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COMPANY OF THE DAY : LINKEDIN

LinkedIn's stock jumped following the company's Q2 2014 earnings announcement. The company beat expectations, gaining 17 million new members in the second quarter, compared to a gain of 16 million a year ago. This is impressive considering the company's user base growth had slowed down significantly in recent quarters. In our earnings note we discuss these earnings and the company's outlook going forward.

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FORECAST OF THE DAY : ACTIVISION'S NUMBER OF WORLD OF WARCRAFT & OTHER MMORPG SUBSCRIBERS

The World of Warcraft was once the world's largest massively multiplayer online role-playing game (MMORPG) franchise.

However, the online gaming landscape has changed considerably as new free-to-play online MMORPGs have entered the fray.

Activision's Call of Duty, Skylanders, Diablo III and other franchises have filled the void.

Read more...
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RECENT ACTIVITY ON TREFIS

LNKD Logo
LinkedIn Surprises As Feature Enhancements Drive Membership Growth
  • by , 17 minutes ago
  • tags: LNKD FB MWW
  • LinkedIn ‘s  (NASDAQ:LNKD) stock jumped more than 12% in the after-hours trading following the company’s Q2 2014 earnings announcement. The company beat analyst estimates on the back of uptick in member additions resulting from launch of new and engaging features. The spur in user activity drove the growth in overall revenues. Linked gained 17 million new members in the second quarter, compared to a gain of 16 million a year ago. This is impressive considering the company’s user base growth had slowed down significantly in recent quarters. Additionally, adjusted EBITDA and revenues climbed significantly as the new targeted ad products continued to attract marketing dollars and the revamp of the platform influenced more users to sign up for paid membership. Overall the results were impressive, and showcased that LinkedIn certainly has the room for further growth, and capability to drive it. We are in the process of updating our price estimate for LinkedIn in light of recent earnings, and will have an update ready soon. Our current price estimate for LinkedIn stands at $134, implying a discount of around 35% to the market price.
    CVS Logo
    CVS To Benefit From Strong PBM Performance & Increasing MinuteClinic Footprint In Q2'14
  • by , 30 minutes ago
  • tags: CVS RAD WAG
  • CVS Caremark (NYSE:CVS), the second largest drugstore chain in the U.S. after Walgreen, has been reporting strong growth over the last two years. After a slight decline in revenues in Q1 2013 and only marginal growth in Q2 2014, the company witnessed robust growth in Q3 2013 (5.8% annual growth), Q4 2013 (4.6% annual growth) and Q1 2014 (6.3% annual growth), each quarter driven by strong performance in the Pharmacy Services segment (which CVS refers to as PBM). CVS is set to report its Q2 2014 earnings on August 5, and we expect the company to retain its growth momentum in the quarter. CVS hsd guided that its PBM business and retail segment revenues will grow, respectively, between 10.8% to 12.0% and 2.5% to  4.o% year over year. CVS remains committed to its goal to create a national primary care platform that provides integrated high quality care that is convenient, accessible and affordable. With its Pharmacy Services Segment (PBM) and in-store clinics to help with basic healthcare needs, CVS’ management remains confident that the company can gain market share across its offerings. Our price estimate of $70 for CVS Caremark is at a discount of approximately 10% to the current market price. We will update our valuation after the Q2 2014 earnings release. View our detailed analysis for CVS Caremark The PBM Business Remains A Key Growth Driver CVS is the only retail drugstore chain that has its own Services arm (PBM), which allows it to offer scale to its retail clients. The company maintains a national network of over 67,000 retail pharmacies that serve customers covered under the programs administered by Caremark. In addition to this, it also designs customized pharmacy service plans for its clients, helping them to minimize costs. CVS has a 30% market share in the managed Medicaid market and believes it is well-positioned to gain additional share through Medicaid expansion. The company estimates the managed Medicaid market will grow by 40% through 2016. CVS claims that its health plan client footprint spans 25 states covering approximately 70% of the eligible exchange population. The company ranked first (among large publicly traded PBMs) on overall satisfaction in the annual pharmacy benefit manager customer satisfaction report released by PBMI in April 2014. The report is a broad survey which includes the opinions of nearly 400 plans sponsors who represent approximately 65 million members. During Q1 2014, CVS announced the renewal of a three-year contract to provide integrated pharmacy benefit services for the federal employee health benefit program (FEP). CVS provides mail, retail and specialty PBM services along with highly customized clinical programs to FEP’s more than 5 million federal employees, retirees and dependents. An Expanding MinuteClinic Footprint Will Benefit CVS MinuteClinics are small walk-in retail health clinics within the CVS Caremark pharmacy stores that  utilize nationally recognized protocols to diagnose and treat minor health conditions, perform health screenings, monitor chronic conditions and dispense vaccinations at much lower prices than a hospital. It is usually staffed with advanced degree nurses known as nurse practitioners who treat routine maladies. CVS, which accounts for more than one in every five prescriptions filled in the U.S., considers MinuteCinics to be an important factor responsible for its retail and enterprise growth. CVS registered a 11.4% year-over-year increase in revenue from MinuteClinics in Q1 2014. Currently, the company has over 800 MinuteClinic locations inside CVS/pharmacy stores in 28 states and the District of Columbia. The U.S. is currently facing  an acute shortage of primary care physicians . With 30 million additional Americans expected to be included under healthcare coverage (as a result of the Affordable Care Act), the demand is expected to outweigh the supply by about 45,000 doctors by the end of this decade. Expanding the MinuteClinic footprint can help CVS take advantage of this huge demand-supply gap. As per a recent report by Merchant Medicine, CVS has a considerable lead with more than double the number of retail clinics compared to its closest competitor Walgreen.  And t continues to open clinics at a much faster pace than its competitors. CVS plans to open a total of 150 new MinuteClinics by the end of the year and operate 1,500 clinics by 2017. ((Read: Why CVS Will Benefit From An Expanding MinuteClinic Footprint ) See More at Trefis | View Interactive Institutional Research (Powered by Trefis) | Get Trefis Technology
    ADP Logo
    Employer And PEO Services Driver ADP's Revenue But Client Funds' Interest Creates Drag
  • by , 2 hours ago
  • tags: ADP PAYX
  • Automatic Data Processing (NASDAQ:ADP), the largest payroll processing and human capital management solutions provider in the U.S., released its earnings results for the fourth quarter fiscal year 2014 (fiscal year ends June 30) on July 31 2014. Its fourth quarter revenue grew 8% year-on-year, to reach $3.07 billion, driven by 5% growth in new business bookings for its Employer and Professional Employer Organization (PEO) Services divisions. However, declining interest earned from client funds partially tempered growth. For the full fiscal year 2014, ADP’s revenue grew 8%, in line with the company’s guidance. The company’s net earnings for the quarter grew 27%, to reach $288.7 million, driving 30% growth in earnings per share. Full fiscal year 2014 earnings per share grew 9%. Along with the fiscal year 2014 results, ADP also shared its outlook for the fiscal year 2015, indicating high-single digit revenue growth. However, the growth includes the contribution of it’s soon to be spun off Dealer Services segment. See our complete analysis of ADP here Client retention and worksite employees growth drive Employer and PEO Services Growth in jobs during the quarter ending June 30 2014 helped drive ADP’s Employer and PEO Services divisions. According to ADP’s monthly national employment report, over 680,000 jobs were added to the private sector during the quarter, driving 2.8% growth in Employer Services’ employees per client. The increase in employees per client helped boost Employer Services’ revenue by 8% during the fourth quarter fiscal year 2014. Client retention rate, which indicates the percentage of clients continuing to avail ADP’s Employer services every year, reached an all time high at 91.4%. This bodes well for ADP since it will ensure a regular stream of revenue in the future. Revenue from PEO services grew 19% driven by 15% growth in average worksite employees during the fourth quarter. Worksite employees are employees co-employed by ADP and its clients in order to facilitate outsourced human resource services at the client’s location. For the full fiscal year, revenues from PEO services grew 15%. Interest on funds held for clients continues to drag revenues For the past few years, low interest rates in the U.S. have led to consistent declines in ADP’s interest earned on client funds. The company earned $684 million as interest on client funds in fiscal year 2008, which declined to $421 million in fiscal year 2013, even as average client fund balances increased from $15.5 billion to $19.2 billion over the same period. In the fourth quarter, ADP’s interest on funds held for clients declined 5% year-over-year to reach $95.1 million due to a 20 basis point decrease in the average interest yield to 1.7%. However, this was partially offset by a 7% increase in average funds held for clients from $20.4 billion to $21.8 billion. For the full fiscal year, interest on funds held for clients declined 11%, to reach $373.7 million, partially offset by an increase of 8% in average client funds balances from $19.2 billion to $20.7 billion. We expect the low interest rate scenario to continue in the short term and present headwinds for ADP’s interest earned on funds held for clients. However, once the Quantitative Easing program in the U.S. comes to an end in late 2014, the Fed may begin to increase rates in mid-2015. This may help drive growth in ADP’s interest earned on funds held for clients. Strong performing Dealer Services segment will soon become an independent company The growing U.S. automotive industry helped ADP add new clients to its Dealer Services segment, which drove up the segment’s revenue by 8% in the fourth quarter, partially tempered by weakness in European markets. Higher digital advertising revenue also contributed to the growth. ADP’s Dealer Services provides integrated dealer management systems, digital marketing solutions, and other business management solutions to auto, truck, motorcycle, marine, recreational vehicle (RV), and heavy equipment retailers, distributors, and manufacturers. In April 2014, ADP decided to spin off its Dealer Services segment into an independent publicly-traded company. The rationale behind the decision was that it will enable the two separate entities to focus on their core businesses. ADP will solely focus on human capital management and Dealer services on automobile dealer management and marketing solutions. ADP will rake in $700 million from the spin-off, which will be utilized to repurchase its own shares. However, we can expect to see a 15%-16% decline in ADP’s quarterly revenues once the spin-off is completed by October 2014. The deal comes with its own costs, of which $15 million was incurred in the fourth quarter. Additional spin-related expenses of approximately $40-$50 million will be recorded in discontinued operations in fiscal 2015. Outlook for 2015 Following these results, ADP has announced its outlook for fiscal year 2015. The management expects revenues to grow 7-8%, with new business bookings increasing 8-10%. The revenue growth takes into account the anticipated 7-8% growth in Dealer Services segment for the fiscal year 2015. Employer services are expected to grow by 6-7% driven by 2-3% growth in pays per control metric. Additionally, PEO services are expected to grow 13-15%. Interest on funds held for clients is expected to increase $5-$15 million based on an anticipated growth in average client funds balances of approximately 5-7%. However, this may be partially offset by decline of up to 10 basis points in the expected average interest yield to 1.7-1.8% We are in the process of updating  our $64 price estimate for ADP based on the recent results. See More at Trefis | View Interactive Institutional Research (Powered by Trefis) |  Get Trefis Technology
    DE Logo
    Agricultural & Turf Equipment Division Is A Long Term Growth Driver For Deere
  • by , 2 hours ago
  • tags: DE CAT
  • Deere’s (NYSE:DE) Agriculture & Turf Equipment division has the highest contribution towards overall revenue compared to its other two divisions – Construction & Forestry and Financial Services. In the fiscal year 2013, Deere generated 77% of its revenue from the segment. We believe that the division is a long term growth driver for Deere, given the ever increasing requirement for food for the growing population. However, we expect to see a dip in the segment’s revenue in the next two years. Given the segment’s significant contribution to the company’s revenue, it forms 80% of our stock price estimate of Deere. Deere’s Agriculture & Turf Equipment segment manufactures and distributes agriculture and turf equipment and related service parts. It offers tractors, harvesters, balers, mowers, forage, tillage equipment, sprayers and seeding equipment under its agriculture product portfolio and utility vehicles, mowers, snow and debris handling equipment, golf and turf care under its turf equipment portfolio. The segment also offers agricultural management systems technology and solutions that help farmers control costs and improve yields. We have a  price estimate of $100 for Deere, which is about 17.0% above its current market price. Food requirements to support the growing population will drive sales of agricultural equipment The primary factor that will ensure growth in revenue of Deere’s Agriculture & Turf Equipment division is the level of food production that is needed to support the growing population. The global population is expected to grow by another 2 billion by 2050, crossing 9 billion. Population growth will drive demand for food for sustenance, necessitating an increase in agricultural output. The United Nations believes that agricultural production will have to be increased by 60% in order to cater to the additional 2 billion population of the world by 2050. In order to increase agricultural production, farmers will resort to equipment such as tractors, harvesters, sprayers, tilling and seeding equipment. This will help drive growth in sales of agricultural equipment, the market for which is expected to grow at an average rate of 8% through 2018. Declining crop prices will temper agricultural equipment sales in the short term In 2013, favorable weather conditions helped drive up production levels of crops such as corn and soybean in the U.S. In 2013, corn production increased 30% and soybean by 8%. The high production levels have forced prices of crops to decline. Currently, corn and wheat are trading at its lowest point since 2010. Given the good weather conditions in Midwest U.S., harvest levels are expected to remain elevated in 2014 as well, which may lead to price declines through 2015. Adding to the problems is the shelf life of crops such as corn. In very cold and dry conditions, corn can be stored for  up to 150 months. If crops can be stored for long periods, high production levels can continue to keep prices depressed for a long time. Declining crop prices will negatively impact farmers’ income since receipts from corn and soybean alone account for around 50% of crop receipts or 28% of overall commodity receipts.  The USDA forecast a 27% decline in U.S. net farm income in 2014 due to the declining crop prices. As income declines, farmers will be forced to put off or cancel purchase or maintenance of equipment. This will have a significant negative impact on sales of agricultural equipment in the short term. However, farmers’ income is expected to increase post 2015 as the build-up of stocks is utilized to serve consumption requirements. Given the expected reduction in farmers’ income, Deere expects its fiscal year 2014 revenue from Agriculture & Turf Equipment division to decline by 7% year-on-year. Sale of business units will have a negative impact on market share and revenue Deere’s Agriculture & Turf Equipment commands 18% of the global agriculture and turf equipment market. However, moving forward we expect to see a small decline in its market share due to the sale of its John Deere Landscape and Water units. John Deere Landscape generated around $1 billion in revenue for the company whereas John Deere Water generated around $220 million. Deere has retained a 40% equity stake in John Deere Landscape unit whereas it has sold 100% ownership of John Deere Water. See More at Trefis | View Interactive Institutional Research (Powered by Trefis) |  Get Trefis Technology
    TSLA Logo
    Earnings Review: Tesla Beats Deliveries Guidance, On Track To Meet 2014 Targets
  • by , 2 hours ago
  • tags: TSLA TM DDAIF
  • Tesla Motors (NYSE:TSLA) did not disappoint investors as it delivered yet another set of solid results. During the quarter, the company’s revenues stood at $769 million, up from $620.5 million in the first quarter of fiscal 2015. The net income stood at -$62 million, or a loss of 50 cents a share. The automaker produced 8,763 Model S vehicles and delivered a total of 7,579 vehicles, outpacing its own guidance by a small margin. This means that Tesla is on course to meet the 35,000 deliveries target for the full-year of 2014, which is in line with the previous guidance. Tesla had introduced a new lease program earlier in 2013. GAAP requires Tesla to spread out the revenues of the cars sold through this program over the lease tenure (i.e. treating these revenues as deferred revenues). Therefore, a better method to gauge the automaker’s performance is to analyze the non-GAAP figures. On a non-GAAP basis, Tesla’s revenues were $858 million, up 55% compared to a year ago. The net income stood at $16 million, or 11 cents a share. We have a  price estimate of $150 for Tesla, which is about 33% below the current market price. We are in the process of revising our estimates to incorporate the latest earnings. Positive Outlook In 2014, the automaker expects to sell 35,000 Model S cars, helped by higher production rates and expansion into new markets. The second quarter’s 8,763 vehicles produced means that Tesla has upped its average weekly production rate to 730 and the full-year guidance of 35,000 corresponds to a weekly production rate of ~700. Meanwhile, the company has also been working on making its assembly line efficient enough to be able to improve the production rate to 1,000 vehicles a week. Tesla plans on producing 9,000 vehicles in the third quarter, representing an increase of 2-3% over the second quarter. The Silicon Valley based company increased its production rate by about 16% over the second quarter but will not be able to continue accelerating at the same rate because of a planned two-week shutdown of its factory to allow the transition of the manufacturing process to a new assembly line. According to the company, without the shutdown, it would have been able to forecast a production rate of 11,000 vehicles for the quarter. The company expects to deliver about 7,800 Model S vehicles in the same period. Without the retooling, the company said it would have been able to forecast 9,500 deliveries for the quarter. Since, just under 1,200 cars produced in the second quarter are only expected to be delivered by the beginning of the third quarter, this means that of the 9,000 cars produced in the next quarter, the company expects only 6,600 to be produced in time to be delivered in the consequent quarter. 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. Average Revenue Per Vehicle Corrects During the quarter, the average revenue per vehicle stood at ~$101,465, implying a drop of 8.3% compared to the first quarter. During the first quarter of 2013, the average revenue per vehicle went as high as $115,000, buoyed by sales of ZEV credits, to the tune of $60 million. Another reason why the figure was higher during the start of 2013 was because Tesla had primarily delivered its high-end versions first. As the automaker eventually delivered its lower priced options, the average revenue per vehicle witnessed a correction. The revenue during the second quarter included the $23 million generated from the sales of power trains to Daimler and Toyota. Tesla has signed a deal with Daimler for the supply of power trains to be used in the production of Mercedes-Benz B Class Electric Drive. During the quarter, it also winded down the agreement for the supply of power trains for Toyota’s RAV4 Electric Vehicle, as Toyota gets set to transition from electric vehicles to hydrogen-powered fuel-cell vehicles. During the quarter, Tesla also started leasing out cars to business ventures. Tesla’s revenue recognition for this leasing program differs from that of other car companies: it will recognize revenue generated from leasing only over the term of the lease unlike other companies which record the full value of the car as revenue because they sell their cars to independent dealers, who in turn lease these cars out to commercial ventures. Tesla sells its cars directly to end customers and hence bears the risk of defaults on these loans directly. See full analysis for Tesla Motors Impressive Margin Expansion The automaker’s gross margins increased by 140 basis points to 26.9% compared to 25.5% on account of an increase in the percentage of vehicles sold via Tesla’s lease program over the quarter. On a non-GAAP basis, gross margins improved to 26.8%. Tesla’s gross margins have improved from 17.1% in the first quarter of 2013 to 26.9% in the latest quarter, helped by higher volumes and operational efficiencies. However, the company thinks there is room to further improve margins. Tesla is targeting gross margins of 28% by Q4 2014. 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. However, Tesla also cautioned that administrative and capital expenses will rise significantly as the company scales up its customer support to keep pace with the growing global demand for its products. The company stated that it plans to accelerate the rate at which it opens stores and service centers. The plan is to increase the number of company operated stores to about 300. Additionally, the company plans to install more than 200 superchargers globally by then end of this year. Superchargers are charging stations installed by Tesla for its customers to charge their car batteries for free. See More at Trefis |  View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    VALE Logo
    Lower Iron Ore Prices Weigh on Vale's Q2 Results
  • by , 2 hours ago
  • tags: VALE
  • Vale (NYSE:VALE), the world’s largest iron ore mining company, announced its second quarter results and conducted a conference call with analysts on July 31.  As expected, lower iron ore prices in the second quarter as compared to the corresponding period last year negatively impacted the company’s results, with higher volumes offsetting some of the negative impact of lower prices. Net operating revenues for the quarter stood at  $9.9 billion, around 7% lower than the figure for the corresponding period last year, which stood at $10.66 billion. Vale reports an underlying earnings figure, which excludes the effects of items such as impairments, foreign exchange and currency swap gains on net income, and is an indicator of the company’s operating performance. Underlying earnings fell nearly 15%, from $2.31 billion in Q2 2013 to $1.96 billion in Q2 2014. See our complete analysis for Vale Iron Ore Prices The average realized price for Vale’s iron ore fines stood at $84.60 per ton in Q2 2014, nearly 18% lower than the average price for Q2 2013, which stood at $102.66 per ton. The sale of iron ore and iron ore pellets collectively accounted for around 73% of Vale’s net operating revenues in 2013. The decline in iron ore prices was primarily responsible for Vale’s poor quarterly results. Iron ore is an important raw material for the steel industry. Thus, demand for iron ore by the steel industry plays a major role in determining its prices. International iron ore prices are largely determined by Chinese demand since China is the largest consumer of iron ore in the world. It accounts for more than 60% of the seaborne iron ore trade. Flagging demand for iron ore from China in the wake of an economic slowdown earlier on in the year, put downward pressure on iron ore prices. According to data from China’s National Bureau of Statistics, growth in investment, factory output and retail sales slowed to multi-year lows in the first two months of the year. A Chinese government crackdown on polluting steel plants has forced many of them to shut down. In addition, tightening of credit by Chinese banks to steel mills that are not performing well will negatively impact these mills’ prospects. Furthermore, the Chinese leadership has proposed structural reforms of the economy, shifting the emphasis from investment and export driven growth to services and consumption led growth. Such a transformation of the Chinese economy may negatively impact Chinese demand for steel in the long term. Chinese steel demand growth is expected to slow to 3% and 2.7% in 2014 and 2015 respectively, from 6.1% in 2013. Weak demand for steel has indirectly resulted in weak demand for iron ore. On the supply side, expansion in production by iron ore majors such as Rio Tinto and BHP Billiton has created an oversupply situation. A combination of weak demand and oversupply is likely to result in lower iron ore prices in the near term. Production Volumes With iron ore prices expected to remain subdued in the near term, the company has adopted a high production volumes strategy. Vale expects to benefit from economies of scale, capitalizing on its low-cost iron ore deposits. In keeping with this strategy, the company’s iron ore production in Q2 2014 rose to 79.4 million tons, which is Vale’s highest ever second quarter production figure. Iron ore production in the second quarter was 12.6% higher than in the corresponding period last year. The increase in production was due to the ramp-ups of Plant 2 in Carajás and the Conceição Itabiritos plant. In keeping with its high volumes strategy, various projects are expected to result in a growth in Vale’s iron ore production from 321 millions tons in 2014 to 453 million tons in 2018. Nickel production stood at 61,700 tons in Q2 2014, 5.2% lower than the corresponding period a year ago. This fall in production was mainly due to suspension of operations at the Sudbury mining complex, as a result of an accident and scheduled maintenance activity. Copper production stood at 81,000 tons, down 11.3% from the corresponding period a year ago, primarily due to scheduled maintenance activity at the Sudbury mining complex. Coal production stood at 2.2 million tons in Q2 2014, up 23.8% sequentially, due to higher output from the Carborough Downs and Moatize operations. Costs In view of the weak iron ore pricing environment, Vale has adopted a strategy of cost reduction, disciplined capital allocation and divestment of non-core assets, in order to remain competitive. In the first half of the year, the company realized $249 million in savings in costs and expenses as compared to the corresponding period last year. The main components of this decline in costs and expenses were selling, general and administrative expenses, which decreased by over 25%, and pre-operating and stoppage expenses, which decreased by close to 4%. As a result of the company’s emphasis on cost reduction, its iron ore cash cost per ton fell from $23.9 in Q2 2013 to $22.1 in Q2 2014. Vale’s capital expenditure for the first half of the year stood at $5.1 billion, $2.1 billion lower than the $7.2 billion in capital expenditure incurred in the corresponding period last year. This reflects the lower capital expenditure budgeted for 2014 as part of its disciplined approach to capital allocation. The company sold-off its stake in FIP Vale Florestar in the second quarter, a fund for investment in reforestation, for around $92 million. This is a part of Vale’s efforts to sell off its non-core assets in order to allocate capital in projects with better returns. With the subdued iron ore pricing environment set to continue in the near term, cost reduction, disciplined capital allocation and divestment of non-core assets may continue to be the theme for Vale for some time to come. See More at Trefis | View Interactive Institutional Research (Powered by Trefis)| Get Trefis Technology        
    ABX Logo
    Lower Gold Prices And Shipments Weigh On Barrick's Q2 Results
  • by , 3 hours ago
  • tags: ABX NEM FCX SLW
  • Barrick Gold Corporation (NYSE:ABX), the world’s largest gold producer, released its second quarter results on August 30 and conducted a conference call with analysts on August 31. Lower realized gold prices as well as lower gold and copper shipments negatively impacted the company’s Q2 results. Revenues stood at $2.43 billion in the second quarter, lower than the $3.20 billion in revenues reported in the corresponding period last year. Adjusted net earnings, which exclude the impact of non-recurring items such as impairments, fell from $663 million in Q2 2013 to $159 million in Q2 2014. The company reported a net loss of $269 million in Q2 2014, as compared to a net loss of $8.55 billion in the corresponding period last year. However, the company’s results were impacted by impairment charges totaling $514 million and $9.32 billion in Q2 2014 and Q2 2013 respectively.The impairment in Q2 2014 related to the Jabal Sayid copper project, which included $316 million attributable to impairment of goodwill. The company reported significantly lower all-in sustaining costs (AISC) per ounce of gold, signifying tangible success in its cost reduction efforts through the sale of non-core assets and a reduction in operating costs. The AISC metric includes operating costs, sustaining capital expenditures, selling, general and administrative costs, mine site exploration and evaluation costs, mine development expenditures and environmental rehabilitation costs. It provides a comprehensive view of costs related to the company’s current mining operations. The company maintained its production guidance for both copper and gold. However, it lowered its AISC guidance for gold. It reaffirmed its commitment to cost reduction and portfolio optimization, and lowered its guidance for capital expenditure. See our complete analysis for Barrick Gold Gold Prices Average realized gold price for the second quarter stood at $1,289 per ounce, down from $1,411 per ounce in the corresponding period last year. Gold prices have fallen over the course of the last year, reacting to cues regarding tapering of the Federal Reserve’s Quantitative Easing (QE) program. Going forward, the Fed’s outlook on the U.S. economy is important as far as gold prices are concerned. With the economy strengthening, the Fed is expected to raise interest rates some time in 2015. However, the timing of an interest rate hike is contingent upon the pace of economic and jobs growth in the U.S. An interest rate hike is likely to lead to a decline in the price of gold, as investors shift towards higher yielding assets. Operational Performance As expected, Barrick’s second quarter gold production of 1.48 million ounces was lower than the figure of 1.81 million ounces for the corresponding period a year ago. This was primarily because of the company’s portfolio optimization efforts, which has resulted in a reduction in its portfolio of mines from 27 to 19, over the course of the last year or so.Barrick’s AISC figure stood at $865 per ounce in Q2 2014, lower than the figure of $910 per ounce reported in Q2 2013. The divestment of high-cost assets as well as cost savings and reduced capital expenditure contributed to the decrease in AISC. The company is targeting $500 million in cost savings for 2014. Cortez, Goldstrike, Veladero, Lagunas Norte and Pueblo Viejo are Barrick’s five core mines. These mines are the company’s low-cost assets. They collectively produced 0.896 million ounces, approximately 60% of the company’s Q2 production. These mines are expected to report an AISC of $750-800 per ounce in 2014, which is lower than the expected AISC of $900-940 per ounce for the company’s overall gold mining operations. Production at the Cortez mine fell from 417,000 ounces in Q2 2013 to 217,000 ounces in Q2 2014, due to the mining of lower than expected grades. Production at the Lagunas Norte mine fell from 131,000 ounces in Q2 2013 to 115,000 ounces in Q2 2014, due to a construction delay on the Phase 5 leach area. The other core mines reported a year-over-year increase in production. Production at Goldstrike rose form 187,000 ounces to 214,000 ounces due to mining of higher grade ores and higher recoveries. At Pueblo Viejo, production increased form 122,000 ounces  to 161,000 ounces as the autoclaves at the mining complex achieved targeted and sustainable run rates. Production at the Veladero mine rose form 140,000 ounces to 189,000 ounces. Barrick’s copper production stood at 67 million pounds in Q2 2013, 50% lower than the production figure of 134 million pounds for Q2 2014. This was primarily due to the partial collapse of the terminal end of the main conveyor at its Lumwana copper mining operations, early on in the second quarter. Outlook The company maintained its previous guidance for gold production of 6-6.5 million ounces for the full year. However, as a result of the company’s efforts at cost management, improvements in operational efficiency and disciplined capital allocation, it has lowered its AISC guidance for 2014 from $920-980 per ounce to $900-940 per ounce. The company also lowered its capital expenditure guidance from $2.4-2.7 billion to $2.2-2.5 billion for 2014. With normal operations resuming at the Lumwana copper mine earlier on in the third quarter, the company maintained its previous production guidance of 410-440 million pounds of copper in 2014. See More at Trefis |  View Interactive Institutional Research (Powered by Trefis)|  Get Trefis Technology
    SPWR Logo
    SunPower Q2 Earnings: Key Takeaways
  • by , 4 hours ago
  • tags: SPWRA SPWR FSLR
  • SunPower (NASDAQ:SPWR) published its Q2 2014 earnings on July 31, posting a set of numbers that were lower on a year-over-year basis. Although the company benefited from reasonably strong sales to Japan and stable ASPs across markets, this was more than outweighed by weaker sales of solar power systems (which likely have better margins),  higher operating expenses and possibly the addition of assets to the company’s Holdco strategy (explained below). Quarterly revenues fell by around 12% year-over-year to about $508 million while adjusted net income fell by around 30% to about $44 million. Although the results beat market expectations, the stock fell by nearly 4% in Thursday’s trading as the company guided for Q3 revenues and adjusted profits that were below consensus estimates. Here is a look at some of the trends that influenced the company’s earnings for the quarter and what to expect going ahead.
    Update on U.S. Petrochemicals Renaissance
  • by , 5 hours ago
  • tags: SSL PSX CVX XOM DOW
  • Submitted by Wall St. Daily as part of our contributors program Update on U.S. Petrochemicals Renaissance In early April, I wrote that cheap shale gas in the United States was leading to a renaissance in the U.S. petrochemicals industry. A sector that had been on its knees a few short years ago had completely turned around, from bust to boom. Since then, conditions have gotten even better. Demand from Asia and Latin America for petrochemical products (i.e., plastics, etc.) continues to march ever higher, thanks to their emerging middle class. It’s to the point now that even Saudi Arabia has become interested in investing in U.S. petrochemicals. Saudi Basic Industries Corporation, better known as SABIC, is the world’s largest petrochemicals company when measured by market capitalization. Last autumn, the company said, “Our strategy is to expand production by utilizing the most feasible feedstock we have at the moment, and that is U.S. gas.” Quite a statement coming from the “king” of Middle Eastern energy and petrochemicals! The Saudis were the first to use ethane from natural gas to create petrochemicals. That put them ahead of the pack in petrochemicals exports, and they have stayed there since. Petrochemicals Investment Boom Based on their statement alone, it’s not surprising that investment into the sector is on the upswing in a big way. In total, the U.S. petrochemicals industry has announced nearly $72 billion in new chemical-related investments. Although not all of these plans will be implemented, the industry has come a long way, considering that no ethane cracker plant was built in the United States in more than a decade. (An ethane cracker plant takes natural gas and creates ethylene, a compound used in the manufacture of all sorts of plastics.) The list of major companies with plans to build a new ethane cracker plant in the United States is like a “Who’s Who” list of the industry. The list includes: Dow Chemical ( DOW ), Sasol ( SSL ), Royal Dutch Shell PLC ( RDS-A ), and Chevron Phillips Chemical. The joint venture of Chevron ( CVX ) and Phillips 66 ( PSX ) broke ground on two polyethylene units capable of producing 500,000 tons a year of plastic resin. ExxonMobil Chemical Investment Perhaps the most impressive of investments being made is the one by the chemicals subsidiary of ExxonMobil ( XOM ), ExxonMobil Chemicals. Exxon announced in June that it had begun construction of an ethane cracker and two polyethylene plants in Baytown, Texas. The company plans to build a massive cracker, which will have the capacity to provide 1.5 million tons of ethylene annually as feedstock for its two new polyethylene processing units. Each unit will be capable of producing 650,000 tons a year of product. Mind you, Exxon produces a premium polyethylene that can make lighter and stronger plastics than its competitors. Exxon expects the entire project to be completed in late 2017, ahead of some of its competitors’ plans. The construction was delayed by about a year, though . . . thanks to Exxon’s long navigation through the Environmental Protection Agency’s regulatory morass before finally winning approval. With Exxon having an inherent advantage – it’s the largest producer of natural gas in the United States – the multi-billion-dollar project is sure to be a big plus for the company as it battles its competitors in the petrochemicals space. And “the chase” continues, Tim Marverick The post Update on U.S. Petrochemicals Renaissance appeared first on Wall Street Daily .
    Why It’s Time to Cull Your Stocks
  • by , 5 hours ago
  • tags: SPY JCI DD
  • Submitted by Profit Confidential as part of our   contributors program Why It’s Time to Cull Your Stocks Good numbers are one thing, but stocks did go up in advance of what’s turning out to be a fairly decent earnings season. It’s not unreasonable at all to expect the market to take a solid break, perhaps for the next two to three months. Of course, predicting corrections and/or consolidations among stocks is a difficult endeavor in an era of extreme monetary stimulus. The Federal Reserve is slowly chipping it away, but it remains very committed to helping capital markets, especially as the economic data continues to be pretty soft. Stocks are still looking stretched and this market is tired. A 10% to 20% correction would be a healthy development for the longer-run trend. Stocks need a catalyst for this to happen. It could come out of nowhere, and I’m reluctant to be a buyer with so many positions trading at record-highs. Johnson Controls, Inc. (JCI), a large U.S. auto parts manufacturer, had a modestly positive third fiscal quarter with sales growing three percent to $10.8 billion due to more sales in China. The company had some one-time restructuring charges during the quarter. Earnings per share from continuing operations (excluding restructuring and one-time items) grew a hefty 17% to $0.84. Management confirmed its full-year guidance, which pleased the Street, but the position is breaking down a bit. E. I. du Pont de Nemours and Company’s (DD) numbers were uninspiring and the company tried to keep investors interested with a four-percent increase to its quarterly dividend. The position’s starting to roll over and with agriculture being such an important part of the company’s business, changing preferences among farmers hurt its most recent quarter. Given current information, a major correction would be a buying opportunity. It would take a lot of froth out of richly priced stocks, which include a lot of blue chips now. Generally speaking, I would not be buying this market. I would be waiting for a more opportune time to consider buying. It might even be time to take some money from winning positions off the table; investment risk goes up commensurately with rising share prices. Corporate balance sheets remain in excellent shape, and so are the prospects for share repurchases and increasing dividends. (See “ Why This Company’s a Solid Pick for Any Long-Term Portfolio .”) The fundamental backdrop for corporate earnings growth remains intact. The one key indicator to watch is the Dow Jones Transportation Average, which led stocks higher since the beginning of 2013. Practically, the broader market isn’t likely to break down without participation from transportation stocks. If this index breaks below 8,000, then the likelihood of a correction significantly increases. This market has come so far in a short period of time and the Federal Reserve has been it’s strongest supporter. But while second-quarter earnings are fairly good, everything looks tired now and it won’t take much for institutional investors to hit the “sell” button. All stocks are risky securities and that even applies to dividend-paying blue chips. It’s time to re-evaluate portfolios and all positions for exposure to risk. An increased weighting towards cash wouldn’t be unreasonable.   The post Why It’s Time to Cull Your Stocks appeared first on Stock Market Advice | Investment Newsletters – Profit Confidential .
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