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


Trefis has launched coverage of Burger King with a price estimate of $29. Burger King has three primary segments - Franchised Royalties, Franchise Rent & Fees, and Company-Operated Restaurants. It has decided to franchise the majority of its restaurants and focus on international expansion and healthier menu options to drive future growth. Our launch article details our outlook for the company.

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Comcast's Universal Studios Hollywood will host a new attraction based on its popular Fast and Furious film series. The theme park announced plans to add a 3-D, HD feature to the park's Studio Tour tram ride by summer 2015. While theme parks are just a small part of Comcastâ s business, they help promote other NBCUniversal properties and bring in stable cash flows. We expect theme park revenues to exceed $3 billion by the end of the decade.

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  • commented 8 hours ago
  • tags: AAPL
  • isn't there a way to find or sort by biggest delta between market price and trfis price? [ less... ]
    isn't there a way to find or sort by biggest delta between market price and trfis price?
    SCHW Logo
    Growth In Trading And Client Assets Drives Strong Quarter For Charles Schwab
  • by , 10 hours ago
  • tags: SCHW ETFC AMTD
  • Charles Schwab (NYSE:SCHW) announced its quarterly results on April 15, reporting a 15% annual increase in revenues. The brokerage firm reported a double-digit year-over-year (y-o-y) growth in its major revenue streams during the quarter- net interest revenues (+18%), asset management and administration fees (+11%) and trading revenues (+11%). The strong growth in revenues was more than what the company had anticipated at the end of the previous quarter. Moreover, the company was able to manage expenses well, and saw a 58% jump in its net income. The strong Q1 earnings signal the start of what could be a very profitable year for brokerages. Going forward, we expect Charles Schwab to continue to attract new customers, which should contribute to a larger client asset base and net interest revenues for the company. Additionally, we expect Schwab’s transaction-based business to continue to improve over the course of this year. We have price estimate of just over $25 for the company’s stock, which is in line with the current market price.
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    Intel's Q1'14 Earnings: Expanding Footprint In New Markets, Strong Data Center Performance & Higher PC Market Share Drive Growth
  • by , 12 hours ago
  • Leading chipmaker Intel (NASDAQ:INTC) believes that its recently reported Q1 2014 earnings mark a strong start to its fiscal 2014. At $12.76 billion, the company saw a 1.5% year-over-year increase in its revenue and reported earnings per share (diluted) of $0.38, which wasa penny over market consensus. A stabilizing PC market, strong growth in data centers and an expanding footprint in the Internet-of-Things market were Intel’s key growth drivers in Q1 2014, offset partially by lower mobile group revenue. 2013 was a year of transition for Intel as it made significant progress in alternative markets with new platforms, product launches and design wins, which increased its competitiveness in the semiconductor industry. Despite a marginal decline in its 2013 revenue, Intel managed to retain its No. 1 spot in the semiconductor industry, with a 15.4% market share. The company believes that the macro situation will improve in 2014 as the industry accepts innovative form factors in ultrabooks, convertibles and detachables, and as the company expands its presence in new growth markets. At the recently concluded Beijing IDF, Intel showcased a broad range of new products that it is bringing to the market in 2014 and beyond, ranging from servers in the Data Center to innovative PC form factors like detachables and all-in ones, tablets, phones and wearables. Additionally, the company began production on its 14-nanometer process technology and remains on track to launch Broadwell in the second half of the year. Our current price of $27 for Intel is almost in line with the current market price. We are in the process of restructuring our model to incorporate the new reporting structure. See our complete analysis for Intel Stabilizing PC Business; Intel Gains Market Share Having grown at a robust rate for many years, PC sales started declining 2011 onward. As per research firm IDC, PC shipments declined 3.7% and 10.3% in 2012 and 2013 respectively. The rate of decline dropped down to 4.4% in Q1 2014 as Windows XP migration (to machines running newer operating systems) and commercial spending helped offset the weak consumer PC demand. Intel claims that it is seeing strengthening consumer demand from emerging markets even though the consumer demand in the rest of the world remains weak. Intel’s PC Client Group revenue declined by 1% year over year (much lower than the 4.4% decline in total PC shipments) which implies that the company ended up gaining additional market share in Q1 2014. Its PC Client Group platform unit volume increased 1% (up for the second consecutive quarter) and inclusive of tablets the company marked a high single-digit unit growth. Mobile unit volume was up year over year for the first time since Q2 2012, while desktop units were flat year over year, with all-time record core volume and mix. PC platform average selling prices declined 3% compared to Q1 2013. Despite its growing focus on alternate growth markets, Intel continues to derive approximately 70% of its revenue from the PC market, and thus is highly sensitive to any adverse development in the industry. The company is working to reinvent PC computing with new form factor innovation, lower price points, longer battery life and an OS of choice. Its 2-in-1 volume increased by over 20% sequentially in Q1 2014, which is typically a seasonally down quarter. Intel expects more than 70 2-in-1 designs running on Intel processors for the back-to-school selling season. Intel’s Data Center Group Remains Strong Intel claims that its data center business continues to see robust growth as a result of the build-out of the cloud and exposure of devices that compute and connect to the Internet. The data center business grew by 7% in 2013, backed by a 35%, 24% and 18% growth in cloud, storage and high performance computing, respectively. The positive momentum continued in Q1 2014, with data center growing by 11% year over year backed by a 3% and 11% increase in platform volumes and average selling prices respectively, compared to Q1 2013. Growth in Cloud, networking and storage was in excess of 20% in the quarter. Last year, Intel extended its leadership at the high end as well as at the leading edge of the market with the launch of the Ivy Bridge-based Xeon product line and Avoton (which targets the micro-server market), respectively. It introduced the Ivy Bridge-EX, which brings the largest generation-to-generation improvement in MT Server performance, this year. The company claims that its new E7 line, which features the largest memory footprint in the industry, saw particularly strong reception from enterprise as a result of its high speed, real-time data analytic capabilities. Intel derives over 20% of its revenues and approximately 28% of its valuation from servers and thus growth in this segment remains important for its valuation. Intel expects its data center business to grow in the 10% range in 2014. Intel Eyes Growth In the Internet-of-Things Market Intel changed its reporting structure in Q1 2014 and now has the Internet-of-Things as a separate product segment. The new business segment, which includes small low-power chips that are used in wearable devices and a range of consumer and industrial products, reported a 32% year-over-year increase in its revenue ($482 million) in Q1 2014 driven by strong demand in in-vehicle infotainment systems and retail. Intel was a late entrant in the mobile computing space and for this reason does not (yet) have a very large presence in the market. However, the computing giant is keen not to miss the next big wave in computing – Internet-of-things. The wearable gadgets market is still at a nascent stage and is predicted to more than double (from $4 billion in 2013) by 2018. Intel is driving significant innovation in this area as its invests, both to extend its architecture into the very low power space and to acquire IP and capabilities. Last month, Intel completed its acquisition of Basis Science which specializes in wearable device technologies for health and wellness applications, which gives Intel an immediate entry into the wearable devices market. The company intends to build upon this foundation to deliver new products that offer greater utility and value to its customers. Intel shipped its first Quark SoCs for the Internet of Things in Q1 2014 and announced an upgrade of Edison to the Silvermont Atom architecture. Edison is on track to ship this summer. Q2 2014 Outlook - Midpoint of the revenue range at $13 billion, up 2% sequentially. - Midpoint of the gross margin range at 63%, with the increase primarily driven by lower factory start-up costs. Full Year 2014 Outlook - Revenues to be approximately flat. PC Client Group revenue to decline in the mid-single-digits and the Data Center Group revenue to grow in the low double-digits. - Midpoint of the gross margin range at 61%. - Capex to be flat compared to 2013. See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
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    American Eagle Outfitters Has Plenty To Explore In China & Mexico
  • by , 12 hours ago
  • tags: AEO GES GPS ANF
  • One of the leading apparel chains in the U.S.,  American Eagle Outfitters (NYSE:AEO), has had a tough time in the recent past due to poor response to product changes and an overall weakness in the U.S. apparel industry. The company reported dismal sales for fiscal 2013, and slashed its outlook for the first quarter of fiscal 2014 on account of extreme weather conditions. Owing to industry weakness, American Eagle’s near term growth is likely to remain slow as most of its business is confined to North America. However, the retailer’s international business is quite important from a long term perspective as it helps in diversifying risks geographically. Although American Eagle’s international presence is limited to just 66 franchise stores in 12 countries, it is looking to speed up its expansion and appears to be targeting the right markets for the purpose. Last year, American Eagle assumed control over its six franchise stores in China, marking the start of its retail expansion in the country. Same year, the company initiated its expansion in Mexico and ended the year with 16 retail stores. These regions are two of the most important developing markets and provide good potential for value-for-money brands. Our price estimate for American Eagle Outfitters stands at $17.75, implying a premium of more than 55% to the market price.
    RHHBY Logo
    Roche Reaffirms Full Year Outlook But Suffers From Currency Movements
  • by , 12 hours ago
  • tags: RHHBY PFE MRK
  • Roche Holdings (OTC:RHHBY) recently released its Q1 2014 results and reported a slight decline of 1% in its revenues. However, this decline is primarily attributable to the strengthening of Swiss Franc against major currencies such as U.S. Dollar and Japanese Yen. Excluding the effect of currency movements, Roche’s top line growth stood at 5% driven by the continued success of its major cancer drugs, including Avastin, Herceptin and Rituxan/MabThera. Additionally, the launch of new products such as Perjeta and Kadcyla helped. While revenue growth for pharmaceutical segment stood at 4%, that of the diagnostics division jumped by 7%, as Roche extended its market leadership in professional diagnostics. The earnings results reaffirm the company’s full year outlook. Roche expects to grow its sales by low to mid single digits in 2014 and EPS growth is likely to exceed its sales growth. Roche has several promising drugs in late stage trials in its pipeline. The company has distinguished itself due to its focus on biotechnology research and development (R&D) and leadership in oncology (cancer therapeutics). It stands to gain due to the shift towards targeted therapies and is already working on promising drugs that can replace its major blockbusters. Our current price estimate for Roche stands at $36.80, which is roughly in line with the market price. We are in the process of reviewing this estimate in light of recent results, and will have an update ready soon.
    FOX Logo
    Fox News Sees Continued Growth In Ratings And Subscription Fee
  • by , 13 hours ago
  • Twenty-First Century Fox ‘s (NASDAQ:FOX) Fox News Channel has reached 147th consecutive month at No. 1 spot in total viewers among cable news networks, in both total day and primetime. For the first quarter of 2014, Fox News was the only cable news network to grow compared to the prior year quarter. Higher ratings translate into better advertising revenues for the cable networks. Fox News spends roughly 45% of its programming on factual reporting, and 55% on commentary and opinion. On the other hand, MSNBC dedicates an average of 15% of its programming to factual reporting while other 85% is dominated by commentary and opinion. CNN is the only channel of the three to spend more time on factual reporting than opinion and commentary. The mix appears to be working in Fox News’ favor as it continues to enjoy higher viewership than both MSNBC and CNN combined. It appears that Fox News will continue to dominate the news networks in the coming years. Let’s take a brief look at the drivers behind Fox News. Understand How a Company’s Products Impact its Stock Price at Trefis
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    Yahoo Earnings: Costs Drag Profitability Even As Revenue Grows
  • by , 13 hours ago
  • tags: YHOO GOOG MSFT
  • Yahoo! (NASDAQ:YHOO) reported its first quarter earnings Tuesday, April 15. The company posted a 1% year-on-year growth in net revenues (excluding Traffic Acquisition Cost or TAC) to $1.087 billion. However, the non-GAAP operating income declined by 33% to $149 million and non-GAAP net income declined by 20% to $312 million during the quarter due to increase in product development and sales and marketing expenses. Yahoo did report an improvement in its core display ad and search ad revenues (excluding TAC). The primary reason for growth was the growth in ad volume and increase in the number of clicks across the ads divisions of the company. Additionally, Yahoo’s investment in Alibaba continued to reap benefits for the company as revenues grew by 66% year over year. Furthermore, Yahoo attracted a record number of mobile users to its properties during the quarter. We believe that the company can increase its revenues in the coming quarters, if it can monetize its increasing user base and content effectively. See our complete analysis of Yahoo! here Outlook For Second Quarter For the second quarter, Yahoo expects revenues (ex-TAC) to be in $1.12-$1.16 billion range. Additionally, it expects adjusted EBITDA to be between $290 million and $330 million, and non-GAAP operating income to be between $130 million and $170 million. Ad Volume Buoys Revenues Even As Pricing Pressure On Ads Continue While search ads makes up 14% of Yahoo’s estimated value, display ads contributes 12.4% of its value. During the quarter, search ad revenues (ex-TAC) grew by 9% year over year to $444 million, while display ads grew by 2% to $409 million. The company reported 6% growth in the number of paid clicks for search ads, and 7% growth in number of ads sold for its display ads division. Furthermore, the price per click for search ads division grew by 8% indicating relevancy and improvement in Yahoo’s content as advertisers increased their search ad spending across Yahoo sites. However, pricing pressure on display ads resulted in 5% decline in price per ads. We expect these trends to continue in the coming quarters as advertisers increase more spending across Yahoo sites search and shift their ad budget to new avenues such as mobile ads for display, which garner lower pricing. Furthermore, we expect the international mix of total search and display to increase, which should be a drag on ad pricing. Going forward, we estimate RPS will decline from $13 to $12, and revenue per impression to remain flat. Costs Increase As Yahoo Focuses on Product Development Through Acqui-Hires Yahoo’s operating profit declined by over 84% year over year to $30 million as its product development and sales and marketing (S&M) expenses were meaningfully higher versus last year. These expenses (i.e. product development and Sales & Marketing) grew by over 28% year over year to $289 million and $329 million respectively. The primary reason for this increase was the integration of the acquired companies with Yahoo’s business. Going forward, we expect the costs to remain high as Yahoo continues to acquire new companies. Mobile Boosts Unique Visitor Count In an earlier article, we argued that Yahoo’s mobile platform will drive its revenue growth going forward. Yahoo continued to report growth in its total mobile unique visitors, which grew to over 430 million in the quarter. The growth in its unique visitor count is important for Yahoo as a bigger user base will consume more content across Yahoo’s websites. This, in turn, will translate into higher page views and searches across all Yahoo platforms, and thus improve revenue across both display and search ad divisions. To capitalize on growth in traffic from mobile devices, the company launched Yahoo! Gemini, a unified ad marketplace for mobile search and native advertising. We believe that a strong mobile platform is important for Yahoo as it can bolster Yahoo’s revenue by capturing a substantial piece of the global mobile advertising market, which will stand at approximately $42 billion in 2017, according to Gartner. Focus On Video Content Intensifies As per our note published earlier, the company has intensified its efforts to build a repository of video programming. During the quarter, the company announced its partnership with Vevo, the home to the endless collection of music videos, with more than 90,000 in total. Vevo videos can now be seen on Yahoo! screen, company’s videos content platform similar to You tube, that lets a user stream premium video content from its partner content providers. Alibaba Continues To Report Growth According to Yahoo’s first-quarter earnings announcement, Alibaba generated $3.05 billion in revenues, $1.64 billion in operating income and $1.34 billion in net income during Q4 2013. The growth in revenues seems to have intensified in the face of the impending IPO. We believe that Alibaba’s valuation will continue to boost Yahoo’s investment value, and bolster its stock price, which was trading 9% higher in aftermarket hours. See More at Trefis | View Interactive Institutional Research (Powered by Trefis)      
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    UTC's Earnings Preview: Restructuring Costs Will Likely More Than Offset Sales Growth
  • by , 13 hours ago
  • tags: UTX GE
  • United Technologies (NYSE:UTX) will announce its first quarter earnings Tuesday, April 22. The industrial conglomerate is coming off a good last year in which its revenues rose by 9% annually, driven by the Goodrich acquisition. The company’s organic sales also picked up steadily through 2013 on higher demand from commercial aviation, partially offset by lower military spending in the U.S.. The company’s 2013 earnings also posted strong growth on additional gains from cost reduction measures. In 2014, in the absence of any major acquisition, we anticipate the growth in United Technologies’s (UTC) results to be more moderate. The company forecasts its 2014 revenues to rise by around 2% annually to $64 billion and its 2014 earnings to rise by 5-10% annually to $6.55-6.85 per share. Higher demand from commercial aviation will likely continue to drive UTC’s 2014 results with greater shipments of aircraft engines from Pratt & Whitney and of spare parts from the UTC Aerospace Systems segment. On the flip side, with the war in Afghanistan coming to an end, demand for Sikorsky’s military helicopters and spares will likely fall, tempering UTC’s 2014 growth. In the first quarter, the company guides its earnings to fall by 10% annually to around $1.25 per share due to restructuring costs more than offsetting moderate sales growth. However, we figure margin expansion gains driven by these restructuring activities will benefit UTC over the long term. We currently have a stock price estimate of $121 for UTC, around 5% ahead of its current market price. See our complete analysis of UTC here Restructuring Costs Will Dig Into UTC’s First Quarter Earnings UTC undertakes restructuring activities like headcount reductions and plant consolidations from time to time in an attempt to lower its operating costs. However, these activities have one-time costs associated with them. Last year, the company incurred $481 million in these restructuring costs, but restructuring played a key role in expanding its segment operating margins to nearly 16%, from under 15% in 2012. In the first quarter, UTC anticipates restructuring costs to dilute its earnings by 18 cents a share, more than offsetting 15 cents a share of expected organic growth. However, in our view, these restructuring activities, by lowering operating costs, will help further expand the company’s margins in 2014. Additionally, higher margins, which enable competitive pricing, will enable UTC to compete more aggressively with its peers. For instance, lower cost structures resulting from restructuring at UTC’s Otis segment, which makes elevators and escalators, enabled the segment to compete more aggressively with lower-priced local alternatives in the fast growing elevator market of China. So, we figure over the long term, gains from higher margins driven by these restructuring activities will more than offset their one-time costs. Commercial Aviation Will Drive UTC’s Sales Growth Separately, in the first quarter, UTC’s sales growth will be driven by the global commercial aviation sector. Higher demand for aircraft engines and other components from original equipment makers such as Boeing (NYSE:BA) and Airbus is pushing up engine shipments of Pratt & Whitney and aircraft component shipments of UTC Aerospace Systems (UTAS) segment. Airplane makers are hiking their production rates in an attempt to make timely deliveries against soaring orders from airlines worldwide. Currently, UTC, through Pratt & Whitney and UTAS, generates around a third of its overall revenues from the global commercial aviation sector. But, the company also generates approximately 20% of its revenues from military markets, primarily U.S. government military spending, which is falling due to the end of war in Afghanistan and fiscal constraints. So, we figure the weakness in UTC’s military markets will temper its growth from commercial aviation in the first quarter. We will also watch UTC’s building segment results for any signs of recovery in commercial construction spending from Europe. Last year, weak construction spending from Europe weighed on results of UTC’s building market related segments, which include Otis and Climate, Controls and Security (CCS). The latter makes Carrier brand heaters, ventilators and air conditioners (HVAC) and provides fire and security solutions from brands that include Kidde and Chubb. See More at Trefis |  View Interactive Institutional Research (Powered by Trefis)
    KO Logo
    Coca-Cola Earnings Review: Still Beverages Offset Decline In Sparkling, Restructuring Impacts Margins
  • by , 13 hours ago
  • tags: KO PEP DPS
  • The Coca-Cola Company (NYSE:KO) announced its Q1 earnings on April 15 as still beverages and emerging economies performed well. Net revenues fell 4% year-over-year to $10.6 billion, marred by structural changes and unfavorable currency translations. Structural changes comprised deconsolidation of bottling operations in Brazil and the Philippines last year, contracting sales for Coca-Cola’s bottling investments this quarter. Excluding the impact of restructuring, sales through March grew 2% on a comparable currency neutral basis. Operating income also declined 1% for the three months. Going forward, structural changes and currency are expected to weigh on Coca-Cola’s financials with an estimated unfavorable 1% and 7% impact on the full-year operating income respectively. In February, Coca-Cola had announced its productivity plan, aiming to generate $1 billion in incremental savings by 2016 to be redirected for media investments. The company is on its way to invest an added $400 million in media initiatives this year, as part of this productivity plan. We estimate a $41.07 price for Coca-Cola, which is around 2% above the current market price. However, we are currently in the process of incorporating the latest earnings into our forecasts. See our full analysis for  Coca-Cola Increased Marketing Fuels Growth In Brazil, Russia On the back of increased spending on promotional activities and advertising for global events, Coca-Cola witnessed volume rises in both Russia and Brazil. The company was one of the official sponsors for the Winter Olympics held in Sochi in February. Large-scale marketing initiatives resulted in a 9% volume growth for the flagship drink Coca-Cola in Russia, despite disruptive winter weather and health concerns regarding sugary sodas. Overall, the company’s unit sales in Eurasia and Africa rose 2% this quarter. On the other hand, Coca-Cola is also sponsoring the 2014 FIFA World Cup and 2016 Summer Olympics to be held in Brazil. Bolstered by increasing disposable incomes and marketing campaigns in the country, Coca-Cola’s Brazil volumes grew 4% year-over-year. Brazil is one of the largest markets for Coca-Cola, accounting for around 7% of the beverage giant’s worldwide volumes. The country’s liquid refreshment beverage (LRB) market was worth nearly $43 billion in 2013, with volumes of over 11.3 billion gallons. According to our estimates, Coca-Cola has close to a 27% market share in the Brazilian beverage industry. Due to positive signs of a revival in economic activity and increased disposable incomes, this market is expected to further grow at a CAGR of 6% to over $54 billion by 2017. Owing to Coca-Cola’s stronghold in the country’s LRB market, coupled with strong marketing and advertising campaigns, the company could further improve its unit sales in Brazil this year. Mexico’s Soda Tax Hinders Growth For Coca-Cola As expected, volumes for Coca-Cola declined by a low-single-digit percent in Mexico, hurt by the newly imposed soda tax. The Mexican government passed a one-peso-per-liter (around 7.6 cents) tax on sugary drinks, effective as of January this year. This move came as the country battles widespread obesity and diabetes. In fact, Mexico has the world’s highest obesity rate at 32.8%. The soda tax was passed onto consumers, thus raising prices of soft drinks. With more than half of the country’s population living below the national poverty line, a price rise dissuaded some price-sensitive customers from soft drink consumption. According to our estimates, Mexico accounted for around 13% of Coca-Cola’s overall volumes last year, only second to the 19% volume contribution by the U.S. As Mexico is the largest consumer of Coca-Cola’s beverage offerings, per capita wise, contracting volumes in the country due to price rises could hinder growth for the company’s carbonated soft drinks (CSD) portfolio this year. Solid Still Beverage Growth Prompts Rise In Net Volumes While the core cola segment has suffered negative consumer perception due to looming health concerns, especially regarding artificial sweeteners in diet sodas, still beverages continue to grow. Unit sales of Coca-Cola’s still beverage portfolio rose 8% year-over-year in this quarter, offsetting a 1% decline in sparkling volume, to cause a 2% growth in overall global volumes. Health and wellness concerns have prompted consumers to shift beverage preferences from sugary sodas to alternatives such as sport drinks, ready-to-drink (RTD) tea and coconut water. While CSD volumes fell by 3.2% last year, capping off nine consecutive years of decline, segments such as energy drinks, bottled water, sports drinks and RTD tea witnessed volume increases in the U.S. Though almost half of Coca-Cola’s unit sales come from the core cola segment of the sparkling beverage category, the company also boasts strong brands in the still beverage category. Coca-Cola’s juice and juice drinks grew 3% in this quarter, despite growing health concerns about high sugar and calorie content in juices. Unit sales for the brand Simply rose by a double-digit percent in the domestic market, while unit sales for Minute Maid grew 1.5%, displacing PepsiCo’s Tropicana as the highest selling juice brand in the U.S. Minute Maid is the first billion-dollar brand to emerge out of China, and the drink Minute Maid Pulpy saw an 8% growth in volumes in the country this quarter, boosting growth for Coca-Cola. On the other hand, Coca-Cola’s robust RTD portfolio, including brands such as Gold Peak, Honest Tea and Fuze Tea, grew by 4% through March. This was fueled by a double-digit rises in Honest Tea and Gold Peak volumes in North America. Due to the healthier perception of tea, which contains antioxidants that boost metabolism, RTD tea is one of the fastest growing segments in the beverage industry. In the U.S., the RTD segment registered a high double-digit percent growth to reach $5.1 billion in sales. This category also contributed to higher margins for Coca-Cola as tea prices plummeted last year to an all-time low. RTD tea is expected to generate sales of $5.3 billion in 2014 and grow at a CAGR of over 6% till 2018, providing ample growth opportunities to tea making companies. See More at Trefis |  View Interactive S&P Capital IQ Analyses (Powered by Trefis)
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    Weak North American Market Shrinks Q1FY14 Sales Growth For L'Oréal
  • by , 14 hours ago
  • tags: LRLCY EL UL PG
  • Global beauty giant L’Oréal (OTC:LRLCY) reported its Q1FY14 results on April 14, after the close of the European markets. Quarterly sales for the company stood at €5.46 billion, 2% lower than sales from a similar period in fiscal 2013. On a like-for-like basis (i.e., adjusted for constant currencies and acquisitions and divestitures), sales were approximately 4% higher over the Q1FY2013 period. However, this like-for-like growth rate was lower than the 6% registered between Q1FY13 and Q1FY12. Geographically, Western Europe, Africa and the Middle East were the only regions where reported revenues showed positive growth. The remaining regions where L’Oréal has business presence posted year-on-year declines in revenue in Q1FY14. In this earnings note, we look at specific trends impacting L’Oréal operating divisions. We have a Trefis price estimate of $34 for L’Oréal that is approximately in line with its current market price. See Our Complete Analysis Of L’Oreal Professional Products Witness First Signs Of Growth The company’s Professional products business, comprising of notable brands such as L’Oréal Professional, Kératase, Redken and Matrix, witnessed the first quarter of positive like-for-like sales growth in Q1FY14. The division’s 3.7% like-for-like growth rate this quarter is higher than the flat performance from a similar period last fiscal. However, currency headwinds resulted in sales declines from the segment on a reported basis, at approximately €735 million, which was 2% lower than the €753 million in sales in Q1FY13. Comparatively, reported revenues stood marginally lower in Q1FY13 compared to Q1FY12. The growth in like-for-like revenues in the Professional products division for L’Oréal was supported by a boost in sales from geographies like Western Europe, United States, Brazil, Russia and India. This boost in sales was facilitated by new product launches in the hair colorant area with the relaunch of Nutritive from Kératase and Inoa and Majirel from L’Oréal Professional. We believe this acceleration in product sales across geographies from its most visible brands should be able to support an expansion in L’Oréal’s market share in the hair care market globally. Consumer Segment Q1 Sales Trip On Hostile North American Weather More importantly, L’Oréal’s Consumer Product division posted weak sales growth this quarter. The Consumer Products division accounts for more than 50% of revenues and any adverse impact to sales growth in this division impacts overall company performance. For the quarter, sales stood at €2.76 billion, only 1.2% higher on a like-for-like basis. Comparatively, this growth rate for the segment in Q1FY13 stood at 6.5%. Sales for Consumer Products in Q1FY14 were negatively impacted by the weak environment in the North American market, where adverse weather conditions resulted in weak sales numbers for various brick-and-mortar retailers. Furthermore, the strong like-for-like sales in Q1FY13 were supported by the launch of important products such as Advanced Hair Care by L’Oréal Paris and Olia from Garnier . These new product offerings created higher sales volumes in Q1FY13 for the Consumer Products division. Going forward, L’Oréal expects healthy like-for-like growth in its Consumer Products division. The company is revamping its hair care product line with Elvive Fibrology in Europe and Volume Filler in the U.S. Similarly, the continued roll-out of the Garnier Olia hair colorant is expected to boost like-for-like sales in the future. In the skin care product category, L’Oréal’s roll-out of Miracle Skin Cream from Garnier and Revitalift Laser from L’Oréal Paris should spur sales growth across its geographic base. We expect new product launches in the skin care segment to cater to an expansion in market share, especially in emerging economies of India and China. By April 1, the recent acquisition of Magic Holdings was consolidated into the L’Oréal group. With this acquisition and the shut down in China of the Garnier brand, L’Oréal expects a re-acceleration in sales from this region in FY14. See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
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