Trefis Helps You Understand How a Company's Products Impact Its Stock Price


Trina Solar recently posted a strong set of Q1 numbers, beating market expectations on both revenues and earnings. Gross margins improved by 2.3% sequentially, aided by a more favorable sales mix and lower manufacturing costs. The outlook for the sector remains positive as concerns of excess supply have largely abated and installations are expected to grow by over 20% this year. Our earnings note gives a review of the company's performance and what to expect going forward.

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The Chinese e-commerce market is expected to see stellar growth in the coming years, and could reach $1 trillion by 2018. Rising Internet penetration and the growing popularity of online shopping are likely to lead to significant growth in the number of online shoppers in China. Alibaba is positioned to benefit as the leading player in the Chinese e-commerce market, and we expect its active buyer count to exceed 500 million by 2018.

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Revising NYT Price To $12
  • By , 5/22/15
  • tags: NYT
  • We recently upgraded our price estimate for  The New York Times Company (NYSE:NYT) from $9.64 to $12.01, based on the expected improvement in the company’s financial results stemming from increase in weekly price of its print subscription and growth in the number of digital subscribers. Furthermore, post the sale of New England media group (NEMG) that took place in the third quarter of fiscal year 2013 and completed at the end of Q4, the company has been able to rein in its sales, general and administrative (SG&A) expenses. The company expects that cost reduction initiatives that were recently implemented across the company should allow it to maintain lower costs in 2015, relative to 2014 levels. In this note, we will discuss factors driving our price revision. Click here to see our complete analysis of New York Times Stable Market Share And Improving Margins NYT’s core business has held on to its market share and its circulation revenue has grown. Furthermore, NYT was able to increase the subscription price for its circulation in 2015, due to the strength of its brand and reach across different media, i.e., print and digital. Additionally, the company’s gross margins improved as newsprint cost declined. Considering the high operating leverage of the company, where in each incremental sale contributes more to the profitability of the company, we anticipate NYT’s gross profit and the cash flow to improve in the future. SG&A Expense To Decline in 2015 The SG&A cost was high for fiscal year 2014 due to higher compensation expense related to new initiatives, and one time pension settlement charge in connection with a one-time lump sum payment offer to certain former employees. The company has stated that some of the initiatives it recently undertook will help it to maintain a lower SG&A cost for most of the fiscal year 2015. While we expect SG&A expense to rise in dollar terms by the end of our forecast period in 2021, we expect the SG&A Expenses as percent of revenue to decline to 44.5%. This has positively impacted our stock price estimate by $2.44. 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  
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    Weekly Tech Update: INTC, CREE, FFIV, QCOM, TXN
  • By , 5/22/15
  • The semiconductor industry was one of the strongest performing sectors in 2014, driven by the continued strength in personal, network and service provider communications, and increasing electronics adoption around the world. According to the Semiconductor Industry Association (SIA), the global semiconductor industry posted record sales of $336 billion in 2014, a 9.9% increase from 2013. Annual sales increased in all the regional markets for the first time since 2010. Despite macroeconomic challenges, the SIA recently reported that worldwide sales of semiconductors reached $83.1 billion (a 6% increase) during Q1 2015 compared to Q1 2014.  The SIA believes that the semiconductor market is well-positioned for continued growth in 2015 and beyond. Below is a weekly update for some of the technology companies that Trefis covers.
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    P&G’s Frederic Fekkai Hair Care Brand Becomes the Latest Victim of the Brand Consolidation Program
  • By , 5/22/15
  • tags: PG UL CL EL KMB
  • Global consumer processed goods behemoth Procter & Gamble (NYSE: PG) continues to take small steps forward in its ambitious brand consolidation program. Frederic Fekkai, a luxury hair care brand and salon chain, has become the latest brand to fall prey to P&G’s brand-shedding strategy. The maker of renowned hair care brands like Pantene and Heads & Shoulders announced on May 21st that it will sell the Frederic Fekkai brand to a joint venture formed by Designer Parfums and Luxe Brands. The terms of the deal were not disclosed. P&G had reportedly purchased the brand for slightly over $400 million in 2008. The latest sale indicates P&G’s growing detachment with the beauty business, which includes skin care and makeup, hair care, and fragrances segments. The company is reportedly in the process of divesting several other components of its beauty business, including the Wella hair care unit, the fragrance business and certain unnamed cosmetic brands (Read: P&G Just Made Its Biggest Move So Far Under The Brand Consolidation Program ). Rumors of the potential sale of the Wella Hair Care unit have been floating around since last November, but have not been substantiated by the company. Nevertheless, P&G’s disinterest in the beauty business is clear from recent events. The company sold the Rochas fashion and fragrances brand in March this year, and was reportedly mulling the sale or IPO of some of its other beauty brands. Besides Wella, currently P&G is also said to be exploring divestment options for Clairol salon hair care products and several designer fragrances. These brands collectively account for over a third of P&G’s revenues of $20 billion from the beauty division. We have a price estimate of $78 for Procter & Gamble, which is nearly the same as its current market price. See our complete analysis for Procter & Gamble here P&G’s Beauty Division: Declining Revenues, Relatively Poor Margins Procter & Gamble’s Beauty division accounted for a quarter of the company’s total revenues of $80 billion in 2014. Although the company’s total revenues have been declining over  the last three years, revenues from the beauty division declined at a faster rate in 2013 and 2014. Revenues from the Hair Care sub-segment, which accounts for nearly half of the Beauty division’s revenues, have fallen continuously for the last three years. According to our estimates, P&G’s market share in the global hair care market has also fallen from a peak of 28% in 2011 to 22% in 2014. Looking at the bottom-line, matters appear even worse for P&G’s beauty business. The EBITDA margin of the Beauty division was 20.4% in 2015, which was the lowest of all divisions of the company. It is also considerably lower than that of P&G’s rivals L’Oreal (OTC: LRLCY) and Estee Lauder (NYSE: EL), making the beauty business an unsustainable proposition over the long term. These facts indicate that the Hair Care segment as well as the broader Beauty division satisfy P&G’s criteria of underperforming businesses, making the responsible brands subject to divestment. As a result, analysts have long considered P&G’s beauty business as ripe for downsizing. Given P&G’s focus on growth potential and profitability (Read: Are P&G And Unilever Headed In Opposite Directions? ), the company is not likely to hesitate  selling off even multi-billion dollar brands like Wella and Covergirl. This lends further credence to the persistent ongoing rumors . Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
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    Factors That Can Lead To A Significant Increase In TI's Valuation
  • By , 5/22/15
  • tags: TXN
  • Texas Instruments Normal 0 false false false EN-IN X-NONE X-NONE (NASDAQ:TXN) is the world’s leading analog chipmaker and a key supplier of embedded chips for a host of applications. Since its exit from the wireless chip business (which weighed on TI’s revenue growth) in 2012, the company has focused on further developing its high margin analog and embedded products portfolio. The operating margin for embedded processing products more than doubled (to 18%) in Q1 2015. TI’s top line has grown at a CAGR of 7% in the last five years. However, muted growth in the company’s personal electronics business, completely driven by a steep decline in TI’s PC circuits offering, and currency fluctuations, slowed the company’s growth momentum in the last quarter. TI believes that this is a short-term trend and is confident about its  long-term outlook. Both its analog and embedded processing business remains strong, and the recent product launches as well as a strong product pipeline is expected to re-accelerate growth in the future. Our price estimate of $50 for TI is at an approximate 10% discount to the current market price. Below are three key factors that can significantly increase our valuation for the company. See our complete analysis of Texas Instruments here TI’s Analog Market Share Increases To 25% (~15% Upside) TI has a wide economic moat because of its proprietary analog designs and the high switching costs of its products. The global analog market is expected to grow at a CAGR of 4.79% between 2013 – 2018 as high-quality analog chipmakers tend to retain design wins for the life of the product, yet maintain healthy pricing and strong profitability on such sales over time. TI has renewed its focus on its analog chip business, highlighted by the large acquisition of National Semiconductor and shrewd purchases of cutting-edge manufacturing equipment for pennies on the dollar. The expansion should allow TI to attract additional high-volume analog chip orders, all while taking on relatively lower fixed costs that should lead to improving gross margins. TI is converting part of its 13-year-old DMOS6 factory to support $3 billion of 300-millimeter analog revenue from a space that had been used for wireless products the company no longer makes. The plan for DMOS6 fits into TI’s target of its capital spending equaling 4 percent of revenue. Most of the equipment already is in place at the above mentioned factory.. The rest of TI’s chip production is done on smaller 200-millimeter wafers. TI’s goal is not to shift existing production from smaller wafers to the larger wafers, but to support future growth. TI can put 2.3 times more chips on the larger wafer, reducing chip costs by 40 percent and increasing its gross profit margin by 8 percentage points. TI generates enough revenue to adequately fund the large sales force and field applications engineers team that only a handful of chipmakers can match. Its sales force helps the firm reach more customers and generate additional chip sales that can fund further sales team expansion, creating a virtuous cycle for the company. We currently forecast TI’s analog market share to increase marginally, from 18.3% in 2014 to 19.2% by the end of our review period. However, there is a possibility that we are underestimating TI growth potential in the analog market. If the company’s market share increases to 25% over our review period, it will lead to a 20% increase in our valuation. TI’s Gross Profit Increases To 65% (~15% Upside) Having seen its gross margin decline from 53.6% in 2010 to 49.7% in 2012, on account of lower revenue, increased capacity, under-utilization charges and the acquisition of its large analog competitor, National Semiconductor, TI has marked a continuous improvement in gross margin since 2013. TI’s overall gross margin increased by 3.8 percentage points, from 58% in Q4 2014 to 57.7% in Q1 2015, reflecting higher revenue, increased factory load-ins, and an improved product portfolio focused on analog and embedded processing that benefits from an efficient manufacturing strategy. The analog and embedded processing products are more profitable and less capital intensive compared to wireless products. Thus, the company benefits by deriving a larger portion of its revenue from these two divisions. In addition to a favorable revenue mix and improved manufacturing efficiency, the gross margin will also benefit from lower depreciation in the future. At present, depreciation is ahead of TI’s capital expenditures. The company expects its capital expenditure to remain at low levels (4% of revenue) for the next few years. As depreciation starts to work itself down over the next couple of years, it will boost gross margins. We currently forecast TI’s gross profit to increase marginally, from 56.9% in 2014 to 57.9% by the end of our review period. However, as a result of strong growth gross profit margins coming from the analog and embedded systems, TI could gain operational efficiency at a much faster pace. If TI’s gross profit increases to 65% over our review period, it will lead to a 15% increase in our valuation for the company. TI Sees Huge Growth In Internet of Things (IoT) Market (~10% Upside) Microcontrollers (MCUs) dominate the Internet of Things (or IoT) that spans across all computing devices except PCs, tablets, and smartphones. Cloud Times estimates that IoT will grow to reach 26 billion connected devices by 2020, up from just 0.9 billion in 2009. Given this exponential growth, it seems the strong demand for MCUs is likely to continue in the future. Owing to the growth in connected devices, TI’s core end markets— automotive and connected devices—present huge addressable opportunities for the company. According to the company’s own estimates, 50 billion devices are expected to be connected by 2020. The above advancement could create a stronger growth for TI’s embedded revenue (MCUs)  in the future. If the company’s embedded business increases, owing to IoT, to 23%  over our review period (as compared to our forecast of 13.6%), it will increase our valuation for TI by almost 10%. 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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    Weekly Media Notes: Disney's Largest Retail Store In China And More
  • By , 5/22/15
  • tags: TWX VIA NWSA FOX
  • The media industry remained active last week, with Disney opening its largest retail store in Shanghai. In another development, Fox’s management stated that they are committed to invest more into programming despite the recent ratings decline. In yet another, News Corp is in Australia Tax Office’s “top tax risk” radar. On that note, we discuss below these developments related to media companies over the last week or so.
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    10% Upside If J&J Is Even Partially Successful In Its R&D Plan
  • By , 5/22/15
  • tags: JNJ PFE MRK
  • In a recent analyst meeting,  Johnson & Johnson (NYSE:JNJ) stated that it plans to file at least 10 new drugs for regulatory approval by 2019, each of which has the potential to become a blockbuster product with annual sales of more than $1 billion. The company also announced its plans of 40 line extensions of current and new drugs. The announcement comes at a time when the consensus is that it will be difficult for J&J to sustain growth of its pharmaceutical business, partially because of the fall of hepatitis C drug Olysio, which was earlier expected to be a big growth driver. While we take a cautious view, a string of successful launches can add meaningful value to the company’s stock. Positive data for pipeline drugs could lead to our forecasts being conservative. For instance, it remains to be seen how Zytiga’s label extension will help it compete against Xtandi. There are additional clinical data that could potentially strengthen Imbruvica’s sales, going forward. Also, the company is likely to file multiple immunology and oncology drugs for FDA review in the next two to three years. More than expected success could add additional $5-$6 billion in annual revenues by 2021. This could lead to an upswing of about 10% in J&J’s stock price. Our current price estimate for Johnson & Johnson stands at $105, which is at a slight premium to the market price.
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    American Eagle Soars On Better-Than-Expected Earnings And Guidance
  • By , 5/22/15
  • tags: AEO ARO ANF
  • American Eagle Outfitters ‘ (NYSE:AEO) shares increased by more than 7% after it reported better-than-expected results for Q1 fiscal 2015, and guided its second quarter ahead of the consensus estimates. Backed by a recovery in store traffic and solid progress on the omni-channel front, the company reported 7% growth in comparable sales and 8.3% rise in revenues to $699.5 million, slightly ahead of the expected $692 million. American Eagle’s earnings increased a staggering 646% to $29.1 million or $0.15 a share, soundly beating its own guidance of $0.09-$0.12. Sturdy topline growth, a  notable rise in gross margins, and controlled SG&A expense  enabled the retailer to record such an increase in profits. American Eagle delivered compelling merchandise in an appealing store and web environment for both its brands. Unlike other specialty apparel retailers, American Eagle has finally managed to draw customer attention with its fashion newness, that allowed it to drive a higher level of store and web traffic and fend off competition from affordable fashion-forward players such as Zara and Forever 21. New merchandise allowed the company to usher a higher proportion of full priced sales, that consequently pushed its comparable sales and margins higher. What’s interesting to note here is that American Eagle managed this growth amid an edgy retail environment, where buyers are consistently switching to online shopping. The credit for this success should not go to the updated merchandise portfolio alone. Swift progress on omni-channel initiatives also contributed to American Eagle’s growth. Following its promising Q1 results, American Eagle guided its second quarter earnings per share at $0.11-$0.14, a little ahead of the analysts’ estimates of $0.11. The company has shown improvement in almost all the facets of its business and it appears that American Eagle has finally come out of its slump for good. Our price estimate for the company at $14.07, is about 10% below the current market price. However, we are in the process of updating our model in light of the recent earnings release.
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    L Brands' Growth Remains Steady; Guides Moderate Improvement For 2015
  • By , 5/22/15
  • tags: L-BRANDS GES GPS
  • The parent company of Victoria’s Secret and Bath & Body Works,  L Brands (NYSE:LB) recently reported its Q1 fiscal 2015 results. The retailer said its adjusted earnings per share increased 15% to $0.61 from $0.53 in the year ago period, which was interestingly just ahead of its recently revised guidance of $0.58-$0.60. L Brands’ net sales increased 5% year over year to $2.512 billion, with a similar increase in comparable sales. The retailer’s net sales growth wasn’t ahead of its comparable sales growth despite continued expansion, because negative currency headwinds had a negative impact of one percentage point on revenue growth. On the profitability side, L Brands gross margins expanded 90 basis points as the company successfully scaled back on promotional activities. Its SG&A as percentage of revenues deleveraged 20 basis points due to higher store selling expenses, but overall operating income increased 11% and margins rose 70 basis points. While L Brands’ performance during the first quarter was good across the board, its guidance is a little disappointing, though marginally better than its earlier guidance. Considering that Victoria’s Secret and Bath & Body Works are the dominating brands in their respective fields and have substantial room for growth, comparable sales growth forecast appears somewhat bleak. The company expects second quarter and full year comparable sales to increase in low-single digit, with net sales growth just a little ahead. While gross margins have improved in Q1, L Brands believes that they will be flat year over year for the full year 2015. Our price estimate for L Brands is at $89, which is roughly inline with the current market price. However, we are in the process of updating our model in light of the recent earnings release.
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    HP Earnings: Soft Demand And Strong Dollar Impact Revenue Even As The Company Gears For Split
  • By , 5/22/15
  • tags: HPQ LXK IBM
  • Hewlett-Packard (NYSE:HPQ) posted its second quarter earnings for fiscal year 2015 on May 21 st . (Fiscal year end with October.) In line with our expectations, HP’s revenues declined by 7% year over year (2% in constant currency) to $25.5 billion. The company delivered $0.55 in GAAP diluted earnings per share, marginally down from the year-ago quarter. The company attributed the decline in revenues to the appreciation of the U.S. dollar and soft demand across the IT services business. The softness in demand was further accentuated by the challenging business environment in EMEA, which contributes nearly 50% to HP’s revenues, and China. The HP enterprise services, software and HP Finance posted a steep decline in revenue. Furthermore, despite the improvement in PC shipments, its computer hardware group failed to post any growth in the top line due to pricing pressures. However, the enterprise group posted encouraging results as Industry Standard Servers witnessed growth. Enterprise group revenues declined 1% to $6.56 billion, while the enterprise service revenues declined by 16% to $4.81 billion. In this note, we will review results for its divisions and discuss the planned split of the company. See our full analysis on HP Outlook for Q3 and 2015 For Q2 FY15, HP estimates non-GAAP diluted net EPS in the range of $0.83 to $0.87. It expects GAAP diluted net EPS in the range of $0.50 to $0.54. Fiscal 2015 third quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.33 per share, related to separation costs, the amortization of intangible assets, restructuring charges, defined benefit plans settlement charges and acquisition-related charges. For fiscal 2015, HP estimates non-GAAP diluted net EPS between $3.53 and $3.73 and GAAP diluted net EPS between $2.03 and $2.23. Separation Update Takes Center Stage HP provided an update on its planned separation into two independent, Fortune 50 companies. The spinoff is fueled by the idea that companies with a narrower focus perform better. The separation remains on track and the company expects associated dis-synergies of approximately $400 to $450 million divided about equally between the two companies. The company also believes that it can offset more than half of these dis-synergy costs in FY2016, and more than fully offset these costs by FY2017. HP also announced new future leadership appointments for both companies. While   Cathie Lesjak will become Chief Financial Officer of HP Inc, Tim Stonesifer will become CFO of Hewlett Packard Enterprise. Mr Stonesifer currently serves as CFO of HP’s Enterprise Group. PC Shipments Improve HP’s PC and Workstation division is the fourth largest division, contributing nearly 30% to its revenue and 14.6% of its estimated value. According to Gartner, worldwide PC shipments experienced 5% decline in the first quarter of 2015. HP’s personal systems division outperformed the industry as both the number of shipments and revenue during the quarter. The company reported 2% growth in total units shipped during the quarter, buoyed by a 19% increase in notebook shipments. While consumer revenues declined 2% (and grew 3% in constant currency), commercial revenues declined by 7% (down 2% in constant currency) as the buyers deferred PC purchases in advance  of the expected release of Windows 10 later this year. As a result, the company reported 5% year-over-year decline (flat in constant currency) in revenues to $7.7 billion. Operating profit declined to $235 million or 3% of revenue indicating the intense price competition in the industry. The company achieved 23.1% share indicating that HP’s recently launched thin notebooks have gained traction with users as Notebook revenue were up by 5% against 19% improvement in shipments. Server Demand Spurs Enterprise Group The Enterprise Group is HP’s third largest business division and makes up 17.8% of its value. This division includes HP’s Industry Standard Servers (ISS), Business Critical Systems (BCS), and storage solutions. The division was able to buck the headwinds of currency appreciation and reported revenues at $6.6 billion. While there was an 11% year-over-year revenue increase (17% in constant currency) in ISS, the company continued to experience a decline in its Business Critical Systems division as revenues declined by 15% year over year. The company reported double-digit increases in ISS’s ASPs as the Gen9 ProLiant server and strength in density-optimized systems drove margins. Going forward, the combination of Gen9 and the refresh cycle of the server should drive growth in the remainder of 2015. The storage division revenues declined 16% (2% in constant currency) to $740 million as revenues for traditional systems declined by 14%. The mid-tier 3PAR storage unit continued to gain traction as revenues grew during the quarter. In sum, sequential comparisons suggest momentum is increasing, even as the year-to-year comparisons remain negative. HP Service Revenues Continue To Suffer The services division makes up 20% of HP’s estimated value. HP’s enterprise services division reported a 11% year-over-year decline (8% decline in constant currency) in revenue to $5 billion, primarily due to key account revenue run off, softness in new signings from EMEA, and currency headwinds. Within this segment, the infrastructure technology outsourcing division reported an 11% year-over-year decline in revenues to $3.15 billion, due to a revenue run-off of lapsed contracts and pricing pressures. Furthermore, its application and business services revenues declined by 11% year over year to $1.85 billion, primarily due to softness in demand from EMEA and key account runoff. Going forward, we expect that the company will continue to report a decline in service revenues as the weak business conditions in EMEA remain, and the company has not been able to bag substantial new contracts. Pricing Pressure Drags Printing and Ink Cartridge Division The printer and ink cartridge division is HP’s largest contributor and makes up 25% of its value. The printer division reported 7% year-over-year decline (2% in constant currency) in revenues to $5.5 billion in the quarter as supplies revenues declined by 5%. The channel inventory for supplies increased during the quarter indicating that slowdown in sales. This also suggests some softness in demand in the future. Furthermore, declines in low-end home and single function laser hardware units drove overall consumer units down 6% year over year. Additionally, aggressive pricing from Japanese competitors in the printing business, primarily due to the weakness of the Yen, continued to challenge HP’s market share. Software Division Revenues Flat lines The software division makes up 6.8% of HP’s estimated value. Software division revenues were impacted by the shift in its portfolio and operating model to SaaS and subscription-based offerings. The company reported 17% decline in license revenues, and 11% decline in service revenues. As a result, HP’s software division revenues witnessed 8% year over year decline in revenues to $892 million. However, HP reported double-digit revenue growth in its cloud, security and big data services. We believe that cloud services are potentially the biggest new revenue source for HP in FY2015. We are in the process of updating our model. We presently have a  $30.35 price estimate for HP, which is 10% below 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
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    Lower China Sales And Large Investments To Weigh On Tata Motors' Fiscal 2015 Results
  • By , 5/22/15
  • The Indian automaker  Tata Motors (NYSE:TTM) is scheduled to announce its Q4 and full fiscal year (ended March) results on May 26. The company reported a mixed bag of results last quarter, with revenues rising 9.6% year-over-year, while profits before tax declined 6.4%. The Indian automaker’s stock price fell 5.3% after the announcement of its third quarter and nine-months ended results on February 5, and the stock is down 20% since. This is happening while the India passenger car business is finally taking off, and growth for the luxury brands Jaguar Land Rover (JLR) has somewhat stalled. JLR forms over 90% of the valuation for Tata Motors, as per our estimates, and while wholesale shipments for the British marquee brands rose by double-digit percentages in the last five fiscals, shipment growth is expected to have contracted this fiscal year. Trefis’ price estimate for Tata Motors is $48, which is above the current market price. See Our Complete Analysis For Tata Motors The top line growth through the nine months ended December 2014 was boosted by higher wholesale shipments for JLR. Rich product and market mix for JLR saw revenues rise 10.3% over 2013 levels, with strong sales for the Range Rover Sport and the Jaguar F-Type. However, while wholesale shipments for JLR rose in the October-December period to bolster top line growth for the division, retail sales to end customers fell 0.6% year-over-year, following an 8% rise in retail sales in the previous quarter. The automaker might have looked to keep supply in line with demand, and eased-off shipping vehicles this quarter, in order to avoid inventory pile-up and protect its premium brand image. Retail sales fell 0.4% in the January-March quarter, and in turn, wholesale shipments could be lower in Q4, dragging down revenue growth. Large start-up costs related to product launches, and higher R&D expenses and CapEx are expected to dent Tata’s financials in the near term, and the company could be cash flow negative in the next fiscal, starting April 2015. China Sales Lag, While U.S. Sales Pick Up For Jaguar And Land Rover China is JLR’s single largest market, forming over 25% of the net retail volumes in fiscal 2015. Economic conditions have become weaker in the country, over previously seen high GDP growth levels, due to industry overcapacity, and real estate and infrastructure sector slowdowns. However, the GDP growth for the country is expected to be 7% this year, which is still solid. Sales of passenger vehicles surged 9.9% year-over-year in 2014 to 19.7 million units in China, and retail sales for JLR surged 28% year-over-year in the country during this period. However, since then, demand for the British luxury vehicle brand has been tepid in the country, with volumes down more than 20% in the January-March quarter. Jaguar Land Rover is rolling-out its locally built Range Rover Evoque in China this fiscal year, but is facing some trouble scaling-up its output. Sales in China might have dropped this year mainly as the Chinese customers decided to wait for the locally-built cheaper JLR models, or it might be due to the measures taken by the government to make domestic automakers more attractive, such as encouraging parallel imports of premium vehicles and gray-market vehicles, not authorized by the automakers, which are sold below the official market price. Luxury foreign automakers came under the scrutiny of, and were later fined by, China’s antitrust regulator last year, as many were found guilty of monopolistic practices pertaining to highly inflated vehicle and spare part prices. Foreign automakers tend to mark-up their model prices in China, to account for taxes and costs of transportation and assembly, but still earn a hefty margin on sales in the country. Domestic automakers are taking away share from foreign makers in China in the last few months, mainly due to the surge in demand for budget SUVs. In this case, local production might be the answer for JLR. Local production will help JLR evade China’s 25% import taxes, as well as bring down model prices. In fact, the imported Range Rover Evoque is around 1.61 times as expensive as the locally-built Audi Q5, reflecting how imported cars are less competitive on the pricing front. Jaguar Land Rover’s vehicle prices are expected to fall by 15% on account of local production, which should help the automaker gather higher volume sales, going forward. On the other hand, after retail sales declining 1% in North America in the nine months ended December, Jaguar Land Rover’s sales jumped 17% in the last quarter, on the back of a strong demand for the SUV brand Land Rover. Jaguar has struggled in the U.S. in the last few months, mainly as the demand for premium sedans has fallen, as potential premium vehicle customers are choosing SUVs and Crossovers over sedans. Luxury SUV growth in the U.S. light-duty vehicle market has outpaced the growth in any other automotive segment, registering a 30% rise in volume sales through April, over 2014 levels. This high demand for the more powerful and spacious SUVs has also propelled a 23% rise in Land Rover sales in the U.S. through April. In contrast, Jaguar registered a 6% drop in retail sales in the country. High Investments In Model Makeovers And Capacity Additions To Hurt Margins Jaguar Land Rover continues to accelerate investments in research and product development, and spent approximately £2.3 billion ($3.5 billion) through the first nine months of fiscal 2015 for this purpose. The British marquee car maker was earlier expecting capital expenses to range between £3.5-3.7 billion this fiscal, but lowered its full fiscal outlook to £3-3.2 billion ($4.6-4.9 billion). Although lower than previously expected, JLR will still spend around 12.5-13.5% of its revenues on CapEx and product development, and expects the figure to range between £3.6-3.8 billion next fiscal. Large investments are likely to hurt JLR’s cash flow in the near term, but the company has around £4 billion of cash and cash equivalents and £1.5 billion of undrawn credit lines, which will support investment plans in the near future. The decline in retail sales in the latter half of fiscal 2015 (October 2014-March 2015) can be attributed to product launch factors. Land Rover’s new Discovery Sport was launched in October last year, and sales for this model have consistently grown, forming 17% of the net Land Rover volumes in April. On the other hand, Jaguar retail sales fell 19% in Q4, after declining 3.5% in Q3, as sales for the sedan XK and XJ fell by double-digit percents. The company has accelerated investments for future growth, and will aim for higher retail sales going forward, especially in China. In particular, the compact sedan XE was launched in March, and is expected to be a volume model going forward. 2015 might just be a transitional year for Tata Motors  — for both JLR and the standalone business, and the company could be headed for growth in the mid to long term. Big talking points in the fiscal year to come include the impact of JLR’s locally-manufactured vehicles in China, and the impact of Jaguar’s first premium compact model in over five years, the XE. 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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    Q1 2015 U.S. Banking Review: Custody Banking Assets
  • By , 5/22/15
  • tags: BK C JPM STT
  • Over recent years, there has been a marked increase in the demand for custodian services worldwide due to the added complexity in compliance and reporting requirements. The stricter regulatory rules have compelled financial institutions to approach custody banks to take care of accounting, back-office and middle-office activities. The resulting increase in the size of assets under custody for the world’s largest custodians has driven top line growth by boosting fee-based revenues. However, the last three quarters have been a mixed period for global custody banks, as the positive impact of new mandates has been largely mitigated by the sharp appreciation in the value of the U.S. dollar. In this article, we focus on the assets under custody for the four largest custody banks - Bank of New York Mellon (NYSE:BK), JPMorgan Chase (NYSE:JPM), State Street (NYSE:STT) and Citigroup (NYSE:C) - which together account for nearly two-thirds of the global custody industry.
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    China Telecom Racing Ahead Of China Unicom In Adding 4G Subscribers
  • By , 5/22/15
  • tags: CHA CHU CHL
  • China Telecom (NYSE:CHA) recorded another month of solid high speed subscriber gains and once again outpaced bigger rival China Unicom (NYSE:CHU) in adding 4G subscribers. Compared to a dismal tally of 691,000 high speed (3G and 4G) subscriber adds by Unicom in April, China Telecom added 2.32 million 3G-4G users, its best monthly performance in 17 months. Since the start of the year, the third largest wireless carrier in China has added an average of 2.1 million high speed subscribers per month, which is over 62% higher than its average monthly gains last year. Its tally is even more impressive when compared to second largest carrier China Unicom, which has recorded a monthly average of just 73,750 high speed users this year, compared to its average tally of 2.2 million last year. China Telecom’s performance was still dwarfed by market leader China Mobile, which gained about 10 million high speed subscribers in the same period. China Telecom ended the month with almost 190 million subscribers, about 1 million more than its tally at the end of March. In the first four months this year, China Telecom gained over 8.5 million subscribers which led to a rise of 25 basis points in its share in the Chinese wireless market to 14.6%. In the same period, China Mobile gained 40 basis points and China Unicom lost 65 basis points to report shares of 62.7% and 22.5%, respectively. Taking into account China Telecom’s impressive pickup in the 4G subscriber market in the last three quarters and improvement in wireless profit margins in 2014, we have revised our price estimate for the carrier to $63, implying a market cap of $51 billion. We expect China Telecom to report earnings of $4.6 per share in 2015, which is in line with the consensus estimates compiled by Thomson Reuters.
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    Oilfield Services Notes: Transocean and Halliburton
  • By , 5/22/15
  • tags: HAL BHI RIG
  • The oilfield services industry had a relatively news filled week, headlined by  BP (NYSE:BP) settling remaining claims with Transocean (NYSE:RIG) and Halliburton (NYSE:HAL) relating to the 2010 Deepwater Horizon oil spill. In other news, Transocean published a rather lackluster monthly fleet status report, indicating that it had idled three more rigs and added a total of just $52 million in new contracts over the past month. Things also remained mixed on the macro front. U.S. benchmark WTI crude has seen a recovery over the last few weeks, rising to levels of around $60 per barrel, driven by inventory declines and projections of sequential monthly declines in output from the largest tight oil plays in the United States. However, despite the improved pricing environment, the U.S. oil rig count posted its 23rd straight weekly decline, as drillers continued to lay-down rigs amid tighter capital budgets. Here’s a quick look at the news that mattered in the oilfield services industry over the past week. See Our Full Analysis For Oilfield Service Companies  Halliburton |  Schlumberger | Baker Hughes Oil directed drilling activity in the United States declined for the 23rd straight week, falling by about 8 units since last week to 660 rigs,  as operators continued to lay down rigs as capital spending cuts continued to take effect amid volatile oil prices. The oil rig count is down by about 55% since the beginning of this year and by about 59% from its mid-October 2014 highs. The gas rig count rose by 2 units over the week, coming in at 223 units. The horizontal rig count (oil and gas), an indicator of unconventional drilling activity, is down by about 49% year to date at about 685 rigs. The North American rig count has been a very closely watched metric in the oil markets over the last several months, as investors and traders try to gain a sense of direction for oil prices by examining supply side factors in the U.S. land drilling markets, which have been the primary cause of the oil glut. BP Settles Macondo-related Claims with Halliburton and Transocean BP agreed to settle its remaining claims with oil-services firm Halliburton and offshore rig contractor Transocean over the 2010 Deepwater Horizon oil spill that resulted in the death of 11 workers and led to millions of barrels of oil spilling into the Gulf of Mexico. Both Halliburton and Transocean noted in press releases that they had settled all remaining claims with BP and were fully indemnified by BP against future court findings. Transocean said that BP would pay it $125 million in compensation towards legal fees incurred, while adding that the companies will mutually release all claims against each other. Halliburton said it had reached an agreement with BP to settle all remaining claims and counterclaims between the companies, although it didn’t disclose the exact terms of the deal. Trefis has a $50 price estimate for Halliburton, which is about 10% ahead of the current market price. We project the company’s FY 2015 revenues at $26 billion with an adjusted EPS of $1.51. This compares to a consensus estimate of $1.54 according to Reuters. Transocean’s Lackluster Fleet Status Report 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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    Solar Weekly Notes: Yingli, First Solar, SunPower
  • By , 5/22/15
  • tags: SPWR FSLR YGE
  • The solar industry had a relatively eventful week, which began with Yingli Green Energy ‘s (NYSE:YGE) stock falling by over 45% after the company noted in its 2014 annual report that there was “substantial doubt” about its ability to remain a going concern. In other news, First Solar (NASDAQ:FSLR) formed a new a joint venture for large-scale PV project development in the Philippines. The Guggenheim Solar ETF, a popular exchange traded fund comprising of solar stocks, fell by about 7% through Thursday. Here’s a brief look at some of the recent developments in the solar industry. See Our Complete Analysis For Solar Stocks  Trina Solar |  Yingli Green Energy | First Solar |  SunPower Yingli Green Energy’s Stock Plummets On Debt Concerns Yingli Green Energy (NYSE:YGE), the world’s second-largest solar panel manufacturer, saw its stock price plummet by over 45% earlier this week, after it said in its 2014 annual report, which was filed after the close last Friday, there was “substantial doubt” about its ability to continue as a going concern. The company cited recurring losses, negative working capital, net cash outflows and doubts related to its ability to service debt as reasons for the uncertainty. Yingli hasn’t posted a quarterly profit since Q2 2011 and remains one of the most highly leveraged firms in the solar industry with about $2.3 billion in debt.  However, the company moved to quickly to reassure investors that it was taking steps to secure more funds. The company said that it had repaid RMB 1.2 billion in notes due earlier this month, and was working to meet other payments on schedule. Even so, the recent developments cast a shadow on the company’s future at a time when the outlook for the broader solar sector remains largely positive, with global installation growth expected to come in at over 20% for 2015. Trefis has a $2 price estimate for Yingli, which is significantly above the market price. We are currently revisiting our price estimate for the company. We are forecasting $2.68 billion in revenue for 2015, with an adjusted loss per share of $0.16. Yingli stock declined by a total of 45% over Monday and Tuesday, although it recovered slightly on Wednesday after the company moved to calm investor concerns. First Solar Forms JV To Tap The  Philippines Market First Solar, the largest U.S. solar company, formed a joint venture called FSO Energy Solutions, with Washington-based engineering and construction firm, OrionGroup International to target commercial and industrial photovoltaic projects in the Philippines. The two companies will jointly focus on constructing and developing solar PV installations across the country and providing power to large commercial and industrial customers via long-term power purchase agreements. The prospects for the solar industry in the Philippines appear to be bright, given the country’s electrical infrastructure challenges and supply shortages, which are leading to rising power prices. A number of large solar companies are betting big on the Philippines market . For instance, Conergy and SunEdison recently announced an agreement to develop and operate about 300 MW of utility-scale solar in the country through 2017. Trefis has a $65 price estimate for First Solar, which is about 15% ahead of the current market price. We project the company’s CY2015 revenues at about $3.45 billion, with an adjusted EPS of about $2.83. This compares to a consensus EPS estimate of about $2.74 according to Reuters. SunPower’s Storage-focused Partnership SunPower (NASDAQ:SPWR) has partnered with the battery systems and services provider Stem to offer behind-the-meter battery systems to commercial customers in the United States. According to GreenTech Media, SunPower has been reselling Stem’s behind-the-meter battery systems to commercial customers across the U.S over the last five months. While most solar companies, including SunPower, have been discussing integrating solar systems with storage over the last few years, the trend hasn’t really scaled up, particularly in residential applications, likely due to high prices and the availability of net metering options. However, SunPower notes that early interest in Stem’s commercial batteries has been high and the company is expecting the storage solutions to help increase its commercial-sector business, based on early activity. Trefis has a $35 price estimate for SunPower, which is about 10% ahead of the current market price. We project the company’s CY 2015 revenues at about $2.83 billion, with an adjusted EPS of about $1.40. This compares to a consensus EPS estimate of about $1.17 according to Reuters. 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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    Logistics Weekly Review: FedEx, UPS
  • By , 5/22/15
  • tags: UPS FDX
  • During the past week,  UPS (NYSE:UPS) agreed to settle allegations against it regarding the submission of false claims in order to cover late deliveries. Meanwhile,  FedEx ’s (NYSE:FDX) arm that provides freight forwarding and customs brokerage services, Fedex Trade Networks, announced the opening of a new facility in Atlanta. Below we take quick look at these notable events. UPS On May 19, UPS agreed to make a payment of $25 million in order to settle allegations that the company had tried to hide late deliveries by submitting false claims to the U.S. government. As a result of purposely recording inaccurate delivery times, UPS’s customers were kept from claiming refunds against late deliveries. The payment only covers the settlement with the federal government and the state of New Jersey. Since the suit involved the federal government as well as nineteen states, the District of Columbia and the cities of Chicago and New York as plaintiffs, UPS will likely be making more settlements before the suit ends. UPS’s stock was stagnant over the week through Thursday. We currently have a price estimate of $111 for UPS. For the year 2015, we estimate revenues of $59.9 billion, compared to a consensus estimate of $59.7 billion, and EPS of $5.19, compared to a consensus estimate of $5.18. Click here to see our complete analysis of UPS FedEx FedEx Trade Networks announced the opening of its new Atlanta gateway office. The office will provide expanded service offerings to customers including a full portfolio of freight forwarding, customs brokerage and distribution solutions. One of the highlights of the office is its proximity to the airport. Coupled with the office’s onsite distribution capabilities, it allows FedEx to provide end-to-end supply chain services to its customers. The office’s operating model will help the company provide cost-effective and efficient solutions for cargo shipments. FedEx’s stock gained 0.85% over the week through Thursday. We currently have a price estimate of $169 for FedEx. For the year 2015, we estimate revenues of $47.9 billion, compared to a consensus estimate of $47.7 billion, and EPS of $8.90, consistent with consensus estimates. Click here to see our complete analysis of FedEx 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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  • commented 5/22/15
  • tags: ACN
  • Saudi Arabia Cement Market Research Report 2015-2019

    Cement is the most essential raw material for the construction industry. For a rapidly growing country like Saudi Arabia, huge investments in infrastructure by the government are boosting the demand for cement. Saudi Arabia, the largest economy in the Middle East, is focusing on

    diversifying the economy to non-oil sectors. Therefore, the government is emphasizing on investment in various construction projects, mainly power and transportation. The government's aggressive plans to construct ‘‘Economic Cities'' in the country are expected to give a further boost to the Cement market in Saudi Arabia, which is currently on a growth path.

    Market Research Store analysts forecast the Cement market in Saudi Arabia to grow at a CAGR of 5.14 percent over the period 2014-2019.

    Browse Complete Report : Saudi Arabia Cement Market [ less... ]
    Saudi Arabia Cement Market Research Report 2015-2019 Cement is the most essential raw material for the construction industry. For a rapidly growing country like Saudi Arabia, huge investments in infrastructure by the government are boosting the demand for cement. Saudi Arabia, the largest economy in the Middle East, is focusing on diversifying the economy to non-oil sectors. Therefore, the government is emphasizing on investment in various construction projects, mainly power and transportation. The government's aggressive plans to construct ‘‘Economic Cities'' in the country are expected to give a further boost to the Cement market in Saudi Arabia, which is currently on a growth path. Market Research Store analysts forecast the Cement market in Saudi Arabia to grow at a CAGR of 5.14 percent over the period 2014-2019. Browse Complete Report : <a href="">Saudi Arabia Cement Market</a>
    IBM Logo
  • commented 5/22/15
  • Global Application Server Market Shares, Strategies, And Forecasts, 2012 To 2018

    A new study Mission Critical J2EE Application Server: Market Shares, Strategy, and Forecasts, Worldwide, 2012 to 2018. The 2012 study has 686 pages, 297 tables and figures. Worldwide Application Server markets are poised to achieve significant growth as Internet of things and the mobile Internet further evolve. [ less... ]
    Global Application Server Market Shares, Strategies, And Forecasts, 2012 To 2018 A new study Mission Critical J2EE Application Server: Market Shares, Strategy, and Forecasts, Worldwide, 2012 to 2018. The 2012 study has 686 pages, 297 tables and figures. Worldwide Application Server markets are poised to achieve significant growth as Internet of things and the mobile Internet further evolve.
    A “Rehab Program” for Data-Addicted Consumers
  • By , 5/22/15
  • tags: SPY TLT
  • Submitted by Wall St. Daily as part of our contributors program A “Rehab Program” for Data-Addicted Consumers By Justin Fritz, Executive Editor   Would you purchase a mobile phone that can only make and receive calls? Joe Hollier and Kaiwei Tang – the gentlemen behind a new Kickstarter campaign – certainly hope so. They’re the creators of a new mobile device called The Light Phone. This sleek, credit card-sized device forgoes the high-tech trappings that now come standard in new devices. It can make and receive calls as a standalone device. Or you can route calls through your current smartphone. But that’s about it. That means no social media… no email… no maps… no Uber… no apps, period. Heck, the thing can’t even send a text message. So why buy the bloody thing? The creators are trying to appeal to consumers who might be ready to unplug… Addition by Subtraction A new study on mobile phone traffic estimates that mobile data will reach 1,970,000 petabytes by 2019. For perspective, one petabyte is 1,000 terabytes. According to Juniper Research, the firm behind these findings, that’s more data than you’d see stored on 10 billion Blu-ray movies. Indeed, each day, we’re becoming more and more addicted to the convenience and connectivity that our phones provide. We all want to be plugged in – all the time. The problem is, this connectivity can come at a cost – as our interactions with real people suffer. But by removing the countless number of features that smartphones provide, something like Light Phone can force us to leave our digital lives behind – at least for a little while. And as our data-intensive habits intensify in the coming years, I bet more and more people will be looking to get back to basics. As a result, there’s bound to be a market for this type of device. Determining how large that market will be, of course, is certainly something the founders will be concerned about as the product becomes available next year. The fact that the phone costs $100 is something they should think about, as well. Especially considering that you can already buy phones with similar features online for under $50.   Best Regards, Justin Fritz Executive Editor, Wall Street Daily The post A “Rehab Program” for Data-Addicted Consumers appeared first on Wall Street Daily . By Justin Fritz
    Frackers Predicted to Fall Like Lehman Bros.
  • By , 5/22/15
  • tags: SPY TLT
  • Submitted by Wall St. Daily as part of our contributors program Frackers Predicted to Fall Like Lehman Bros. By Tim Maverick, Commodities Correspondent   In November 2007, the relatively unknown hedge fund manager David Einhorn raised major concerns about the accounting at Lehman Brothers. It led him to bet against the company, and short the stock. No one paid much attention . . .  until Lehman Brothers collapsed. Einhorn’s reputation was made, and his firm, Greenlight Capital, became one of the hedge funds to watch. Now, Einhorn has found another prominent target: the frackers, U.S.-based oil exploration and production (E&P) companies. Zeroing In Einhorn called much of the industry “frack addicts” who were wasting money on wells that’ll never pay off. He said some companies are currently getting a negative return on their invested capital. And that, in some cases, that was true even when oil was trading at $100 per barrel! Einhorn added, “When someone doesn’t want you to look at traditional (financial) metrics, it is a good time to look at traditional metrics.” By “someone,” he means exploration and production companies. Einhorn dislikes how these firms report their earnings through methods like EBITDAX, which means earnings before interest, taxes, depreciation, amortization, and exploration expenses. He said this measure “stands for earnings before a lot of stuff.” In particular, Einhorn targeted five companies: Pioneer Natural Resources ( PXD ), EOG Resources ( EOG ), Continental Resources ( CLR ), Whiting Petroleum ( WLL ), and Concho Resources ( CXO ). Pioneer seems to be his No. 1 target, since he dubbed it “the motherfracker.” “A business that burns cash and doesn’t grow isn’t worth anything,” said Einhorn about Pioneer. Instead, Einhorn encouraged investors to focus on cash as a guide to the health of the industry. Since 2006, the U.S. oil exploration and production industry has spent $80 billion more in capital than it made selling oil. Einhorn says companies were only kept alive by the constant inflows of capital from bankers (also known as loans) and investors alike. David Einhorn is a well-known poker player. (He won $4.4 million at the 2012 World Series of Poker tournament.) But is he bluffing here? On the Money, Sort Of There is no denying the massive cash burn of these E&P companies. Many of them have debt problems, which I have spoken about before . Moody’s said its LSI (Liquidity Stress Index) for these companies more than doubled in March to 9.8% from 4.4%. But keep in mind, this Index hit 26% in March 2009 when oil prices plunged due to the financial crisis. And the group as a whole is making progress. The forecast is for these companies to be at a cash flow break-even point in 2015, thanks to cuts in capital expenditures. For example, Pioneer says that, by the end of 2015, costs for drilling and completing a well will be 20% lower than just a year ago. In addition, that $80 billion Einhorn mentioned didn’t just disappear. It went toward buying assets that will provide oil sometime in the future. The Verdict on Einhorn What is the bottom line here? The sector is long overdue for a shakeout. Many companies’ weaknesses were masked when oil was at $100, but now, there’s nowhere to hide. The best analogy for this situation was made by Ed Crooks of the Financial Times . He compares it not to the Lehman debacle, but to the dot-com boom. He says the technological progress being made in shale development is real, as it was in the dot-com era. That is why drilling and completion costs for wells are falling every year. But not all companies will survive. Investors need to do their due diligence to separate the wheat from the chaff. Crooks said the low-cost shale producers may turn out like Google ( GOOGL ). But the high-cost producers may go the way of And the chase continues, Tim Maverick The post Frackers Predicted to Fall Like Lehman Bros. appeared first on Wall Street Daily . By Tim Maverick
    Relief Coming for Drought-Ravaged California?
  • By , 5/22/15
  • tags: SPY TLT
  • Submitted by Wall St. Daily as part of our contributors program Relief Coming for Drought-Ravaged California? By Greg Miller, Senior Technology Analyst   After two long years of forecasts, calculations, and waiting, it’s finally happening… The global weather event called El Niño is back. This happens every few years, when the waters in the Pacific Ocean, primarily off the coast of South America, become warmer. This heats the air above the ocean and disrupts the normal west-to-east flow of Pacific winds. In turn, this shifts the usual areas of cloud formation, causing unusual fluctuations in rainfall and temperatures. The Australian Bureau of Meteorology recently joined the U.S. Climate Prediction Center and the Japan Meteorological Agency in saying that Pacific Ocean temperatures have risen enough to trigger the effect. They also agree that – while it could bring relief to certain regions like drought-crippled California – it’s going to wreak havoc worldwide . . . Forecasters Unite Behind “Super El Niño” The effects of an El Niño can be far-reaching and varied. In 1982, for example, a larger-than-usual El Niño caused droughts in some places, widespread flooding in others, and almost gave the United States a year without a winter. The last El Niño in 2010 caused droughts in India and Australia. The common denominator is widespread chaos. Even small El Niños can upend the usual climate patterns enough to cause serious damage and even death. They’re also notoriously tough to predict. Both the U.S. and Japanese authorities started by saying that this year’s El Niño would be mild. In fact, the Japanese even said that the effect had already happened, faded away, and then returned! Australia veered in the opposite direction, with its head of climate modeling, David Jones, stating, “This will be a substantial event.” Last Thursday, the U.S. Climate Prediction Center changed its mind and upgraded the forecast, too, saying the El Niño will be stronger this year than it originally thought. If they’re right, look out! Scientists fear that a strong El Niño, combined with ocean temperatures that are already warming from global climate change, could trigger a “Super El Niño.” What does this mean? Relief for California? For California, mired in a four-year drought that’s one of the worst in its history, the prospect of an “El Niño” is music to residents’ ears, given that these events mostly bring extensive rainfall. But in its current parched condition, it’s also a doubled-edged sword. On the one hand, the state desperately needs the rain, and El Niño could break up the Ridiculously Resilient Ridge that Wall Street Daily Founder, Robert Williams, told you about last year. But too much rain all at once could trigger other disasters like flooding, landslides, and crop destruction. If this year’s El Niño is indeed an especially heavy one, much of the world would experience highly unusual weather events. In addition to possible drought relief in California, other areas like South America could see much heavier rainfall than normal. And while it would prove priceless in refilling reservoirs, the downsides are serious. Conversely, places like Australia and much of Asia are prone to drought in El Niño conditions. So what’s the prognosis? And the Forecast Is . . . While there are no guarantees, all signs point to havoc. Economically, crops and even mining would be affected in many areas. And while there’s little chance of a global food shortage, food prices could fluctuate wildly. Localized areas without the resources to import large quantities of food could endure terrible results. Indeed, cocoa futures are already rising, as traders anticipate smaller-than-normal yields in the main cocoa-growing areas of western Africa. Bottom line: El Niño events are always unpredictable and different across the world. Higher global temperatures could exacerbate El Niño effects in some areas, but mute it or even change things entirely in others. And, of course, as with all weather prognosticators, the forecasts could turn out to be completely wrong! However, with the tools available to climatologists becoming more sophisticated every year, the prospect of everyone being completely wrong is highly doubtful. It’s time for the world to buckle up, because El Niño is coming. To living and investing in the future, Greg Miller The post Relief Coming for Drought-Ravaged California? appeared first on Wall Street Daily . By Greg Miller
    Mining Value Stocks: Beginning to Dig Out?
  • By , 5/22/15
  • tags: JOY RIO FCX
  • Submitted by George Putnam, III as part of our contributors program . Mining Value Stocks: Beginning to Dig Out? I was at best early–and perhaps wrong– when I highlighted the mining sector two years ago. The good news is that I recommended sticking to the large, well-capitalized companies in the sector. As a result, while the stocks we highlighted then have not performed well in the interim, they have not been crushed like many of the more leveraged names in the sector, some of which are down 80% or more. What I did not anticipate two years ago was the rapid decline in Chinese demand for coal and other commodities and metals. This pushed the prices for many commodities down sharply, and the profits and stock prices of the commodity producers followed. I do not claim to have any expertise in forecasting Chinese demand. What I am seeing, however, are the beginnings of supply reductions in a number of metals. Mines and smelters are being closed to reduce the higher cost production, and there are rumblings of possible mergers among some of the players that could lead to further cutbacks. If commodity supplies are brought into line with the reduced demand, prices will stabilize and the stocks will begin to move up. Should Chinese demand pick up again, the supply cutbacks could cause commodity prices–and the related stocks–to rebound very sharply. Because my crystal ball on all of this is still pretty hazy, I am once again suggesting that you focus on the larger players with the stronger balance sheets. Many of the smaller, more leveraged miners and metals producers may not survive if commodity prices stay low for a prolonged period. Freeport-McMoRan is the world’s largest publicly traded producer of copper, which accounted for 60% of 2014 revenues. Oil & gas represent 20% of sales, and gold and molybdenum round out Freeport’s revenue base. Management has recently been focused on improving the balance sheet–they sold $5 billion in assets in 2014 and are considering additional divestitures. I was too early in the commodity cycle with our August 2013 recommendation, but I still like the company’s long-term prospects. Rio Tinto is a well-regarded, world-wide miner that produces a diverse range of mineral resources. Unfortunately, it made the mining industry’s largest acquisition ($38.1 billion) right at the peak of the commodity cycle in 2007. That CEO is gone, however, and Rio’s operations and finances look solid. Rio has weathered many commodity cycles over its 140-year history, and it is likely to rebound strongly when this one eventually turns. Another way to play a possible rebound in mining would be through the stock of Joy Global, which produces mining equipment for both surface and underground mineral extraction. Revenues are down more than 30% from their peak in 2012, but the company is still solidly profitable, and the balance sheet is decent. Joy is cutting costs, which will boost the bottom line when mining recovers.  
    IBM Logo
  • commented 5/22/15
  • tags: IBM
  • Comment on System z ASP

    I also believe that when IBM comes out with that quantum computer for a while they will be the only show in town including repairs and servicing
    [ less... ]
    Comment on System z ASP I also believe that when IBM comes out with that quantum computer for a while they will be the only show in town including repairs and servicing
    IBM Logo
  • commented 5/22/15
  • tags: IBM
  • Comment on OS & Others Annual Renewal Rate

    I think that with graphene IBM will come out with the first quantum computer along with the software to run OS and programs. [ less... ]
    Comment on OS & Others Annual Renewal Rate I think that with graphene IBM will come out with the first quantum computer along with the software to run OS and programs.
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