Trefis Top 5 – May 3 Insights (UAL, JNY, S, EL, EFTC)

Today we initiated coverage on United Continental with a $28 price estimate, and we take a look at the benefits of the merger between the two airline giants. We assess Jones Apparel’s better apparel wholesale unit that makes up 30% of its stock value, and we recap Sprint’s net subscriber additions that are helping lift shares post earnings. Estee Lauder earnings are around the corner (May 5th), and we focus on profit margins and growth in its skin care segment. Finally, we look at E-trade’s earnings beat that showed solid growth in its financial performance in terms of net income growth, brokerage income and interest earned on customers’ balances.

United Continental Coverage Launch – $28 Stock Price Estimate

United Continental (NYSE:UAL) was formed after the merger of United Air Lines and Continental Airlines. The merger agreement was reached in May 2010, but it wasn’t until October 2010 that the two airlines started reporting the results together. United and Continental transport people and cargo through their mainline operations, which utilize full-sized aircraft, and regional operations which utilize smaller aircraft that are contracted by United Express, Continental Express and Continental Connection. With key global air rights in the U.S, Europe, Middle East, Africa, Latin American and the Pacific, United Continental (UAL) has the world’s most comprehensive global route network.  UAL competes with Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), American Airlines (NYSE:AMR), and U.S. Airways (NYSE:LCC).

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Better Apparel Wholesale ~30% of Jones Apparel Group’s Stock

Jones Apparel Group (NYSE:JNY) is a multi-brand company that designs and markets women’s and children’s apparel, footwear, accessories, fragrances and jewelry. The company sells its products through third-party specialty retail stores and department stores, in addition to the company’s own retail stores, and it competes directly with comparable holding companies such as Liz Claiborne (NYSE:LIZ) and Phillips-Van Heusen (NYSE:PVH) as well as department store mainstays such as Polo Ralph Lauren (NYSE:RL) and store-owned private labels.

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Sprint Guides to Positive Net Subscriber Additions in 2011

Sprint (NYSE:S) recently released its Q1 earnings and based on trends of improving average revenue per user (APRU) and subscriber additions, we have updated our price estimate for Sprint’s stock to $5.84. The company reported that it expects positive net additions for 2011, which we look at below. Sprint primarily competes with AT&T (NYSE:T) and Verizon (NYSE:VZ) in wireless and fixed line businesses. Our price estimate for Sprint stands at $5.84 and implies a premium of roughly 13% to the market price.

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Estee Lauder Earnings Preview, Looking at Margins & Skin Care

Estee Lauder (NYSE:EL) plans to announce Q3 2011 earnings on May 5th. We watch to see if Estee Lauder will surprise again as it did in its Q2 announcement, which led to a swift 14% rally in its shares. Estee Lauder, the maker of premium beauty care products, competes with companies such as Revlon (NYSE:REV), Avon (NYSE:AVP) and L’Oreal (PINK:LRLCY). We value Estee Lauder with a $71.60 Trefis price estimate of its stock, at close to 24% discount to its current market price.

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E-Trade Results Show Broadbased Improvement

E-Trade (NASDAQ:ETFC) recently released its results for the first quarter of 2011. ^[1] The company ended the quarter on a high note with improvements seen across its divisions with growth in their brokerage income, increase in interest as well as non-interest revenue, reduction in provisions for loan losses and tighter expense management. E-Trade competes with firms like Charles Schwab Corporation (NYSE:SCHW), Ameritrade (NYSE:AMTD), Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC).

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1. E*TRADE Financial Corporation Announces First Quarter 2011 Results, E-Trade Investor News, April 20 2011 [↩]