wearable gadgets with role-play of various characters and it will hit the retail stores in October this year. Added to the benefits of Star Wars merchandise, Disney should be able to grow its consumer products revenues in 2015, despite a slower first half. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
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    Walgreens Steps Up Retail Clinic Expansion As Demand For Convenient Care Grows
  • By , 8/27/15
  • tags: WAG
  • As selling medicines become less profitable, pharmacies have been looking for new avenues for growth. Most of the top pharmacy chains in the U.S. are, therefore, increasing focus on selling beauty products and also remodeling stores in the process. Drug retailers have found another source of growth in retail health clinics, which have been proliferating across the U.S. for the last few years.  Walgreens (NASDAQ:WBA) currently has 400 healthcare clinics spread throughout the country. CVS Health (NYSE:CVS), on the other hand, is far ahead in the race with about 1,000 clinics and plans to further expand to 1,500 clinics by 2017. In an attempt to narrow this gap down, Walgreens recently announced a collaboration with Providence Health and Services through which new clinics will open at Walgreens stores, but will be owned and operated by Providence and its affiliates. As more people continue to come under insurance coverage, the shortage of primary care physicians (PCPs) is only expected to increase. These clinics will address the growing need for easy-to-access and faster care which other settings do not offer. They would also drive sales of OTC and beauty products as visiting patients are likely to make additional purchases. These factors make it a win-win situation not only for drugstores and patients, but also for larger hospital settings, which could utilize their resources for treating more complex conditions. Below we look at some of the factors discussed above in more detail. Our current  price estimate for Walgreens stands at $70, which is at a discount of about 20% to the market price. View our analysis for Walgreens Existing Shortage and Increasing Demand For PCPs According to a new study conducted by the Association of American Medical Colleges (AAMC), demand for physicians is expected to grow faster than supply, leading to a projected shortfall of between 46,100 and 90,400 physicians by 2025. While some demand is generated from changing demographics (i.e., the aging population of baby boomers), the implementation of the Affordable Care Act (ACA) is expected to further drive up demand as more people come under insurance coverage. Considering the health and risk factors of the population likely to gain insurance (out of the 26 million people who otherwise would be uninsured in the absence of ACA and estimated changes in utilization levels), the projected increase in demand for physician services is about 2.0% above that created by changing demographics. Low Pricing and Convenience Are The Key Demand Drivers According to CVS spokesman Brent Burkhardt, convenience is the major factor driving demand for walk-in retail clinics, which also charge less than urgent care centers. Availability at short notice, shorter waiting times and longer opening hours, compared with doctors’ offices, give the retail clinics an upper hand over the latter, especially in case of patients with non-life-threatening but frequent illnesses, such as ear infections, sinus infections or minor cuts. Affordability and fixed pricing make retail clinics even more attractive. Dr. Ateev Mehrotra, an associate professor at the Harvard Medical School and a policy analyst at the research organization Rand Corp, co-authored a study on the quality of care for three common conditions and found encouraging results for these clinics. It was found that the quality of treatment was similar across retail clinics, physician offices and urgent care centers. Additionally, retail clinics were found to offer the services at a significantly lower cost, averaging at $110 compared to $166 at physician offices, $156 at urgent care centers and $570 in emergency departments. Driven by the demand generated by these factors, the number of retail clinics in the U.S. is expected to go up quickly, as pharmacies compete for patients. View Interactive Institutional Research (Powered by Trefis) Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
    SLB Logo
    Schlumberger To Buy Cameron, Gets A Better Price Than Halliburton-Baker Hughes Deal
  • By , 8/27/15
  • tags: SLB HAL BHI
  • At a time when the free fall of crude oil prices is driving the valuation of energy services companies to an all-time low, the market is set to witness yet another merger leading to further consolidation of the industry. Schlumberger  (NYSE:SLB), the world’s largest oilfield contractor, has announced its plans to acquire Cameron International (NYSE:CAM), an oilfield equipment maker, in a stock and cash transaction valued at $14.8 billion. The market seemed positive about the deal, since Schlumberger’s stock fell only 3.4% on Wednesday, 26 th  August, when the news became public, as opposed to a 12% decline witnessed by its closest competitor Halliburton (NYSE:HAL) when it announced the deal with Baker Hughes (NYSE:BHI) in November last year. Cameron’s stock jumped over 40% within a single trading day. Schlumberger expects to close the transaction, which is likely to be accretive within the first year, by the first quarter of 2016, subject to Cameron’s shareholders’ approval and other regulatory approvals. In this article, we will discuss the deal in the light of its rationale and value accretion to the companies. See Our Complete Analysis For Schlumberger Here   The key highlights of the deal include: Cameron shareholders will receive 0.716 shares of Schlumberger’s common stock and a cash payment of $14.44 for each share held for a total deal value of $14.8 billion. The deal price of $66.36 per share represents a 56.3% premium to Cameron’s closing stock price of $42.46 per share on Tuesday. On closure of the deal, Cameron shareholders will own approximately 10% of Schlumberger’s outstanding shares. Synergies of $300 million and $600 million are expected in the first and second years respectively, making the transaction EPS accretive to Schlumberger in the first year itself. Combined entity will offer the industry’s first integrated drilling and production system to the oil and gas industry clients. Rationale of the deal Due to the uncertain outlook for crude oil prices, it looks next to impossible for energy services companies to grow organically. Hence, in the quest for inorganic growth, the mergers and acquisitions (M&A) activities in the industry have gone up significantly over the last one year. The most talked about of these was the $35 billion deal between Halliburton and Baker Hughes announced last year, which is yet to be completed. The deal threatened to create a combined entity which had the potential to challenge Schlumberger’s industry leading position . Since the announcement of that merger, the market had been waiting for a similar move from Schlumberger. However, the oilfield giant took its own time, and finally decided to acquire Cameron, not only to offer an integrated platform by building on its deepwater partnership, but also to create value for its shareholders. Following are the major drivers behind this deal: Offering Integrated Solutions Cameron is the world’s largest surface wellhead provider offering a vital set of valves, pumps, and blowout preventers which help to control the flow of oil from the underground reservoirs. The deal will allow Schlumberger to bundle its reservoir and well engineering and digital mapping technologies, with Cameron’s surface, drilling, processing, and flow control technologies to offer an integrated “pore-to-pipeline” product to the global oil and gas industry. This will provide a first-mover advantage to the company and enable it to grow its market share in the long term.   Source: Schlumberger and Cameron Conference Call Diversifying Into Deepwater Market Schlumberger and Cameron have been working together since 2012 as partners on OneSubsea, a joint venture created to focus on providing integrated deepwater offerings. Besides, Schlumberger has a track record of buying its joint venture partners. In the past, the company has acquired Smith, WesternGeco, Eurasia Drilling, and Dowell on different occasions. Thus, this merger is not a surprise and was reasonable for it to happen sooner or later. Further, the deal will enable Schlumberger to diversify further into the deepwater market and leverage Cameron’s heavy-duty offshore drilling hardware such as gears and blowout preventers.   Source: Schlumberger and Cameron Conference Call EPS accretive Schlumberger expects to realize pretax synergies of approximately $300 million in the first year and $600 million in the second year. In the first year, the synergies will primarily be cost related which would include reduction of operating costs, streamlining of supply chains, and improving manufacturing processes. In the second year and beyond, the synergies will predominantly come from revenue consolidation. In addition, the company claims that the deal will be accretive to its earnings per share within the first year of deal closure.   Source: Schlumberger and Cameron Conference Call Does The Deal Make Sense? In the current environment where all the energy services companies are struggling to weather the downturn, Schlumberger has actually managed to hold up quite well. The company maintained a flat operating margin despite a notable decline in its top line. Thus, if any energy service company can successfully pull off a merger at this time, it is Schlumberger. Apart from enhancing the company’s product offering, the following are some of the reasons why we think that the deal makes financial sense for the company: Better Price Unlike its competitor Halliburton, Schlumberger has strategically timed its merger with Cameron. Of late, the global markets have plunged due to fears over a slowdown in the Chinese economy. This further pulled down the crude oil prices and reversed all the recovery that took place in the first six months of 2015. This resulted in a further decline in the valuation of energy services companies. Thus, Schlumberger hit the hammer just when the iron was hot and announced this deal. Interestingly, Schlumberger is paying a premium of 56.3% to the shareholders of Cameron, which is identical to the premium paid by Halliburton to the shareholders of Baker Hughes . However, the latter deal was announced almost a year back when oil prices were close to $75 per barrel, as opposed to the current scenario where the oil prices have gone below $40 per barrel. In addition, Cameron’s stock has slipped more than 35% over the last one year. Thus, it is apparent that Schlumberger got a better deal than its competitor. Value Accretive Though Schlumberger claims that the deal will be EPS accretive in the first year itself, we did a quick back of the envelope calculation to cross check the company’s stance. At the end of the June quarter, Schlumberger had a cash balance of over $3.5 billion. This indicates that the company has a strong cash balance to carry out the deal without taking on more debt. Further, based on the cost synergies anticipated by the company, we estimate that the present value of these synergies to Schlumberger’s shareholders will be approximately $3.1 billion (considering Schlumberger’s 90% stake in the combined entity and a discounted rate of 9.8%), which is lower than the cash consideration of $2.8 billion that is being paid to Cameron’s shareholders. Thus, the deal will be value accretive for Schlumberger in the first year as claimed by the company.   Source: Schlumberger and Cameron Conference Call Minimal Regulatory Concerns Unlike the Halliburton and Baker Hughes deal, which is yet to close due to antitrust issues, this deal is more focused on diversification into oilfield equipment supply, rather than eliminating competition. Since Schlumberger and Cameron cater to different markets and clients, the transaction is less likely to attract antitrust issues. Consequently, there are more chances of the deal going through without any divestitures or regulatory hurdles. In a nutshell, we expect the deal to be value accretive for the shareholders of both Schlumberger and Cameron driven by cost and revenue synergies in the short term, and integrated product offerings in the long term. View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
    JNJ Logo
    JNJ's Splenda Sale Shouldn't Be A Concern For Investors
  • By , 8/27/15
  • tags: JNJ PFE MRK
  • Johnson & Johnson  (NYSE:JNJ) has agreed to sell its iconic sweetener product SPLENDA to Heartland Food Products Group. The terms of the deal have not been disclosed yet, but it is not hard to see why the company may no longer be interested in this business. First, Splenda sweetener is part of Johnson & Johnson’s consumer products segment which has operated on very low margins as compared to pharmaceuticals or medical devices businesses. Second, Splenda’s and other sucralose products’ prices are likely to suffer going forward due to weakness in carbonated drinks market globally. Thus, it makes little sense for the company to continue in this business, especially when there are bigger and more promising opportunities on the pharma side. For investors, this is not a move worth contemplating. Our current price estimate for Johnson & Johnson stands at $107, which is at a premium of more than 10% to the market price. While the global markets have fluctuated recently, we believe that Johnson & Johnson’s longer term outlook doesn’t warrant material change as of now.
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