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Anheuser-Busch InBev is scheduled to announce its Q1 results on Wednesday. The company is expected to deliver solid revenue growth this quarter on higher average revenue per unit volume. Results for this quarter are expected to be negatively impacted by FX and a higher cost of sales. However, solid performances in key markets such as the U.S., Mexico, Brazil, and China are expected to offset the rise in costs.

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Tableau's customer base has seen significant growth over the past few years, jumping from 7,700 customers in 2011 to 26,000 in 2014. Tableau's relatively low penetration in international markets suggests that there is a lot of scope for growth. We forecast the total number of customers to exceed 60,000 over the next six to seven years.

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The Impact Of A Sustained Increase In Chinese Aluminum Production On Alcoa
  • By , 5/5/15
  • tags: AA RIO
  • Aluminum prices have been fairly subdued this year. London Metal Exchange (LME) aluminum prices have averaged roughly $1,800 per ton so far this year, as compared to roughly $1,900 per ton in 2014. Aluminum has diverse applications in industry. It is an important input in the packaging, aerospace, automotive, construction, commercial transportation, power generation, capital goods, and consumer durables industries. Thus, demand for aluminum is broadly correlated with industrial growth. Economic weakness in Europe and slowing Chinese growth have contributed to the weakness in aluminum demand, and consequently prices, over the last few quarters. China, the world’s largest consumer of aluminum, is expected to witness a slowdown in GDP growth to 6.8% and 6.3% in 2015 and 2016 respectively, from 7.4% in 2014. On the supply side, production capacity has not been reduced corresponding to the weakness in demand over the last few quarters. Persistently high aluminum inventory levels relative to demand have kept LME aluminum prices depressed. This inventory was built up partially as a result of aluminum being tied up in financing deals, which were made possible due to low interest rates. Despite inventories being at a record high, market forces failed to rationalize supply through the shutdown of smelting capacity. Though global aluminum majors like Alcoa and Rusal did make significant smelting capacity cuts, the same was not true of Chinese companies. This was primarily due to state intervention in the form of provision of subsidies or renegotiated power contracts to smelters, which serve as a disincentive to cut production. China accounts for around half of the world’s aluminum production, and the expansion in production by Chinese producers has more than made up for capacity cuts by global majors. This oversupply situation is expected to keep aluminum prices depressed. As a result of the fall in LME prices, regional aluminum prices in China are trading below the costs of production of a majority of Chinese domestic smelters. However, Chinese aluminum producers were boosted by a recent decision of the Chinese government to provide tax breaks and subsidized power to domestic aluminum smelters. This is likely to lead to an increase in Chinese production and could further worsen the gap between supply and demand, resulting in a drop in global aluminum prices. In this article, we will take a look at the impact of this scenario on Alcoa’s stock price. Impact of a Sustained Increase in Chinese Aluminum Production on Alcoa Boosted by favorable government policy, China could add an additional 4.5 million tons in smelting capacity over the course of the year, or close to 10% of global aluminum production. Though the shutdown of obsolete and high cost aluminum smelting capacity will reduce the net addition to production capacity, the closures of high-cost Chinese smelting capacity will be much less as compared to the fresh production capacity that comes online. Similarly, though the shutdown of high-cost smelting capacity from the rest of the world could lessen the impact of Chinese capacity additions, a net addition to global aluminum smelting capacity in 2015 is still the most likely scenario. If China continues to supply subsidized power to its aluminum smelters, resulting in capacity additions at current rates, the global oversupply of aluminum is likely to persist. This would negatively impact LME aluminum prices. A fall in LME aluminum prices is likely to translate not only into lower realized aluminum prices for Alcoa, but also lower realized alumina prices, since a significant proportion of pricing contracts for Alcoa’s alumina sales are linked to LME aluminum prices. While modeling the high Chinese aluminum production scenario, we will assume that the company’s production plans and capital expenditure remain the same in this alternative scenario. Since we forecast capital expenditure as a percentage of EBITDA, in order to model this new scenario we have modified our forecasts in order to keep capital expenditure at the same absolute levels in the new scenario. If we factor in these assumptions on the various drivers impacted in our stock price model, our price estimate for Alcoa decreases by 15% from $14.35 to $12.20. Thus, there is significant potential for a downward revision in valuation in the case of a sustained increase in Chinese aluminum production. See our complete analysis for this scenario 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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    Earnings Preview: How Many Vehicles Can Tesla Deliver This Quarter?
  • By , 5/5/15
  • Tesla Motors (NYSE:TSLA) is scheduled to announce its Q1 earnings on May 6. Investors will be keenly watching the guidance and updates on business operations given out by the company during the earnings call. In 2014, the automaker was  expected to sell 35,000 Model S cars, helped by higher production rates and expansion into new markets. However, the company fell short of that target selling something just short of 32,000 units. The auto maker attributed the miss to a misreading of demand from China and some delays in the production process. Following Q4 earnings, the company issued a target of 55,000 deliveries for 2015, which would require it to up its delivery rate by 70% for each quarter compared to last year. Even though the company has been working on making its assembly line efficient enough to be able to improve the production rate to 2,000 vehicles per week by the end of the year, that is a tough ask. To meet its 2015 targets, Tesla will have to increase its delivery rate by about 70% for each quarter compared to the rate last year. The planned introduction of the Model X by the middle of 2015 should help the company in attaining that target, but a lot of it will rely on how quickly it is able to reach the production rate target of 2,000 vehicles per week.  By our estimates, just about 1,400 of the cars produced in the fourth quarter were only delivered in the first quarter of fiscal 2015, which meant that the lag time between production and delivery came down considerably for the fourth quarter, as just under 80% of the cars produced in the quarter were delivered. The company said that it expects the quarterly gap between vehicles produced and vehicles delivered to decline in the future quarters. This is important as some customers, especially in China, have expressed disappointment at the time lag between time of order and time of delivery.  We have a  price estimate of $170 for Tesla, which is about 25% below the current market price. See Our Complete Analysis For Tesla Motors Here Margin Expansion Tesla’s gross margins improved from 17.1% in the first quarter of 2013 to 25.2% in the fourth quarter, helped by higher volumes and operational efficiency. What was surprising was that the company thought that there was room to further improve margins. Tesla targeted gross margins of 27% by Q4 2014. The company achieved that target with its gross margins improving to 27.4% on a GAAP basis on account of higher revenues from the sale of ZEV credits. On a non-GAAP basis, gross margin stood at 26.7%. Tesla’s gross margins have improved from 17.1% in the first quarter of 2013 to 27.4% in the fourth quarter of 2014, helped by higher volumes and operational efficiencies. Tesla is targeting gross margins of 26% in 2015. Auto companies, in their definition of cost of goods, usually include some fixed cost components like labor costs, plant operational expenses, etc. Therefore, as volumes increase, the additional revenues often result in improved gross margins. In the long run, Tesla’s gross margins could face a downward pressure. While achieving 27% gross margins for luxury cars may not be difficult, the real challenge for the automaker would be to sustain the figure when it introduces the Gen III within the next 2-3 years. Due to its lower price (expected price ~$35,000-40,000), the model should see higher volumes than the Model S. Since luxury cars generally have higher margins than mid-price cars, and thus a greater proportion of Gen III sales could erode some of the profitability. Mainstream automakers such as GM or Ford have gross margins in the range of 18-20% compared to ~25% margins for a luxury automaker such as Daimler. However, there are other factors which might help the company overcome those downward pressures, chief among which is the Giga factory. If you think about the supply chain involved in the manufacturing and distribution process of a battery, you will see some element being mined in South America and then shipped to North America for refining and processing and then shipped to Japan or South Korea for further refining and processing and then back to North America where it will be put in a car that will be sold in Europe. This is a horribly inefficient process. Tesla’s big move is to bring all these different parts under the same roof. This move alone will save the company a lot of money. Besides savings in labor costs, increased demand will reduce the battery’s price — the adding up of a number of single digit percentages which might bring down the cost of producing and selling a battery by as much as 30%. Given that 25% of the cost of making a car is battery costs, this can result in improved margins. Powerwall Late last month, Tesla announced a new product line called Powerwall, which is a lithium ion battery that allows consumers to store energy for later use. The batter costs $3,500 for 10 kilowatt hours of storage and $3,000 for 7 kilowatt hours of storage. We will be looking carefully for what Tesla hopes to achieve from this foray into the energy storage segment. Even though these batteries have brought down the cost of storing energy to an amount much lower than people suspected, their economics are still only useful for people and places where the cost of power outage is very high. Therefore, this technology will only find early adopters from enterprises and consumers for whom the cost of a power outage is extremely high. These might include movie theaters, utility companies and markets such as Australia and Hawaii. However, if the company can bring down the cost of the battery in the future, a number of different uses can open up thereby rapidly expanding the market for this product. That, in turn, will increase the demand for the battery, which will, in turn, drive down the price of lithium ion batteries resulting in further cost savings for the company. We will talk about these scenarios in an upcoming piece. However, it will be interesting to see what the company envisions for itself with this new product.
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    Keurig's Q2 Earnings Preview: Brewer Sales Volume Remains Key Driver
  • By , 5/5/15
  • Keurig Green Mountain (NASDAQ:GMCR) is scheduled to release its second quarter earnings report for the fiscal 2015 on May 6. Brewer product recalls and a poor customer response to the new Keurig 2.0 led to a weak holiday period in terms of sales of brewers and other accessories; the brewer and accessory sales declined 18% y-o-y to $307 million in Q1. Keurig reported net Q1 revenue of $1.38 billion, in-line with the net revenues in the same period the previous year. On the other hand, in the first quarter, portion pack net sales rose 9% year-over-year (y-o-y) to $1.012 billion, primarily due to the 13% y-o-y increase in volume sales of portion packs. The Vermont based K-Cups maker plans to release its new cold brewer, Keurig Cold, this year. Additionally, the company has been joining hands with several retail and food chains, for the manufacturing and distribution of some coffee brands in the K-Cups. We have a  $103 price estimate for Keurig Green Mountain, which is roughly 8% below the current market price. See our full analysis of GMCR here All Eyes On Brewer Sales Volume Keurig Green Mountain has witnessing a decline in the brewer sales volume for the last 2 quarters. In the September-ended quarter, brewer sales declined 5% y-o-y in the fourth quarter, due to a decline in brewer volumes by 8% and brewer pricing by 11%. Furthermore, the company sold nearly 4.5 million brewers in the first quarter of fiscal 2015, down 12% (600,000 brewers) y-o-y. The weak brewer sales in the holiday season also included the negative impact of a recall on certain MINI plus brewers, and greater than expected retailer portion pack inventory reductions. The company mentioned that it was expecting a decline in the brewer sales year-over-year (y-o-y) due to the low promotional price points last year. However, the decline was more than the expectations due to the voluntary product recall. Replacing the product on retail shelves led to unexpected expenditure by the company in the Q1, and it is expected to hamper the revenue growth in the second quarter as well. Moreover, Keurig 2.0’s launch was fairly unimpressive because of the two major reasons — firstly, the delay in putting the new packs on the retail shelves, and secondly, consumer perception about Keurig 2.0. Most of the customers were unclear whether the new version of Keurig brewer would brew all their favorite brands. This confusion added to the decline of the brewer sales in the holiday period. Despite the lower expectations, the company’s overall financial performance in the second quarter depends mostly on the Keurig Brewer volumes. Expectations Rise Before Keurig Cold’s Launch Keurig Cold, the company’s cold brewer platform, is designed to dispense single servings ranging from carbonated drinks to non-carbonated beverages, such as juice drinks and iced teas. Moreover, Keurig added  Dr Pepper Snapple (NYSE:DPS) as another beverage partner, when the two companies joined hands in developing a selection of Dr Pepper Snapple’s brands for the upcoming Keurig Cold Platform. Adding Dr Pepper Snapple’s brands to its arsenal gives Keurig an additional option. The partnership between the two companies now provides an additional consumption platform for select Dr Pepper brands and could possibly raise sales. On the other hand, in December, Keurig announced yet another deal, when it entered into an agreement to acquire the remaining 85% equity of Bevyz, a fully owned subsidiary of MDS Global Holding Ltd., in the first week of December 2014. The Bevyz Fresh machine has a completely different technology, as it is compatible with both hot and cold beverages such as carbonated soft drinks (CSD), frappes, juices, teas, energy drinks, and coffee.  An all-in-one machine replaces the need for separate appliances and could attract consumers based on its convenience and counter-top space optimization. With the company’s strategy of adding partners to its list of licensed brands, we can expect Keurig to join hands with more beverage companies in the coming months, before the launch of this awaited product, as the company might be trying to avoid a lackluster launch as in the case of Keurig 2.0. K-Cup Sales To Strengthen Keurig’s Top-line Performance In Q1 2015, Keurig’s portion pack sales rose 9% y-o-y to $1.012 billion, primarily driven by 13% y-o-y increase in volume sales of portion packs. Recently, Keurig expanded its partnership with Dunkin’ Brands and J.M. Smucker Company, after signing agreements for manufacturing, marketing, and distribution, as well as sale of Dunkin’ K-Cups at retail chains in North America. Apart from this deal, the company also signed multi-year deals with DS Services of America, a subsidiary of Cott Corporation (NYSE: COT), as well as Reily Foods Company for the manufacturing and distribution of some of the coffee brands, such as Javarama coffee, New England Brand coffee, New Orleans Famous French Market brand coffee, and Luzianne brand iced-tea pods for its hot brewer platform. All these deals indicate the company’s intent to expand the list of its licensed coffee brands to be served in the K-Cups or other portion packs. With some popular brand names under its arsenal, the additions of these names might increase the customer base for the company. According to Trefis estimates, K-Cups portion packs segment accounts for more than 70% of the company’s valuation. A boost in the sales of these portion packs might certainly drive the company’s overall revenue growth. 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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    Activision Blizzard's Earnings Preview: Heroes Of The Storm Might Prove A Good Gamble
  • By , 5/5/15
  • tags: ATVI EA GME MSFT
  • The American gaming giant, Activision Blizzard (NASDAQ: ATVI), is slated to announce its first quarter earnings report for the fiscal 2015 on May 6. In the fiscal 2014, the company reported record EPS figures of $1.42, up more than 50% from the previous year. On the other hand, Activision’s Q4 2014 net revenues declined 2.5% year-over-year (y-o-y) to $2.2 billion. However, impressive financial performance in the first nine months of 2014 resulted in a double digit (nearly 11%) revenue growth for the whole fiscal year, as the company reported $4.8 billion in net revenues. In 2014, Activision released new versions of some of its popular franchises, such as  Call of Duty: Advanced Warfare, Diablo III, and Skylanders TRAP TEAM, as well as some new path-breaking franchises, such as Destiny and  Hearthstone: Heroes of Warcraft. Activision’s two new franchises,  Destiny and  Hearthstone attracted over 40 million gamers combined, generating a net $850 million in non-GAAP revenues.  In 2014, Activision’s results in all the geographical segments improved y-o-y, with nearly 39% growth in Asia-Pacific and 15% y-o-y growth in Europe. Our $21  price estimate for Activision Blizzard’s stock is nearly $2 below the current market price. See our complete analysis of Activision’s stock here Activision Retains Dominance In FPS Genre The first-person shooter (FPS) genre is becoming more and more popular, and  Activision Blizzard (NASDAQ: ATVI) has dominated the FPS domain for the last 5 years, primarily driven by the  Call of Duty franchise. The company released the 2014 edition of the franchise, Call of Duty: Advanced Warfare, in November of last year, and it sold nearly 7.2 million units on all the major platforms in the first week of its release. As of March 21, the title sold approximately 18.64 million units worldwide, with roughly 50% of the sales in North America. Sony’s PlayStation platforms lead the race in terms of the unit sales on console systems. In 2015 alone, the title sold roughly 1.9 million units, indicating the sustaining demand for the franchise. It was the #1 console title of the year 2014, with consolidated revenue of $11 billion. Moreover, the company released the second expansion pack for the game, called Ascendance on March 31, 2015. It provided the gamers with four new multiplayer maps, bonus weapons and other variety of features. Furthermore, before the holiday season of 2014, Activision released a new FPS franchise:  Destiny, which is an online FPS game based on a post apocalyptic science fiction theme in a persistent online world. Destiny has sold over 10 million units as of March 21, 2015, of which 4.44 million units were sold in the first week of its release, making it the #3 highest sold title of 2014. Destiny has over 16 million registered users, averaging 3 hours of game-play per day. It became the highest played game in North America on the PlayStation 4 platform in December. The company will release another expansion pack for the game: House of Wolves in the second quarter. Both the titles combined provide Activision an upper hand in the FPS genre, and with more shooter games and a few more expansion packs for the existing franchises, the company might continue attracting gamers. Trefis charts below show our forecasts for the company’s title sales for the two major gaming platforms. Skylanders & World of Warcraft Continues To Be The Favorites In Respective Genres The popular Role-playing adventure game for kids, Skylanders, continues to be a huge franchise for the company, with over 240 million toys sold till date and $3 billion in revenues. The franchise outsold all action figure lines in 2014, outperforming its nearest competitor by 30%. Furthermore, Skylanders’ new title: TRAP TEAM, outperformed its nearest competitor by 17%. Activision plans to launch a new Skylanders game in the fourth quarter of 2015. According to VGChartz, Skylanders: TRAP TEAM has sold nearly 3.34 million units, as of March 21. On the other hand, the company’s widely popular Massively Multiplayer Online Role-Playing Game (MMORPG),  World of Warcraft, is the most successful game of all time in its genre. However, the franchise is facing the decline in the subscriber base, due to the introduction of several free-to-play online games. To revive the interest of gamers in the franchise, the company has been constantly improving the game-play, by introducing new offerings and expansion packs. This resulted in an increase in the subscriber base to over 10 million, as well as generated additional revenues. Despite the recovery efforts of the company, the franchise faces a threat from new free-to-play titles in the market. Blizzard To Enter New Genre With Heroes Of The Storm The company plans on releasing a new ‘multiplayer online battle arena’ video game: Heroes of the Storm on June 2, 2015, with an open beta testing period starting from May 19. It’s a free-to-play online game, where the gamers can battle with each other using the iconic characters from Blizzard’s Warcraft, StarCraft, and Diablo universe. The players can even customize their heroes and team up with friends for all-out bouts, through Blizzard’s online gaming service of February 2015, over 9 million enthusiastic players had signed up to receive invites for beta testing. Being a free-to-play online game, it might attract gamers in the initial period. Through this game, the company is entering a lucrative market, and its success might open a new market for the company to tap into. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    CL Logo
    Currency Headwinds Dampen Colgate-Palmolive’s Sales in Q1, Robust Cost Savings Continue
  • By , 5/5/15
  • tags: CL PG UL EL KMB
  • Global oral care leader Colgate-Palmolive (NYE:CL) reported its 2015 first quarter earnings on April 30th. The company’s top-line was hammered by currency headwinds and contracted by 6% year on year. Organic (non-GAAP) revenue growth rate was 4% year on year, of which 2.5 percentage points was driven by pricing growth and the rest by volume expansion. As in the fourth quarter of 2014, Colgate-Palmolive’s organic growth rate in this quarter also was higher than that of its rivals, Procter & Gamble (NYSE:PG) and Unilever (NYSE:UL). Colgate-Palmolive’s cost saving and restructuring programs got off to a good start in 2015. Benefits from cost savings along with higher pricing offset the impact of commodity cost inflation, which helped expand the non-GAAP gross margin by 30 basis points year on year to 58.9%. Currency headwinds caused non-GAAP diluted EPS to contract by 3% year on year to reach $0.66. The severe impact of adverse currency movements is underscored by the fact that on a constant currency basis, non-GAAP diluted EPS expanded by double digits. Despite the severe currency headwinds, Colgate-Palmolive stands by its long-term goal of double-digit growth in EPS. However, taking stock of the prevailing situation, the company expects the 2015 full year EPS to decline by low-single digits, excluding the impact of the 2012 Restructuring Program. On a constant currency basis, Colgate-Palmolive expects a double-digit increase in the 2015 full year EPS. We are currently revising our price estimate of $56 for Colgate-Palmolive to reflect the first quarter results. See our complete analysis for Colgate-Palmolive here Price Hikes in Emerging Markets Drive Top-Line Growth In the first quarter, Colgate-Palmolive’s organic revenue growth in emerging markets stood at 6.5%, compared to 1.5% organic revenue growth in developed markets. The revenue acceleration in emerging markets was driven primarily by higher pricing, which contributed 5 percentage points to the revenue growth. Colgate-Palmolive indicated that it expects “pricing to build” further over the rest of the year. On the other hand, promotional pricing resulted in a 50 basis points negative impact on organic revenue growth in the developed markets. The company indicated that it may pull back on promotional pricing in North America in the following quarters. Notably, volume growth contributed more than price hikes towards organic revenue growth in developed markets in the first quarter. The company stated that another major factor that drove revenue growth in the first quarter was focus on innovation in the premium category. During the quarter, Colgate-Palmolive introduced a number of new products across all its business divisions, many of which were geared towards the premium segment. It combined the release of new innovative products with a heavy emphasis on marketing and efficient in-store execution, which facilitated faster adoption rates of its new products and thereby contributing to revenue growth. Volume Growth in Developed Markets Outpaces Emerging Markets In the first quarter, Colgate-Palmolive’s volume expansion was higher in the developed markets than in the emerging markets. This is a departure from recent trends, since volume growth in emerging markets has steadily outpaced that in developed markets in recent years. The company attributes the volume growth in developed markets to an increase in retail consumption in large store formats in the U.S. Additionally, we believe that the rapid increase in pricing may have impacted Colgate-Palmolive’s volume growth in the emerging markets. Sustained price hikes in a sluggish consumption paradigm may be causing the company’s customers to switch to cheaper local products, or worse, cheaper products offered by its rivals. Until the fourth quarter of 2014, Colgate-Palmolive seemed to have maintained a fine balance between price hikes and maintaining volume growth. Thus, it avoided committing the same fallacy which seems to be ailing Procter & Gamble. However, the slowing volume expansion in emerging markets may indicate that the company has reached a stage where increasing prices further could push away customers. Whether the first quarter was a red herring in this regard or the beginning of a trend remains to be seen. Margins Expand on Robust Cost Savings Colgate-Palmolive’s non-GAAP gross margin expanded by 30 basis points year on year in the first quarter, thanks to higher pricing and benefits yielded by robust cost saving programs. The improvement in gross margin trickled down to the non-GAAP operating margin also, which increased by 40 basis points year on year. The improvement in operating margin was also helped along by lower SG&A expenses in the first quarter. It should be noted that advertising expenses, which are included in SG&A expenses, declined in absolute terms sequentially, but increased as a percentage of sales. Colgate-Palmolive stated that advertising as a percentage of sales was 10.6% in the first quarter, compared to 9.7% in the fourth quarter of 2014. Comparatively, the figure was 11.1% in the first quarter of 2014 but had declined thereafter through the rest of 2014. This indicates that while advertising expenditure remains below the year-ago level, the company is increasing its investment in advertising as a percentage of sales. This is in contrast to Procter & Gamble’s strategy, which is to cut down on its advertising expenditure by focusing more on digital advertising (Read: P&G Reports Moderate Q3 Results, Lays Out Future Growth Strategy ). On the other hand, Colgate-Palmolive reiterated its belief in traditional advertising modes, and hinted that it may consider a pullback in traditional advertising by its rivals as an opportunity to be leveraged. Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
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    Chesapeake 1Q 2015 Preview: Lower Oil Prices, Net Production To Weigh On Earnings
  • By , 5/5/15
  • tags: CHK COP EOG APC
  • Chesapeake Energy (NYSE:CHK) is scheduled to announce its 2015 first-quarter earnings on May 6. We expect lower price realizations to weigh significantly on the company’s financial results. Chesapeake’s net hydrocarbon production is comprised of 70% natural gas and 30% liquids (crude oil and natural gas liquids). Benchmark crude oil prices have fallen sharply since June of last year on rising supplies amid slower demand growth. The average  WTI crude oil spot price declined by more than $50 per barrel or 50% year-on-year during the first quarter. In addition, the average Henry Hub natural gas spot price also declined by $2.31 or 44.3% y-o-y during the quarter. Apart from lower price realizations, we expect Chesapeake’s first-quarter earnings to also fall as a result of lower net production, primarily driven by recent divestitures, curtailments, and higher project downtime. However, hedging gains and productivity improvements are expected to partially offset the impact of lower benchmark prices and net production on the company’s overall performance. Chesapeake is the 2nd-largest producer of natural gas and the 11th-largest producer of liquids (crude oil and natural gas liquids) in the United States. The company’s operations are focused on discovering and developing unconventional natural gas and crude oil fields onshore in the U.S. It owns positions in the Barnett, Fayetteville, Haynesville, Marcellus, and Bossier natural gas shale plays, and in the Eagle Ford, Granite Wash, Niobrara, and various other conventional and unconventional liquid-rich plays across the U.S. The firm has interests in over 45,100 natural gas and crude oil wells that produce approximately 729 thousand barrels of oil equivalent per day (MBOED), net to Chesapeake. At the end of 2014, Chesapeake’s proved hydrocarbon reserves stood at almost 2.47 billion barrels of oil equivalent, with 75.5% of these reserves categorized as proved developed. We currently have a $15 per share price estimate for Chesapeake, which is around 10% below its current market price. See Our Complete Analysis For Chesapeake Energy Lower Net Production Chesapeake’s net hydrocarbon production is expected to decline both sequentially and year-on-year during the first quarter. This is primarily because of the impact of recent divestitures completed by the company to enhance its liquidity and reduce the debt burden. Last year, Chesapeake sold certain assets in the southern Marcellus Shale, and a portion of the eastern Utica Shale, to a subsidiary of Southwestern Energy Company for aggregate net proceeds of approximately $4.975 billion. The company sold approximately 413,000 net acres of property and approximately 1,500 wells in northern West Virginia and southern Pennsylvania, of which 435 wells were in the Marcellus or Utica formations, along with related gathering assets and property, plant, and equipment. This is expected to reduce the company’s net oil and gas production by around 57 MBOED sequentially. In addition, Chesapeake also began the curtailment of its net operated production in the Marcellus shale during the fourth quarter last year, primarily because of low in-basin field prices. This lowered its net hydrocarbon production by around 15 MBOED in 4Q 2014 and is expected to have continued during the first quarter as well. Apart from this, higher project downtime is also expected to bring down the company’s net hydrocarbon production in 1Q 2015. For the full year, Chesapeake currently expects its net production, adjusted for the impact of recent divestitures, to grow by around 1-3% despite the sharp cut in drilling activity, primarily because of drilling efficiency improvements implemented over the last couple of years and the expected deflation in service costs during the second half of the year. Hedging Gains Chesapeake hedges a significant portion of its net production to reduce the impact of the volatility in commodity prices on its financial performance. In its latest annual SEC filing, the company noted that it has downside price protection on approximately 43% of its projected net crude oil and natural gas production for 2015 at an average price of $93.39 per barrel of crude oil and $4.21 per thousand cubic feet (mcf) of natural gas. This basically means that the overall impact of the recent decline in benchmark commodity prices on Chesapeake’s financial performance will be mitigated to a certain extent. As the company delivers the quantity of oil and gas locked in hedging contracts, it will book a gain representing the difference between its actual revenue and the estimated revenue at prevailing commodity prices, net of transaction costs. This will partially offset the impact of softer benchmark commodity prices and lower net production on its overall performance. 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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    Avon Q1 2015 Earnings Review: Latin American Growth Seems To Be Recovering, However, North America Still Under Pressure
  • By , 5/5/15
  • tags: AVP EL LRLCY REV
  • Avon Products (NYSE:AVP), the direct selling company of beauty, household, and personal care products, delivered yet another weak quarter. In Q1 2015, the company’s sales declined by 18% to $1.8 billion. However, in constant dollar terms, Avon’s revenues grew by 1% due to growth in Europe, the Middle East, and Africa. The company’s active representative base declined by 1% on a year-over-year basis. However, there was a sequential quarter over quarter improvement in Avon’s representative base. As of December 2014, Avon had around 6 million active representatives. Avon’s bleak performance continued in North America (which accounts for more than 10% of its revenues). However, within the Latin American region (which accounts for over 50% of Avon’s revenues), Brazil showed signs of recovery. The company launched a new product positioning theme on May 1. Avon is trying to upgrade its direct selling model to a more social selling structure, whereby its active representatives can sell through the digital media. Our current price estimate of $9.75 for Avon Products is at a significant premium to the current market price. We are in the process of updating our estimates. Avon’s Performance In Some Of Its Key Regions Brazil Latin America contributes to over 50% of Avon’s annual revenues. Within the Latin American region, Brazil is Avon’s single largest market. Brazil is the third-largest beauty market in the world.  This market has had a 10% annual growth rate for the last 17 years, up until 2013, when the growth rate in 2013 was 4.9%. Direct selling contributes to approximately 70% of Brazilian market sales in the skincare, color, and fragrance categories. These factors fueled Avon’s erstwhile growth in Brazil. In 2014, Avon’s sales received a setback in Brazil primarily due to Brazil’s weak economy, competition from retail channels, and Avon’s improper product pricing mix. Hence, as a recovery measure, towards the end of 2014, the company forged strategic alliances with KORRES, a Greek skincare brand, and Coty, a French beauty and personal care company, to provide a boost to the Latin American, and specifically to the Brazilian, market. In the Brazilian beauty market, fragrance plays a crucial role in the overall product mix and the launch of Coty products helped Avon in filling the demand gap. Hence, in Q1 2015, Avon witnessed an improvement in its sales from this region. Coty had been positively received by the Brazilian beauty product users. Currently, Avon is strategizing on the pricing mix in Brazil and approaching the product price mix in a staged manner in order to regain the consumer confidence. However, Brazil’s IPI tax (one of the basic sales taxes in Brazil) will have an estimated 50 basis point impact on the company’s constant dollar adjusted operating margins for the full year 2015. In Brazil, Avon is a leading player in the color and skincare segments, and these segments would be dampened due to the IPI taxes. Mexico Sales in Mexico suffered in the first half of 2014 due to attrition in the representative workforce and an unsuitable portfolio price mix. The product portfolio and pricing have since improved. Avon tried improving the retention rate by helping representatives navigate the first six campaign cycles. In Q1 2015, growth was still sluggish in Mexico, despite a boost in the active representative base. There was a slowdown in average orders in the Fashion & Home category. North America In North America, Avon’s sales have been hit by a drop in the representative pool. In 2014, North America experienced a 17% constant dollar decline in revenues and an 18% decline in the active representative base. In Q1 2015, though some cost management initiatives proved effective, the company still faced a serious slowdown. Revenues in North America declined by 17% on a constant dollar basis and the active representative pool also fell by 17%, on a year-over-year basis. Avon has increased its advertising expenses for North America for its products as well as for recruitment of representatives. The management still expects the region to turn around. Avon had nearly 470,000 representatives in North America in 2009, which declined to 258,000 representatives by the end of 2014. The recovering North American economy and the subsequent creation of full-time jobs is expected to pile on an additional pressure on Avon’s representative base because Avon representatives are usually non-contractual workers. Avon’s Product Positioning Drive And Plans For 2015 Avon is repositioning its brands with the tagline ‘Beauty for a purpose’. The theme was introduced to its representatives on May 1st and will be extended to consumers with a full integration expected by the end of 2015. The company will shift its marketing focus to the digital and social media.  The company is also transforming its business model into a social selling model with the aid of mobile, digital and social media., Avon’s social selling model, currently present in the U.S., will be expanded to other markets. Social selling gives representatives the ability to use their own e-stores for online selling. Avon is also trying to complement its direct selling model with a retail approach. For example, in Poland, representatives and sales people run their own retail store of Avon products. Avon plans to roll out this model to other geographies in the future. Avon’s skincare segment reflected sequential improvement over the last five quarters. In Q2 2015, Avon plans to launch an upper market product line called Nutra Effects. There will be a few key additions to its Anew line. Within the color cosmetics segment, Avon has planned a few product lineups in mascara, lipstick and eye color. The color segment is being boosted with strong advertisements in key markets. 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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    Turner Networks Boosts Time Warner's Q1 Earnings
  • By , 5/5/15
  • Time Warner (NYSE:TWX) recently reported its Q1 2015 earnings, which came out largely on expected lines. While revenues grew 5% to $7.12 billion, adjusted earnings were up 23% to $1.19 per share. Growth was largely led by Turner networks, which benefited from the NCAA coverage. HBO continued to see steady growth in subscription revenues while higher revenues at Warner Bros. were offset by unfavorable foreign exchange movements. Overall, the results were good across divisions and the company maintains its guidance of $4.60 to $4.70 earnings per share for 2015. This is slightly higher than our current earnings estimate of $4.48 per share. We will soon revise our  $93 price estimate for Time Warner to incorporate the recent quarterly earnings. We continue to believe that Time Warner will see healthy growth in the near term as well as in the long run primarily driven by its media networks.
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    Is There A Silver Lining For Pfizer Amid Challenging Conditions?
  • By , 5/5/15
  • tags: PFE JNJ RHHBY
  • As expected,  Pfizer ‘s (NYSE:PFE) operational growth was overshadowed by adverse currency movements in the first quarter of 2015. However, that’s transient and should not worry investors too much. It is more important to understand where the business is headed fundamentally. Pfizer’s sales have suffered in recent past due to loss of patent exclusivity of several drugs and less-than-expected success from new product launches. The situation, although remains challenging, is not so bad now. While it is too early to predict anything, we believe Pfizer’s business may be at the cusp of rebounding, assuming some of the late pipeline drugs clear the clinical and regulatory hurdles. Let’s take a look at what the recent results suggest. Our price estimate for Pfizer stands at a little over $36, implying a premium of about 5% to the market.
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    CVS Starts Fiscal On A High Note, PBM Will Continue To Boost Revenues
  • By , 5/5/15
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  • At the end of last week,  CVS Health (NYSE:CVS) announced its quarterly earnings for the three months ended March 31, 2015. As expected, the company’s PBM business continued to drive growth with significant contributions from specialty pharmacy and pharmacy network claims. Overall, revenues in the pharmacy services segment increased by 18.2% to $23.9 billion. On the other hand, revenues in the retail pharmacy segment increased by 2.9% to $17.0 billion. Pharmacy same-store volumes increased 5.1% (sales increased 4.2%) as the company continued to gain pharmacy share. CVS’s share in the retail pharmacy market stood at 21.5%, an increase of 50 basis points versus the same quarter a year ago. The company reported 17% in gross margins, which is a contraction of about 120 basis points year-over-year. As the PBM  business offers lower margins compared to the retail business, higher top line growth in the PBM segment led to lower overall margins. Overall, it was a better-than-expected first quarter for CVS. In this article, we will look at why the company is confident of continuing the growth momentum. We have a  price estimate of $81 for CVS Health, which is at a discount of approximately 20% to the current market price. View our detailed analysis for CVS Health Specialty Pharmacy To Continue To Be The Star Performer Specialty revenues continued on a strong growth trajectory in the quarter increasing 46% year over year. While new specialty therapies have hit the market frequently, 88 drugs in the last 3 years, existing ones received more than a 100 new indications during the same time period. 2014 saw the launch of new specialty drugs for Hepatitis C, Sovaldi and Harvoni, which cost $84,000 and $94,500 respectively for a 12-week course of treatment. The fact that these drugs accounted only for 10% of the overall revenue growth indicates how strong the growth of the drug group, as a whole, is. This year, a new class of drugs called PCSK9 inhibitors, which lower cholesterol, are expected to be launched. While it might take a while for the new class of drugs to be adopted, partially because of the significant step-up in cost compared to currently used generics, the potential it holds is enormous. The company said that one in four people that are on stance currently could be candidates for these new therapies. In all, the PCSK9 market could be worth $10 billion a year, according to FiercePharma. Note that CVS reports its specialty revenues as part of its PBM business, unlike earlier when it was included in the retail pharmacy segment. New Client Additions And Renewals To Increase Number Of Scripts Processed After the impressive first quarter, especially in the PBM business, CVS narrowed its 2015 top-line outlook for its services segment to growth between 11.25% and 12.25%, 25 basis points higher than the prior guidance range on the low-end. Even the operating profit guidance for the division has been narrowed down to between 7.75% and 10.75% year-over-year, an increase of 100 basis points on the low end. While some of these revisions reflect expectations from growth in specialty revenues, new additions to the PBM business is also a key contributor. For the 2015 selling season, net new business stands at $4.1 billion, about $0.5 billion higher than what the company expected during its last update. On the other hand, it has also completed about a third of client renewals for the 2016 selling season. Credit for this growth goes to the company’s services, which have been able to generate significant savings for its clients. CVS’ formulary management solution promotes lower cost generics and provides limited access to branded drugs by constantly changing the drugs listed on its formulary. Compared to a 12.7% growth trend in the overall book of business, its clients using the value formulary achieved a growth trend of only 0.5%, more than 1200 basis points better than the overall book. In times when drug expenses are hitting new highs, we believe that services offering such significant cost savings will continue to attract new clients. 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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    Viacom Posts Loss In The March Quarter Amid Restrucutring
  • By , 5/5/15
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  • Viacom (NASDAQ:VIA) recently reported its earnings for fiscal Q2 2015. (Fiscal years end  with  September.) The company’s revenues declined 3% to $3.08 billion while the net loss stood at $53 million compared to a profit of $502 million reported in the prior year quarter. However, adjusted earnings stood at $467 million or $1.16 per share. The company took a $784 million restructuring and programming charge in the March quarter. Viacom’s media networks benefited from higher affiliate fees, but the company continued to see a drop in domestic advertising, which was down 5% due to lower ratings. While the company’s filmed entertainment segment benefited from the success of The SpongeBob Movie: Sponge Out of Water, the segment revenues and operating income declined due to decreases in home entertainment and licensing revenues, partly led by unfavorable foreign currency impact. We continue to believe that the ratings woes will weigh over Viacom’s performance in the near term and expect the media networks revenues to see low-single-digit growth over the next few years. We currently estimate revenues of about $14.2 billion for Viacom in 2015, with EPS of $6.03, which is in line with the market consensus of $5.55-$6.70, compiled by Thomson Reuters. We currently have a  $80 price estimate for Viacom, which we will soon update to incorporate the recent quarterly earnings.
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    Shutterfly Q1 2015 Earnings Review: Next Generation Shutterfly And GrooveBook In Focus
  • By , 5/5/15
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  • Leading internet based image publishing service,  Shutterfly (NASDAQ:SFLY) reported its Q1 2015 earnings on April 29th. Shutterfly’s net revenues of $160 million (17% year-on-year growth) marked the 57th consecutive quarter of year-on-year increases. The top-line performance was a consequence of customer order growth for the consumer brands, complemented by a boost from the enterprise business. Shutterfly is on a major upgradation path, wherein it plans to integrate all its brands on a common technological platform. The next generation Shutterfly or Shutterfly 3.0, will be available towards the end of 2016. Shutterfly 3.0 will enhance user engagement and improve monetization. The company has also undertaken some internal restructurings and movements which are expected to enhance future performance and efficiency. In Q1 2015, Shutterfly’s unique customers increased by 25% on a year-on-year basis to reach 3.2 million. The average order value (AOV) per order decreased by 14.5% to $28.86. This was mainly on account of GrooveBook, which offers services at a lower price point than the other Shutterfly brands. The number of customer and orders, however, received a boost of 10% and 16% respectively. Other than the flagship Shutterfly brand, the popular brands in Shutterfly’s portfolio are: ThisLife (photos and videos organizer), Tiny Prints (premium cards and stationery for all occasions), Treat (personalized greeting cards), Wedding Paper Divas (wedding related stationery), BorrowLenses (online photo and video equipment rental service), GrooveBook (mobile photo-book service), and others. From March 18th, Shutterfly has discontinued its Treat brand, due to a lack of a strong dedicated user base. However, the current Treat users will be redirected to and will be served through the flagship brand. We are in the process of updating o ur $49 price estimate for Shutterfly . GrooveBook’s Strategic Importance In Shutterfly’s Future Vision: User Expansion Across Income And Age Segments Shutterfly’s acquisition of the mobile photo book application, GrooveBook, has been instrumental in expanding Shutterfly’s capabilities and consequently, in gaining customers across newer demographics. GrooveBook prints up to 100 photos stored in the mobile phone, in a 4.5″ x 6.5″ GrooveBook format. It then emails the keepsake book to customers, for a monthly charge of $2.99. At the time of its acquisition in November 2014, GrooveBook had more than 1 million downloads, 200 million photo uploads and a subscriber base of around 7 million. Shutterfly decided to keep GrooveBook as a stand-alone application, as well as, integrate GrooveBook’s functionality across its multiple brands. The acquisition also enhanced vertical integration. Grove book prints photo books from photos saved in mobile phones, which was the next logical step for Shutterfly, after offering customers photo-printed cards, mementos, and accessories.. GrooveBook provides the bang for the buck. This helped Shutterfly in gaining a hitherto unexplored user base. For example, Shutterfly’s normal services offered 100 prints for a month at a total cost of $22 to $23. Groovebook, on the other hand, provides the whole package for $2.99. Though the cost reduction comes with lower quality, it is still attractive to the younger population with lower disposable income. Hence, Shutterfly is gaining markets from an erstwhile unexplored younger demography. In the long run, the brand loyalty would influence these new consumers to purchase other Shutterfly offerings as they grow older and gain more purchasing power. The Next Generation Shutterfly 3.0 Would Lead To Enhanced Operational Efficiencies, Better Brand Recognition, And Higher Adoption Rates Shutterfly plans to launch the next generation Shutterfly by the end of 2016. Shutterfly 3.0 will integrate the services of its brands such as This Life, Tiny Prints, and Wedding Paper Divas with the Shutterfly flagship brand, into a common platform. The services of Shutterfly and This Life can be accessed through the same mobile application, as well. This consolidation will prevent investments across different technology platforms and hence, will be more cost efficient for the company. In addition, it will be less cumbersome for Shutterfly’s users to manage. The company will continue its investments on the individual brands, but all the brands will be supported through a common technology platform, including cart, checkout, creation paths, login, address book, and media storage platforms. The management expects Shutterfly 3.0 to enhance the rate of adoption of its lesser known brands. Through a common platform, the Shutterfly brand name will add value to those brands. This in turn will drive up the monetization. Post The Failed Snapfish Deal, Is Another Alliance On The Cards? On October 2014, private equity firm, Silver Lake Partners had put their plan of acquiring and combining Shutterfly and Hewlett-Packard’s Snapfish on hold.  . The merger of Shutterfly and Snapfish—both companies operating in the photo storage and printing space—would have created a bigger entity, expanded the customer base, and posed substantial threat in this market space witnessing continuous influx of players. According to recent news, Hewlett-Packard has agreed to sell Snapfish to District Photo, a U.S. digital imaging company. Under its previously announced $300 million stock repurchase plan, Shutterfly repurchased 1 million shares in Q1 2015, at an average price of $45.16. The company has $264 million of repurchase capacity remaining. Hence, according to its management, along with its organic growth, the company is on the look-out for strategically relevant acquisitions. With the fall-out of the Snapfish deal, we can expect Shutterfly to buy companies that would aid in its user base expansion (similar to GrooveBook) and at the same time help in solidifying its dominant position in the industry. 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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    AB InBev Earnings Preview: Strong Revenue Per Hectoliter Growth To Boost Sales
  • By , 5/5/15
  • Anheuser-Busch InBev (NYSE:BUD) is scheduled to announce its Q1 results on May 6. The global leader in beer sales is expected to deliver solid revenue growth this quarter on higher average revenue per unit volume. Organic growth in revenues stood at 5.9% last year, even as volume sales rose only 0.6%. This was mainly because the brewer remained committed to its premium brand profiling and put more emphasis on sales of premium beer brands, growing revenue per hectoliter by 5.7%. AB InBev has focused on M&A activities to grow its business, especially by acquiring strong local businesses in emerging markets that have an already established loyal customer base. The combination with Grupo Modelo and Oriental Brewery yielded positive results in Mexico and South Korea, respectively, in the last year, and AB InBev was also able to deliver $730 million in cost synergies related to the Grupo Modelo acquisition, and remains on track to achieve $1 billion in cost savings by the end of 2016. On the back of strong revenue growth and higher cost savings, AB InBev’s normalized earnings per share rose 10.6% to $5.43 in 2014. The financial results for this quarter are expected to be negatively impacted by a stronger dollar, as compared to certain local currencies, and higher cost of sales. However, solid performances and growth in average revenue per hectoliter in key markets such as the U.S., Mexico, Brazil, and China are expected to more than offset the rise in operational costs. We have a  $122 price estimate for Anheuser-Busch InBev, which is above the current market price. See Our Complete Analysis For Anheuser-Busch InBev Expected Growth In The U.S. On Higher Craft And Imported Beer Sales Beer is a relatively mature market in the U.S. Beer consumption has declined in the country in the last few years as millennial customers are more health conscious and look to curb alcohol consumption. In 2014, with improving economic conditions in the U.S., due to lower energy prices and historically-low unemployment rates, higher customer purchasing power allowed a slight 0.5% year-over-year growth in beer volumes. The conducive market conditions also helped improve the industry-wide average revenue per hectoliter, bolstering the beer market’s net value to $101.5 billion, up 1.5% over 2013 levels. The U.S. is the largest market for AB InBev, accounting for 24% of net volumes and 30% of net revenues last year. Although AB InBev’s U.S. volume sales remained essentially flat in Q4, this was a rather positive outcome after consecutive quarters of declining volumes in the country. AB InBev ended the year with a 1.4% decline in volume sales in the U.S. This quarter, the brewer could achieve growth in the country through a lower percentage decline/slight growth in beer volume sales, and higher revenue per hectoliter, boosted by larger proportionate sales of imported and craft beers. Imported and craft beer volumes grew by 6.9% and 17.6%, respectively, in the country last year, outpacing the 0.5% growth in the overall market. In particular, the Mexican imported beer segment, which forms around 8-9% of the U.S. beer market according to Anheuser, grew 11% in 2014, and continues to thrive on an increasing Hispanic population in the country and higher customer demand. AB InBev is expected to gain from the high demand for imported beer this quarter and going forward, as distribution of the Mexican brand Montejo spreads to eight additional states in 2015. The beer brand started selling in September last year in California, Arizona, Texas, and New Mexico, where 70% of America’s Latino population resides, and the initial roll-out of Montejo has been successful. On the other hand, incremental sales from the craft breweries acquired by Anheuser, such as Oregon’s 10 Barrel Brewing, Elysian Brewing Company, Blue Point, and Goose Island, are expected to fuel growth in the top line in Q1. The imported and craft beer segments together form only 26% of the beer market, which is still dominated by the domestic beer segment. However, these segments are growing at a relatively faster rate, and operate at higher price points. This is why AB InBev is eyeing growth in these segments, which promise higher average revenue per hectoliter. China Volumes Could Slow Down But Sales Growth To Remain Solid Hurt by rough weather conditions and relatively slower economic activity in the latter part of the year, the industry-wide beer volumes in China declined by 1.8% in 2014. However, AB InBev’s volume growth remained positive at 1.6%, reflecting strong growth in the brewer’s focus brands in the country. The brewer’s core focus group in China comprising Budweiser, Harbin, and Sedrin grew by 7.8% last year, and accounted for approximately 73% of the company’s portfolio in the country. While the 1.6% volume growth figure represents organic growth, volume growth including M&A activities was approximately 9% in 2014. In three of the four largest markets for AB InBev, namely the U.S., Brazil, and Mexico, the brewer has massive volume shares of 46.4%, 68.2, and 57.8% respectively. It is generally tougher for companies with massive market shares (near 50% or more) to further grow share, especially in relatively mature markets such as the U.S. beer market, which is not so dynamic. However, in China — the largest beer market in the world in terms of volumes, and the third largest for AB InBev — the brewer holds a smaller 15.9% volume share. This means that there is still a large growth opportunity for the world’s largest brewer in China, where beer penetration is still low, as compared to Europe and the U.S. This quarter as well, although AB InBev’s volumes might not grow by much in China, which faces slowing economic activity, higher revenue per hectoliter is expected to boost the brewer’s sales. China formed 87% of net volumes last year for AB InBev’s Asia-Pacific division, which forms approximately 12% of the company’s valuation by our estimates. Despite a small 1.6% growth in volumes, AB InBev’s China revenues rose 11.6% over a year ago period in 2014, and as the premium segment is growing twice as fast as the overall beer market, and given the brewer’s premium positioning, sales growth could remain strong this quarter as well. 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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    Tableau To Continue Firing On All Cylinders In Q1; Currency Headwinds Could Have Some Impact
  • By , 5/5/15
  • Tableau Software (NYSE:DATA) will report its first quarter earnings on May 7th. Tableau is an innovative Business Intelligence (BI) software company, which provides its clients with tools and interactive dashboards to search, query, analyze and visualize sets of data to generate useful business insights. Tableau is considered a pioneer in the field of data discovery. Data discovery involves discovering insights from a set of data and analyzing and presenting those insights in interactive and visual format, which makes it easy for business users (non-IT) to run queries and analysis. The company has grown at a rapid pace  with the increase in demand for data discovery based BI software, and we believe that this trend will continue in the near future. Around 23% of Tableau’s revenues come from international markets. Consequently, we believe that the strengthening of the dollar will have some negative impact on the company’s results in the short term. Currency headwinds have had a similar impact on the first quarter results of other technology companies such as  Qlik Technologies (NASDAQ:QLIK) and  Akamai (NASDAQ:AKAM). We currently have a price estimate of $103 for Tableau, which implies a premium of around 5% to the market price.
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    Nvidia's Q1'16 Earnings Preview: Gaming, Automotive, Data Center & Cloud In Focus
  • By , 5/5/15
  • Leading GPU processor developer,  Nvidia (NASDAQ:NVDA) will report its Q1 2016 earnings on May 7th. The company closed its fiscal 2015 (ended January 2015) on a strong note, driven by its increasing strength in gaming, data center computing, the cloud and the automotive electronics. In addition to beating its Q4 2014 guidance, Nvidia’s Q1 2016 revenue outlook was slightly above the consensus estimates. For Q1 2016 (which is a seasonally down quarter), Nvidia expects to report revenues of $1.16 billion, +/- 2%. Nvidia’s focus on addressing the top 30% of the market (mainly those vertical segments where visual computing matters the most) is clearly paying off and has helped it outpace the PC market (where it has always had a significant exposure). A decade back, PC original equipment manufacturers (OEMs) accounted for almost 100% of Nvidia’s business, but now account for less than 20% of the company’s business. Over the years, Nvidia has transitioned into a software centric company primarily serving four key markets – gaming, automotive electronics, enterprise graphics, and  high-performance computing (HPC). Our price estimate of $23 for Nvidia is slightly above the current market price. We will update our valuation for the company after its Q1 2016 earnings release. See our complete analysis for Nvidia Automotive & Shield to Drive Growth In Nvidia’s Tegra Business While mobile computing has been a key focus area and the largest segment for Nvidia’s Tegra business in the last few years, the company claims that automotive and SHIELD (Nvidia’s gaming device) now represent the vast majority of its Tegra revenue. Nvidia expects the two segments to be the biggest growth driver for its Tegra division in fiscal 2016. The automotive segment is the fastest growing sub-segment and offers higher gross margins (compared to devices). Automotive electronics is a large market and it is going through a transition  as cars have increased computing capability in both the drive train and the dashboard. Increasingly, dashboard functionality within cars (infotainment system, digital cluster and automatic driver assistance) are being computerized. Strategy Analytics expects the market for Advanced Driver Assistance Systems will generate around $15 billion in 2016, with a CAGR of 23%. Nvidia  has been working on building its automotive computing platform for over a decade and is in a strong position to leverage this growth. The company’s automotive platforms remain on a sharp upward trajectory with over  7.5 million cars using Nvidia’s technology at present, up from 4.7 million a year ago. In the last few quarters, Nvidia has significantly expanded its Shield lineup, which includes the Shield Android handheld console, Shield tablet, and an Android TV console. Nvidia claims that the mobile gaming is a  $70 billion market and is growing rapidly internationally. The mobile cloud is probably one of the most important disruptions in the history of computing, and yet there’s really no computer gaming architecture that serves mobile cloud very well. According to Nvidia, SHIELD offers the platform that allows the mobile cloud to bring gaming to an under-served and new market. Given its strong graphics and processing capabilities, the company is able to deliver a compact powerful and optimized system to eager gamers. Large-Scale Data Centers To Be A Significant Source Of Future Growth The release of the Kepler-based GPUs in 2013 fueled Nvidia’s growth in professional graphics and translated into higher market share and margins for the company. Nvidia remains the dominant player in professional GPUs. The company launched the new Quadro product platform, which provides up to two times the improvement in application performance and data handling capability, in August 2014. The Quadro professional solutions, including processors based on the new Maxwell GPU architecture, are seeing a fast ramp up in the market and are being shipped by all of Nvidia’s major OEM partners. For the sixth year in a row, every film nominated for an Academy Award for special effects was made using Quadro. The NVIDIA GRID graphics virtualization platform continues to gain momentum with more than 300 companies worldwide testing the product in recent months. Over 1,000 enterprises worldwide have evaluated the GPU server platform though the tri-grid online demonstration, up from just 400 a year ago. Nvidia launched a program with VMware for early customer access to GRID virtualized GPUs in August last year. The program is drawing wide global interest, and some of the early customers include: the aircraft maker Airbus, the international construction group CH2M Hill, healthcare provider MetroHealth, Villanova University and Halliburton. About a week back, VMware rolled out the latest version of its vSphere virtualization software, including full support for Nvidia’s GRID vGPU graphics virtualization technology. Nvidia’s accelerated computing platform is also seeing strong growth as HPC customers and cloud service providers continue to deploy large GPU-enabled systems. In Q4 2015, the company introduced its new flagship Tesla offering (Tesla K80 Dual-GPU) which provides nearly twice the performance and double the memory bandwidth of its predecessor, the Tesla K40. The U.S. Department of Energy recently announced that its next generation of supercomputers will utilize Tesla GPU accelerators in conjunction with NVIDIA NVLink high-speed interconnect technology. Transition To Maxwell Drives Growth In High End PC Gaming Nvidia completed the product transition to Maxwell based GPUs (desktop, notebook and workstation) in Q3 2015. Maxwell is Nvidia’s 10th generation GPU architecture, offering 2X the performance power of the Kepler architecture, which the company had touted as the most energy-efficient GPU ever built by it. Backed by the Maxwell refresh and the seasonal increase in consumer PCs, Nvidia’s GPU business grew 13% and 11% year on year in Q4 2015 and fiscal 2015, respectively. Nvidia added the GTX 960 processor to its Maxwell lineup last quarter, bringing the Maxwell platform to the $199 segment, which the company considers to be the gaming market sweet spot. There are now more than 50 million PCs with GeForce Experience, which aims to bring the simplicity and the community benefits of the console to the PC. In the month of November alone, GeForce Experience users downloaded Nvidia drivers over 30 million times. PC gaming represents almost 40% of the worldwide gaming market, which is higher than consoles, phones, tablets or any other individual gaming segment. View Interactive Institutional Research (Powered by Trefis):
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    TripAdvisor Q1 2015 Earnings Preview: Strategic Investments Might Lead To Growth
  • By , 5/5/15
  • TripAdvisor (NASDAQ:TRIP) is set to release its results for Q1 2015 on May 6th. The company ended 2014 on a healthy note, riding on its host of acquisitions, upgrades, and its newly introduced Instant Booking Platform. The world’s largest travel review company posted revenues to the tune of $1.25 billion in 2014, up by 32% year on year. All the three divisions posted strong top line growth — click-based advertising revenue grew by 25% year on year to $870 million, display-based advertising increased by 18% year on year to $140 million, and subscription & transaction revenue was up by 82% year on year to $236 million. According to TripAdvisor’s President and Chief Executive Officer, Stephen Kaufer, TripAdvisor laid its foundation for future growth in 2014. Bookers can now plan, compare, as well as complete the booking process of the three most popular travel categories (hotels, attractions, and restaurants) through TripAdvisor’s website. The company plans to aggressively scale and promote this holistic travel platform in 2015. We will shortly update our valuation of $87 for TripAdvisor post the first quarter earnings result. See Our Complete Analysis for TripAdvisor Here TripAdvisor’s Instant Booking Platform Will Increase TV Advertisement Expenses In 2015 TripAdvisor launched its Instant Booking platform in the U.S. in Q1 2014.The platform allows users to carry on the end to end steps of the booking process — from selecting a room to inputting personal and credit details — on TripAdvisor’s platform itself. Customers can do the booking while remaining on the TripAdvisor page.  However, the customer information is sent to the hotel so that the credit card is charged by the hotel and other payment related support is offered by the hotel itself. This is a unique model in the existing marketplace and hence gaining partners on the platform is taking longer than usual according to management. The company aims to spread the new avatar of TripAdvisor through online and offline channels, through their “plan, compare, and book” message. In 2015, the company plans to spend around $60 million towards TV advertisements, in order to spread the message across the globe. TripAdvisor Grows In The Tours And Activities Space TripAdvisor acquired Viator in September 2014 in order to extend its reach in the entertainment sector, which is TripAdvisor’s third largest source of demand after hotels and restaurants. Viator is a leading online service provider of over 20,000 tours and attractions. Viator’s competitive advantage over its peers lies in its “curation model”. Since the acquisition, bookings via Viator have more than doubled.  In February 2015, TripAdvisor and Viator announced the launch of a new tours and activities supplier platform called Marketplace. Marketplace will enable more partners to list their business on, and more users to book tours and activities through, Viator. Restaurant Reservation Business Is Expected To Be A Major Growth Driver TripAdvisor acquired LaFourchette, the leading online restaurant reservation systems in France and Spain, in May 2014. In Q4 2014, TripAdvisor acquired mytable and restopol is in Italy, and Ie ns in The Netherlands. Other than the countries where these entities belong, TripAdvisor’s restaurant inventory (as a result of these acquisitions) now spans across France, Spain, Switzerland, Belgium, Turkey, Sweden and Denmark, making it a market leader in the European online restaurant reservation domain. In 2015, TripAdvisor continued its tryst with European restaurant booking websites with the acquisition of Portugal-based Best Tables in April 2015. Best Tables also operates in Brazil and has a database of 1,200 bookable restaurants. The details of the acquisition are yet to be disclosed. International diners are increasingly using the Internet to make restaurant reservations due to the convenience and discounts offered online. Restaurants are also increasingly adopting online booking models as they help fill up empty tables, offer more convenience, and enhance efficiency. TripAdvisor receives over 200 million page views per month from its restaurant traffic. The company will be able to better monetize its restaurant traffic by converting many of its users into seated diners. As a consequence of these acquisitions, restaurant booking activities have increased by four times on the TripAdvisor platform. TripAdvisor is currently re-branding its restaurant platform as TheFork. The company plans on expanding TheFork’s reach to newer markets over the next 3 to 5 years. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap  
    BABA Logo
    Alibaba Earnings Preview: Trends We Are Watching
  • By , 5/5/15
  • tags: BABA AMZN EBAY
  • All eyes will be on Alibaba (NYSE:BABA) on Thursday, May 7th, when the Chinese Internet behemoth reports its financial results for the quarter and fiscal year ended March 2015. Coming on the heels of disappointing results by other Internet heavyweights such as Twitter and LinkedIn, Wall Street participants will be keenly watching this earnings release. The company’s stock has been trading on negative sentiment over the past few months on the back of concerns related to slowing growth and increased regulatory pressure. Though it was trading at around $100-110 in December 2014, it is now down to just over $80 (near its 52-week lows). We think these quarterly results could see some impact from Alibaba’s efforts to restrict the sale of counterfeit products on its marketplaces. In addition, the growing share of mobile platform in the overall GMV will further weigh on top-line growth due to lower monetization rate on mobile devices. At the same time, we expect the profitability to decline in the quarterly results due to heavy growth in expenses with acquisitions of new businesses and investments in growth strategies.
    FOX Logo
    Studio Operations Likely Boosted Fox's Q3 FY15 Earnings
  • By , 5/5/15
  • 21st Century Fox (NASDAQ:FOX) will report its Q3 fiscal 2015 earnings on May 6th. (Fiscal years end with June.) The company should continue to benefit from the growth in subscription fees. However, rising programming costs remain  a concern for the cable networks. Moreover, currency headwinds could weigh over the the company’s performance during the March quarter. The company will surely benefit from Fox News, which continued to dominate at the top spot in the March quarter and was up 10% in primetime ratings. This likely boosted the network’s advertising revenues. Fox’s studio business likely  benefited from its wide success at the box-office. The studio grossed more than $340 million in the March quarter at the U.S. box-office. This is much higher than $210 million it grossed in the prior year quarter. We estimate revenues of about $28 billion for 21st Century Fox in 2015, with EPS of $1.73, which is in line with the market consensus of $1.56-$1.78, compiled by Thomson Reuters. We currently have a  $39 price estimate for 21st Century Fox, which is about 20% ahead of the current market price. Understand How a Company’s Products Impact its Stock Price at Trefis
    Reader Comment: Are E-Cigarettes Getting Stubbed Out?
  • By , 5/5/15
  • tags: MO PM
  • Submitted by Sizemore Insights as part of our contributors program Reader Comment: Are E-Cigarettes Getting Stubbed Out? by Charles Lewis Sizemore, CFA In response to my article “ Are E-Cigarettes Getting Stubbed Out? ” and specifically to my comment that slowing imports could be a sign of slowing product demand, Pascal Culverhouse of Electric Tobacconist wrote a thoughtful reply. Mr. Culverhouse can certainly speak with authority on the subject; he happens to be the proprietor of an online vaping retailer based in the UK. He notes that his sales continue to grow at a rather brisk pace of 10% per month. Here’s my take on your imports theory: Two years ago, the model (in the US & UK) was that people would buy cigarette-style ecigs, followed by unique cartridge refills which weren’t interchangeable across brands. These cartridges were usually made in China, meaning that the majority of the products needed to be imported. Fast forward two years and the bottom has fallen out of that side of the market. From occupying around 80% of our sales this time last year, it is now around 20%. Nowadays people are more interested in the ‘tank-style’ liquid kits which can be filled up with any e-liquid of their choosing. This fact has the following implications: Liquid can be blended anywhere and the public is starting to favour domestically-made stuff (instead of bulk-made Chinese liquid), hence reduced imports. Tanks last longer, so less hardware is required. Again, meaning less importation of hardware. Brands find it harder to tie the customer down because the ‘cartridge refill’ model is all but dead. There have been many reports about the slowing of the industry, but my feeling is that these reports come off the back of skewed statistics. If you measure the growth of, say, the five biggest brands in the US/UK then you will see their growth curve slowing (this is what we have seen among the major brands we carry – blu, NJOY, VIP, Vapestick etc), but the industry itself is dispersing and growing at a rapid rate. So from an investment point of view, Big Tobacco has its work cut out, as the ecig industry is becoming more like the wine industry where from one day to the next a customer might want to try a ‘tipple’ of Five Pawns Bowden’s Mate, and then the next they might want some NJOY Samba Sun. I can’t see how punters are going to be tied down in the way they are with tobacco. Vaping is now akin to having a wine glass and the freedom to fill it up with whatever wine you want [Emphasis Charles] — bad news for anyone looking to dominate the industry. I genuinely feel we are one of the few companies who can truly offer an insight into the market, as we are the only company which covers everything from Big Tobacco, to major independents to quirky start-up brands. Thanks to Pascal for his thoughtful comments. I reasoned in my article that Big Tobacco might be better positioned than the smaller upstarts to withstand the inevitable legal and regulatory onslaught facing the industry. But beyond this, Big Tobacco really has no clear competitive advantage over the upstarts, and Pascal’s experience would seem to confirm this. For those still unfamiliar with the ins and outs of electronic cigarettes, Pascal’s site will give you a good sampling of the market: . This article first appeared on Sizemore Insights as Reader Comment: Are E-Cigarettes Getting Stubbed Out?
    The DuPont Proxy War Gets Juicy
  • By , 5/5/15
  • tags: DPZ TIF DD
  • Submitted by Wall St. Daily as part of our contributors program The DuPont Proxy War Gets Juicy By Shelley Goldberg, Commodity Strategist   Adventure . . .  A war of words . . .  Fighting between top-level movers and shakers . . . Ugly accusations! No, I’m not talking about a soap opera miniseries. This a real-world drama playing out right now at DuPont ( DD ). It’s a battle between the current DuPont Board of Directors and Trian Partners, a fund management team out of New York with a vested interest in the chemical company . Trian is trying to convince shareholders to oust the current DuPont board, and it’s willing to play dirty to get what it wants. The final, shocking episode will air on May 13. That’s when the chemical conglomerate’s annual meeting takes place. At that time, shareholders will have the opportunity to vote for four new Directors of the Board. Who will win, and what’s in store for this far-reaching chemical company? The List of Grievances Trian purchased a stake in DuPont of approximately 2.7%, or $1.8 billion, in March 2013. Since then, Trian has been vocal about its desire to replace the current board, saying it wants to hold them accountable for “consistent underperformance.” In April, the fund manager launched its “DuPont Can Be Great” campaign aimed at shareholders. The thing is, DuPont’s stock price over the last five years doesn’t look too shabby, with a $65-billion market capitalization. Still, Trian executives say DuPont’s value could and should be much higher. All the company needs is the right board in place. In fact, Trian executives believe that DuPont’s implied target value per share could be in excess of $120 by the end of 2017. Trian has been harping on a few specific statistics to back up its complaints: The earnings per share (EPS) in the last three years was below the EPS in 2011. If management had hit their 2010 five-year target, EPS would be $6.45 for 2015. Currently, the company is on track to hit a 2015 EPS of $4.00 to $4.25. DuPont is underperforming its peers both in revenue growth and margins in five of its seven operating segments, and its earnings growth has been in the bottom quartile of its peers since 2011. Approximately $5 billion of agriculture research and development over the last five years has yielded billions in losses. The board has failed to align executive compensation with performance, awarding management for failing to reach their targets. Character Assassinations and Finger-Pointing DuPont’s leadership has been coming back with its own rhetoric, saying the stock is up because of fundamentals. But Trian is making it loud and clear that investors should not be fooled, emphasizing that, sooner or later, every company’s share trades are based on earnings. Editor’s Note: Trian is throwing its weight around to try to get what it wants, and so can you. Founder Robert Williams has discovered a loophole that allows everyday players to invest alongside the most successful venture capitalists. And it keeps everyone on a level playing field. Find out more . Trian claims that DuPont’s CEO, Ellen Kullman, lacks confidence in both her strategy and the company. As evidence, the fund managers pointed to her prematurely selling over half her equity stake (about $80 million) at $72 or less after Trian first invested, and later selling 23% of her holdings when share prices spiked after the release of Trian’s 2014 Summary White Paper. Train also says that four of the board members should be ousted for tolerating subpar performance, allowing poor corporate governance, and providing weak management oversight: Alexander Cutler, the Lead Director, failed to hold management accountable for publishing nine different versions of 2011 EPS. Lois Juliber, the longest-tenured board member (20 years). The Institutional Shareholder Services (ISS) governance overview states that director tenures over nine years are “excessive” and could “potentially compromise a director’s independence.” Furthermore, she has overseen ill-conceived executive compensation programs used to enrich DuPont’s executives. Robert Brown, the Science and Technology Committee Chair, failed to discover any significant agricultural traits. Its Applied BioSciences revenue was 80% below 2012 targets. Lee Thomas was supposed to offer insights on governmental relations and environmental management from his tenure as the U.S. Environment Protection Agency (EPA) Administrator. Yet, he left the EPA almost 30 years ago, and the agency has changed dramatically since then. In fact, on April 21, after the release of the Trian campaign, the EPA reached a settlement with DuPont resolving the agency’s allegations that it distributed and sold pesticide products that lacked the required labels or that were missing critical information. DuPont’s $22,200 penalty is chump change relative to its previous $1.9-million penalty paid to resolve allegations of violations of pesticide reporting and distribution laws. So who would replace this so-called incompetent team? Well, of course Trian has a list of its favorites, whom its claims can improve DuPont’s operating performance, earnings growth, return on invested capital, and corporate governance. Show-and-Tell Management If Trian has its way, heading up the board would be Nelson Peltz, the CEO and founding partner of Trian with 40 years of investment experience. He served as a Director and Non-Executive Chairman of Wendy’s Company ( WEN ) and as a board member of multiple companies ranging from Madison Square Garden Company ( MSG ) to Legg Mason Inc. ( LM ). The three other board picks also have proven track records of success in business and investments. Trian claims it’ll make DuPont’s boardroom a place of constructive debate rather than “show-and-tell” management presentations. DuPont has said it’s prepared to accept one of Trian’s nominees, but the company has refused to add Peltz. While DuPont agrees with Peltz’s idea to spin off its performance chemicals business, he also wants DuPont to separate its materials businesses from its nutrition and health, agriculture, and industrial biosciences divisions. DuPont has rejected the proposal, saying Trian has a “singular, value-destructive agenda to break up and add excessive debt to DuPont.” The larger stakeholders – such as Fidelity Investments, which owns 2.5%, and California State Teachers’ Retirement System, which held about 3.6 million shares as of February 28 – will have some influence. But Trian is currently influencing the rest of the shareholders more than these two. So, does DuPont have tremendous potential? Will Trian’s board picks turn it around? Both are likely. Trian’s proxy statement is highly convincing, even for readers who don’t personally know the cast involved. And Trian has an impressive track record of increasing shareholder return for companies ranging from Tiffany & Co. ( TIF ) to Domino’s Pizza ( DPZ ). After all, Nelson Peltz will do all he can to get valuations levels up. Not only does he have skin in the game, but he surely doesn’t want to be referred to as Nelson Putz by the investment community. Good investing, Shelley Goldberg The post The DuPont Proxy War Gets Juicy appeared first on Wall Street Daily . By Shelley Goldberg
    Upgrade Your Work Day With the Desk of the Future
  • By , 5/5/15
  • tags: SPY TLT
  • Submitted by Wall St. Daily as part of our contributors program Upgrade Your Work Day With the Desk of the Future By Justin Fritz, Executive Editor   The disadvantages of sitting at a desk all day are well-documented. Studies show that sitting for long periods can lower your metabolism, and boost your risk of heart attack or a stroke. It can even cut your life expectancy . . . Back in 2011, The Wall Street Journal cited an American Cancer Society study, which said, “Women who sat more than six hours a day were 37% more likely to die prematurely than women who sat for less than three hours, while the early-death rate for men was 18% higher.” That same article discussed how more companies were beginning to provide standing desks to employees. And the trend has only picked up steam in recent years. In fact, most of us on the Wall Street Daily staff are currently rocking the standing desk. Although I was hesitant to give up my cushy chair at first, I’ve since found that standing improves my focus, productivity, and posture. Heck, I’ve even lost a few pounds. Standing desks are far from perfect, however. So as more people cut ties with their chairs, some companies are working hard to cash in on the trend by improving the standing desk in novel ways. And one New York City startup has designed the coolest effort I’ve seen so far. Healthy Work Habits Go High-Tech The Autonomous Desk – currently part of a Kickstarter campaign – is certainly the standing desk of the future. While most standing desks are just hunks of metal and particle board, this thing comes packed with high-tech features and connectivity options.   Ever heard of a talking desk? Because this one boasts speech recognition technology. So it can become a Siri-style personal assistant – reading back messages, playing music, alerting you of upcoming meetings, etc. The desk can even interact with other connected devices, like a smart thermostat. Of course, those features aren’t exactly necessary for most people. But the desk does provide a few upgrades to the traditional standing desk that everyone would find useful. For instance, it comes equipped with a wireless charging station for your phone and a USB port. But the best improvement involves how the desk handles height settings. And this is where it gets smarter still… Most standing desks come with pre-defined height settings a few inches apart. Personally, I can’t seem to find the perfect level for my height. The Autonomous Desk uses a motor to raise and lower the desk to a height that’s best for you. Better yet, it remembers your customized settings . . .  and then automatically raises to your preferred height when it senses your arrival. You can learn more about the desk over at Kickstarter . Best Regards, Justin Fritz Executive Editor, Wall Street Daily The post Upgrade Your Work Day With the Desk of the Future appeared first on Wall Street Daily . By Justin Fritz
    Batteries: The Power of the Future?
  • By , 5/5/15
  • Submitted by Wall St. Daily as part of our contributors program Batteries: The Power of the Future? By Tim Maverick, Commodities Correspondent   Elon Musk is at it again. Most casual observers thought the giant lithium-ion battery Gigafactory being built by Tesla Motors ( TSLA ) was all about the electric car market. That’s . . .  mostly true. But it’s also about so much more. Musk also plans to use the Gigafactory to produce batteries that can power private homes, and even larger structures. The company’s Chief Technology Officer, JB Straubel, believes the market for stationary batteries “can scale faster than automotive,” and could account for up to 30% of the Gigafactory’s battery output. Rumors about the company making the major shift into stationary batteries have been around for a while. But, they weren’t confirmed until the evening of April 30 by Musk at a Tesla event. Storage and the New Grid What’s so big about this news is that these batteries may very well become a key component in the grid of the future. More and more homes, businesses, and utilities are using renewable energy. But the major problem with energy sources, like solar and wind power, is that power generation can be intermittent. These batteries can be used to combat the surging nature of renewable energy by storing electricity during peak productions times and then releasing it when it’s needed. The battery system, unveiled by Tesla yesterday, is similar to what has already been available to about 300 customers of Solar City ( SCTY ), a company that Musk chairs. These units can be leased for an initial outlay of $1,500, with a payment of $15 per month. Musk unveiled two batteries for the home: the 10-kilowatt capacity Powerwall and the 7-kilowatt capacity Powerpack. The cost is $3,500 and $3,000, respectively. The Powerwall is intended to provide back-up power for the home while the Powerpack can be used to run everyday refrigerators and TVs. In the corporate world, Tesla battery back-up systems have already been installed by both Apple ( AAPL ) and Google ( GOOGL ) at their corporate campuses. The company has also launched a pilot program with Wal-Mart ( WMT ). No price was stated by Musk for the business products. Currently, it’s believed that these corporate customers are shaving 20% to 30% off their monthly electric bills. Readers may be wondering why Musk is unveiling these systems now, when Tesla has already tested them so extensively. Well, Musk is no fool . . .  He sees a very big market about to open up. Elon Musk’s Vision California’s Public Utilities Commission initiated an energy storage mandate in October 2014 that requires the state’s utilities to have at least 1.3 gigawatts of electricity storage capacity by 2020. Other states are sure to follow California’s lead. Already, some electric grid operators in Texas and New York have begun using batteries for energy storage to smooth out the flow of electricity over transmission lines. The move toward energy storage is gaining momentum around the world, too. Navigant Research forecasts that global revenue from grid-scale energy storage may exceed $68 billion by 2024. And don’t forget about the home-use market. Simon Moores of Benchmark Mineral Intelligence estimates that Tesla could produce enough lithium-ion batteries by 2020 to power 3.5 million homes. Being the premier player in batteries has apparently been Elon Musk’s plan all along. In Elon Musk’s future, everyone will have home and car batteries that they plug in to charge and that are connected to the grid digitally, making blackouts a thing of the past. Analyst Ravi Manghani of GTM Research said of Musk and Tesla, “They’re not just car makers. They’re part of the electricity network. At least, folks in the energy industry are very well aware of Tesla as a battery maker.” And as Simon Moores said, Musk is making Tesla the first fully integrated and diversified battery company. Time will tell if that is a wise move, and if Elon Musk is mentioned in the same breath as Steve Jobs. And the chase continues, Tim Maverick The post Batteries: The Power of the Future? appeared first on Wall Street Daily . By Tim Maverick
    ArcelorMittal Logo
  • commented 5/4/15
  • tags: MT
  • Private Investor

    Fundementals will vex you all the time , probably why contrarians exist. [ less... ]
    Private Investor Fundementals will vex you all the time , probably why contrarians exist.
    Exxon Mobil Logo
  • commented 5/4/15
  • tags: XOM
  • Question

    Hi Evan,
    I'm new to Trefis and I thought that maybe since you were a student (as am I) that you would help me out with this site. I was looking at the feed that you are subscribed to, and wondered what that was...maybe you can explain it to me? I know this seems bizarre, but any help would be great! Thanks :) [ less... ]
    Question Hi Evan, I'm new to Trefis and I thought that maybe since you were a student (as am I) that you would help me out with this site. I was looking at the feed that you are subscribed to, and wondered what that was...maybe you can explain it to me? I know this seems bizarre, but any help would be great! Thanks :)
    COP Logo
    ConocoPhillips First-Quarter Report: Lower 48 Drives Production Growth But Slowdown Imminent
  • By , 5/4/15
  • tags: COP EOG APC CHK
  • ConocoPhillips (NYSE:COP) recently announced its 2015 first-quarter earnings. As expected, the company swung to a loss as lower price realizations more than offset the impact of higher net production and better volume-mix. The company’s earnings per share (EPS), adjusted for non-operating items, declined to a loss of -$0.18. In addition to lower price realizations, primarily due to the recent decline in oil prices, the company’s earnings were also impacted by more than a 350% increase in dry hole expenses. However, the loss could have been much wider if not for higher net production, primarily driven by its ongoing unconventional development program in the Lower 48 states of the U.S., and a 12% year-on-year reduction in operating costs, adjusted for restructuring charges. In response to the changed crude oil price environment, ConocoPhillips has slashed its annual capital spending budget by more than 28% and has set a goal to reduce its annual operating costs by more than a billion dollars, from the 2014 base, over the next couple of years. ConocoPhillips is the world’s largest independent exploration and production company by proved reserves and annual production. Its daily net hydrocarbon production from continuing operations, excluding Libya, averaged 1,532 thousand barrels of oil equivalent (MBOED) last year, and it had proved oil and gas reserves of around 8.91 billion barrels of oil equivalent (BOE) at the end of 2014. Headquartered in Houston, Texas, the company has operations in 27 countries, generating annual sales revenue of more than $52 billion. Based on the first-quarter earnings announcement, we have revised our  price estimate for ConocoPhillips to $63/share, which is around 5% below its current market price. See Our Complete Analysis For ConocoPhillips Lower 48 Drives Production Growth But Slowdown Imminent The biggest positive for ConocoPhillips’ investors in the company’s first-quarter performance was the 5% growth in net oil and gas production from continuing operations, excluding Libya and adjusted for downtime and divestiture-related variance. As expected, a large majority of this growth came from the ongoing development of its onshore assets in the Lower 48 states of the U.S., where the company has made some great progress recently. ConocoPhillips’ net crude oil production from the Lower 48 states has grown from around 117 thousand barrels per day (MBD) in 1Q 2012 to 198 MBD in 1Q 2015, a growth of almost 70%. During the first quarter, almost 43% of the total net year-on-year production growth of around 82 MBOED came from its operations in the Lower 48 states, where the company is focusing on the development of its acreage in the Eagle Ford and the Bakken/Three Forks shale plays. Production from the Lower 48 states at 542 MBOED was up by around 6.9% y-o-y. However, in view of the changed crude oil price environment, ConocoPhillips is now ramping down its unconventional reserves development program in the Lower 48 region. This is in line with the broader shale oil industry in the U.S. The number of active oil rigs in the U.S. has fallen sharply over the past few months after oil prices slumped due to oversupply, primarily driven by surging tight oil production in the U.S., and the Organization of Petroleum Exporting Countries (OPEC) decided to maintain their production, with clear intentions of decelerating the growth in U.S. crude oil production. The chart below highlights the trend in the number of active oil rigs in the U.S. and the WTI crude oil price. During the first quarter earnings call, ConocoPhillips announced that it currently has just 15 operated rigs active in the Lower 48 states, down more than 50% from the end of last year. As a result of fewer active rigs, the company expects its net production growth from the region to also start slowing down and eventually turn negative in the second half of the year. Therefore, despite a 5% growth in the first quarter itself, ConocoPhillips maintained a 2-3% overall net production growth guidance for the full year. 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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