Lexmark, SanDisk and Yahoo Report Earnings; we think there is upside to Lexmark and SanDisk

Lexmark, SanDisk and Yahoo reported earnings recently and we’ve updated our price estimates for these companies as a result.  Below is a summary of the most important changes for each company:

Lexmark: Trefis price is $32.63, up slightly from $32.38; market price jumps from $22 to $28

Lexmark reported figures in line with our expectations.  The company has been focused on cost reductions and made cuts during the past quarter.  Lexmark indicated that cost reductions were expected to continue and we’ve reduced our forecast for Corporate Costs as a % of Sales to reflect this positive development.  This forecast impacts both of Lexmark’s main business lines: Laser Printers & Cartridges and Inkjet Printers & Cartridges.

We made two other updates Lexmark.  You can see a summary of all three updates here (scroll to the comments section)

SanDisk: Trefis price is $27.92, up from $20.46; market price is $23.50, up from $21.50

1. Increased Price per Gigabyte (Positive Impact)

SanDisk reported declines in the prices of flash memory, SanDisk’s primary offering, that were less than what we had expected.  Price per Gigabyte impacts many of SanDisk’s business lines with Mobile Flash Cards and Digital Cameras being the most significant.  Price per Gigabyte is a highly sensitive forecast impacting SanDisk’s stock price. This forecast is also difficult to forecast as flash prices can fluctuate a lot in the short term depending upon overall industry supply-demand.

2. Increased Flash Gross Margin (Positive Impact)

We believe that the company’s margins will be better than our original forecast as a result of a mix shift towards X3 and X4 type flash memory which has slightly better margins.  The change impacts SanDisk’s Mobile Phone Flash, Digital Camera Flash, USB Flash Drive and Gaming Flash businesses.

3. Decreased Sales and Marketing as % of Revenue (Positive Impact)

4. Decreased R&D as % of Revenue (Positive Impact)

The company reported better cost control and as a result we’ve revised our estimates of Sales & Marketing and R&D costs.

We updated three other forecasts for SanDisk.  You can see a summary of all seven updates here (scroll to the comments section)

Yahoo: Trefis price is $17.24, up from $17.04; market price up to nearly $18 from $17

Yahoo reported core search advertising and display advertising businesses performed in line with our expecations and we have not updated.  Yahoo said that strength in number of searches was more than offset by declines in Revenue per Search (RPS) in the search advertising business.  Our 2009 estimate for RPS assumes a 16% decline which is in line with figures reported by Yahoo over the past few quarters.

We’ve updated the Cash minus Debt balance for Yahoo.  You can see a detailed summary of our view on Yahoo here (scroll down to the comments section)