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PG Logo
What To Watch For In Procter & Gamble's Fiscal Q3 Results
  • By , 4/19/19
  • tags: PG UL KMB CL
  • Procter & Gamble (NYSE: PG) is scheduled to announce its fiscal third quarter results on Tuesday, April 23. In the first half of fiscal 2019, the company’s net sales came in flat at $34.1 billion. Moreover, P&G’s organic sales were up 4% year-over-year (y-o-y) on 3% volume growth, with flat pricing and 1% growth in mix across segments, excluding the impacts of foreign exchange, acquisitions, and divestitures. In terms of the bottom line, P&G’s core EPS (adjusted) also grew 4% y-o-y to $2.36, primarily driven by a reduction in shares outstanding. We have a  $93 price estimate for P&G’s stock,  which is almost 10% below the current market price. We have created an interactive dashboard on What To Expect From P&G’s Q3?   which outlines our forecasts for the company’s Q3 results. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation and see  more Trefis Consumer Staple data here. Q3 Expectations In Q3, we expect Procter & Gamble to report flat revenues on the back of declines across segments – Grooming and Baby, Feminine, and Family Care. This is because we continue to expect the rising competition from local players to negatively impact the revenue in the Baby, Feminine, and Family Care segments in Q3. We also expect the Grooming segment to continue its declining revenue trend, due to secular pressure from the likes of Dollar Shave Club. However, the rising popularity of its direct-to-customer model  Gillette-On-Demand could offset some of this pressure. In Q3, we expect the company’s SG&A costs to be around $4.6 billion, slightly up year-over-year (y-o-y). This is based on our assumption of growth in productivity savings from the combination of reduced overhead, agency fees, and ad production costs. We also expect the company’s adjusted gross profit margin to decline slightly in Q3, on the back of rising delivery costs. Based on these adjustments, we expect P&G’s adjusted operating income to decline almost 5% y-o-y to about $3.3 billion for Q3 2019. Overall, these adjustments resulted in a 6% y-o-y increase in our adjusted net income forecast for the company, translating into adjusted EPS of $1.08. Fiscal 2019 Outlook  P&G has issued strong guidance for the full year fiscal 2019. The company has updated its full-year fiscal organic sales growth outlook to 2% to 4%, compared to a previous 2% to 3% range, driven by the strong momentum of the fiscal first half. It also expects total revenues to be in the range of down 1% to up 1%, compared to previous guidance of down 2% to in-line with fiscal 2018 results in the same period. In terms of the bottom line, the company reaffirms its expectation of core earnings per share growth to be in the 3% to 8% range. For the full fiscal year, commodity costs are expected to be a $400 million headwind and trucking costs will likely be up 25% or more versus last year’s levels. In addition, pricing could remain positive in the back half, but this could increase volume uncertainty and volatility. Further, macro uncertainty stemming from issues like Brexit and a crisis of consumer confidence in France could also impact both the top and bottom line for the full year. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    CRM Logo
    Which Segment Will Push Salesforce.com's Revenue Growth in 2019?
  • By , 4/19/19
  • tags: CRM SAP DATA
  • Trefis estimates the Cloud-Based CRM Software segment will push  Salesforce.com ‘s (NYSE: CRM) total revenue to nearly $15.9 billion in 2019. The company posted revenue of $13.3 billion and earnings of $2.75 in 2018. We have created an interactive dashboard wherein you can edit the drivers to arrive at your own conclusions,  How has Salesforce.com’s revenue performed over the past few years and what is its outlook for 2019?, In addition, here is more Information Technology Data .   Total Revenue: The company has seen a constant growth in Total Revenue over the past years. The revenue has increased from $6.7 billion in 2017 to $13.3 billion in 2018. Trefis estimates the strong growth will continue and the company will post Total revenue of around $15.9 billion in 2019.   Cloud-Based CRM Software Revenue: Cloud-Based CRM Software   Revenue has been the highest contributor to Total Revenue over the years. The revenue has increased from $5.2 billion in 2016 to $9.6 billion in 2018. Trefis estimates the segment to have continued its growth as the company continues to be a synonym for CRM Software across the globe, as well as the market leader, and post revenue of approximately $11.2 billion in 2019.   Cloud Software Revenue: Cloud Software Revenue has registered the highest growth in terms of percentage over the past few years.. The revenue has increased from $1 billion in 2015 to $2.9 billion in 2018. Trefis estimates the segment to have strong growth as the cloud software market continues its rapid growth globally and post revenue of approximately $3.7 billion in 2019.   Consulting & Services Revenue: Consulting & Services Revenue has seen high growth over the years. The revenue has increased from $0.5 billion in 2015 to $0.9 billion in 2018. Trefis estimates the segment to maintain its strong growth in the near term and post revenue of approximately $1.1 billion in 2019.     What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    HD Logo
    How Has Home Depot's Revenue Performed And What Is Its Outlook For 2021?
  • By , 4/19/19
  • tags: HD LOW
  • Trefis estimates that a continuous increase in the revenue per square foot covered metric will take  Home Depot ‘s (NYSE: HD) revenue to more than $122.1 billion by 2021. The company posted revenue of $108.2 billion and earnings of $9.78 for 2018. We have created an interactive dashboard wherein you can edit the drivers to arrive at your own conclusions,  How has Home Depot’s revenue performed over the past few years and what is its outlook for 2021? .  In addition, here is more  Consumer Discretionary data . Total Revenue: Home Depot has had a good growth in revenue over the years where it has increased from $94.6 billion in 2016 to $108.2 billion in 2018. We expect the growth to continue and revenue to be more than $122.1 billion on the back of the revenue per square foot metric in 2021.   Revenue per Square Foot: This the fastest growing metric for the company and the one which is propelling the revenue forward. In the recent  past it has increased from $399 in 2016 to $456.6 in 2018. Trefis expects the growth to remain steady and the metric to be more than $513 in 2018 due to better market conditions, greater Pro sales, and growth in digital sales. The focus on appliances as well as innovation are other factors driving this growth.   Square Footage per Store and Number of Stores: These metrics have remained flat in recent years as the company consolidates its operations and focuses on the supply chain infrastructure of the existing stores and revenue growth from them. Trefis estimates the metrics will continue to be flat in the near term.     What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    TXT Logo
    Textron's Revenue Declines in Q1, But Witnesses Improved Bottom Line Due To Aviation
  • By , 4/18/19
  • tags: TXT UTX LMT
  •  Textron (NYSE:TXT) Textron reported earnings on the 17 th of April. Textron beat earnings mainly on the back of the aviation segment, which grew to $1.1 billion, with higher volumes seen from both the jet and turboprop segments.  The aviation unit delivered 44 jets, this up from 36 jets during the same period last year. The Bell helicopter unit saw a decline with 30 deliveries, this down from 44 units last year. Textron’s industrial and systems segment continued to see weakness during the quarter on the back of weak demand. The industrial segment in general has been struggling due to a lack of demand. We currently have a price estimate of $60 per share  for the company, which is higher than the market price. View our interactive dashboard for Textron Q4 2018   and modify the key drivers to visualize the impact on Textron’s price. Key Takeaways for Textron’s Q1 Earnings: -Earnings per share came in at $0.76, primarily as a result of a stronger aviation segment. – Revenue declined though, 2% yoy, this was driven by lower revenue in the Systems, Bell, and Industrial units for Textron. This decline was offset by a 12% jump in the core aviation segment. -Operating margin came in 9.5%, while operating cash flow for the quarter came in at $196 mil. -Long term debt remained flat at $2.8 billion. -We expect that EPS  will come in around $3.60-3.70 for the year. Going forward, we expect the Aviation segment to continue to see stronger demand, while the rest of the sectors will continue to struggle. With EPS coming in higher than the previous year, we expect that it will lead to improved performance for the stock; which then will bring the price closer to our estimate.   What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Research Like our charts? Explore  example interactive dashboards  and create your own.    
    KO Logo
    What To Expect From Coca-Cola’s Q1 2019 Results?
  • By , 4/18/19
  • tags: KO PEP
  • Coca-Cola Company (NYSE: KO) is set to announce its financial results for Q1 2019 on April 23, 2019, followed by a conference call with analysts. Total revenues for Coca-Cola have largely trended lower over recent quarters, falling from $8.9 billion in Q2 2018 to $7.1 billion in Q4 2018. Lower revenue was primarily driven by the loss of revenue from the refranchising of company-owned bottling operations and the impact of currency headwinds. However, the trend is expected to reverse, as revenues are projected to increase by 3%-4% (y-o-y) in Q1 2019 with most of the refranchising already completed, coupled with benefits from a number of acquisitions throughout 2018. Market expectation is for the company to report adjusted earnings of $0.46 per share in Q1 2019, marginally lower than $0.47 per share in Q1 2018. Lower earnings are likely to be a reflection of rising transportation costs and currency swings. We have summarized our key expectations from the announcement in our interactive dashboard – How is Coca-Cola expected to fare in Q1 2019 and what is the outlook for the full year? In addition, here is more  Consumer Staples data . A} Revenue Trend EMEA Revenue from the EMEA region has been under pressure due to a decline in price/mix primarily due to negative geographic mix from the timing of shipments across the Middle East and North Africa. Additionally, continued double-digit growth in Coca-Cola Zero Sugar and strong performance in Fuze Tea was offset by the impact of a challenging macroeconomic environment in certain key African and Middle Eastern markets. Latin America In spite of volume declining by double-digits in Argentina, segment revenues have been more or less stable over the last couple of quarters largely driven by strong performance in Mexico through revenue growth management initiatives, as well as positive price/mix across all business units. The segment is expected to see a pick-up in 2019 with KO’s increasing market share in non-alcoholic ready-to-drink (NARTD) beverages. North America Revenue from North America has declined in the last quarter due to lower volume of sparkling soft drinks, juice, dairy, and plant-based beverages. Tea volume declined low single-digits, impacted by deprioritizing low-margin tea products. Additionally, refranchising of certain operations in the region has led to lower revenues. However, revenue is expected to increase going forward as most of the refranchising is already completed, coupled with high growth in Coca-Cola Zero Sugar and strong performance in Sprite. Asia-Pacific Revenue in APAC faced pressure in Q4 2018 with lower volumes in the Philippines and Australia and  the impact of the deprioritization of low-margin commodity water. However, the segment is once again expected to register growth, led by strong sales across India and Southeast Asia, benefiting from strong marketing and innovation within Trademark Coca-Cola and Sprite, coupled with rising market share in NARTD beverages, sparkling soft drinks, and tea and coffee. Bottling Investments Revenue from the bottling business has been decreasing due to refranchising of the company’s bottling operations. However, with most of this program already behind us, the impact of refranchising is expected to be negligible in 2019. B} Expenses Trend Coca-Cola’s total expenses have been declining over the quarters due to benefits from refranchising of the high-cost bottling business. Additionally, lower tax expense with the implementation of the TCJ Act has led to significant reduction in total expenses on a y-o-y basis. We expect the extension of the company’s productivity plan to drive margin growth going forward. What is the outlook for the full year? Revenue is expected to increase by 4.6% to $33.3 billion in 2019, driven by growth across all major segments, offset by a lower revenue from the bottling business. However, with most of the refranchising already completed, the revenue loss from the segment is not expected to be as significant as in 2018. Revenue growth would also be driven by inorganic growth strategies of Coca-Cola, with the company announcing several key acquisitions in 2018, including Costa Limited and a strategic partnership with BODYARMOR. Additionally, it also announced the acquisition of full ownership in Chi Ltd, which is a fast-growing leader in expanding beverage categories, including juices, value-added dairy, and iced tea in Nigeria. We expect net income margin to rise only marginally to about 21% in 2019, from 20.2% in 2018. Margin growth would be driven by the ongoing refranchising of low-margin bottling operations and Coca-Cola’s new productivity plan which has been extended to 2019 to achieve incremental savings of about $800 million. However, rising transportation costs and currency swings are expected to be potential drags on the company’s margins, thus limiting the upside on earnings. Trefis has a price estimate of $50 per share for Coca-Cola’s stock. We believe that an expanding footprint in the emerging markets, new product offerings, and strong organic sales growth would support growth in KO’s stock price.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    AA Logo
    Alcoa Misses Consensus In Q1 2019; Reaffirms Full Year Outlook
  • By , 4/18/19
  • tags: AA CLF VALE
  • Alcoa (NYSE: AA) released its Q1 2019 financial results on April 17, 2019, followed by a conference call with analysts. The company missed consensus estimates for revenue as well as earnings. Alcoa reported revenue of $2.72 billion in Q1 2019, which marked a decline of close to 12% on a y-o-y basis. Lower revenue was mainly a reflection of a decrease in aluminum and alumina shipments, along with a drop in global aluminum prices. Revenues declined by 18.7% sequentially, primarily due to a sharp drop in alumina prices due to higher global supply in Q1, along with lower aluminum volume sold due to operational disruptions. The company reported adjusted net loss of $0.23 per share in Q1 2019, compared to adjusted net profit of $1.01 per share in Q1 2018 and $0.70 in Q4 2018. Net loss for the quarter was mainly driven by high restructuring and other related costs of $120 million, associated with two aluminum plants in Spain with combined operating capacity of 124,000 metric tons per year, that have been maintained in restart condition. We have summarized the key announcements in our interactive dashboard – How did Alcoa fare in Q1 2019 and what is the outlook for the full year? In addition, here is more  Materials data . Key Takeaways Alumina Revenue Revenue from third-party alumina sales decreased by 2% (y-o-y) to $897 million, driven by a drop in shipments. However, on a sequential basis, third-party alumina sales declined by 20.8% due to a much lower price realization compared to the previous quarter. Alumina shipments decreased from 2.38 million tons in Q1 2018 to 2.33 million tons in Q1 2019. Lower volume was driven by lower demand for alumina with many aluminum companies cutting down on capacity, mainly in China (alumina is a raw material for aluminum companies). After a year of being in deficit, which led to alumina prices increasing significantly post Q1 2018, alumina has been in surplus (excess supply) from December 2018, which has, in turn, led to a sharp drop in global price levels. This led to a significant reduction in price realized to $385/ton in Q1 2019 from $479/ton in Q4 2018. Aluminum Revenue Revenue from third-party primary aluminum sales decreased by 20.2% (y-o-y) to $1.57 billion in Q1 2019, compared to $1.97 billion in the year-ago period. Lower revenue was driven by a decrease in volume sold and price realization. Volume decreased by 10.7% in Q1 2019, due to outages at Wagerup and Pinjarra. The decrease in price realization is in line with a sharp drop in global aluminum prices since December 2018. With aluminum exports from China being at record highs (exports exceeded 500kmt in seven of the last eight months) due to very low domestic demand, the price realized per ton has witnessed a sharp drop in Q1 2019. Profitability In spite of a lower effective tax rate, net income margin in Q1 2019 was -7.3%, significantly lower than 6.3% in Q1 2018. This was mainly due to restructuring charges of $113 million, as against a reversal of 19 million in Q1 2018. Higher restructuring charges were associated with two aluminum plants in Spain with combined operating capacity of 124,000 metric tons per year, that have been maintained in restart condition, as a part of Collective Dismissal Process with the workers. Outlook for FY 2019 For the full year, we expect total revenue to decline by close to 14% to $11.5 billion in 2019, mainly due to lower revenue from the alumina and aluminum segments, driven by a decrease in shipments and global price levels for both the metals. Revenue from Bauxite is also expected to decline with the commodity being is excess supply, which would, in turn, lead to a further drop in prices. Decrease in shipments is expected to adversely affect the company’s profitability as the total cost would be attributed to lower volume. Also, an additional restructuring charge related to Spanish operations, which is expected to be incurred in Q2 2019, is also likely to affect margins for the year. We expect net income margin to decline to 1% in 2019 from 1.7% in 2018. Trefis has a price estimate of $33 per share for Alcoa’s stock, which is higher than its current market price. We believe that the company’s focus on improving its asset base and reducing cost, along with the recently announced $200 million share repurchase program, would continue to support the growth in its stock price.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    CS Logo
    What To Expect From Credit Suisse In Q1?
  • By , 4/18/19
  • tags: CS UBS DB
  • Credit Suisse  (NYSE:CS) is expected to publish its Q1 2019 results on April 24. This note details Trefis’ forecasts for Credit Suisse, as well as some of the key trends we will be watching when the company reports earnings. How have Credit Suisse’s revenues changed recently, and what’s the forecast for Q1? Total Revenues for Credit Suisse have largely trended lower over recent quarters. Revenues fell from CHF 5.6 billion in Q1 2018 to CHF 4.8 billion in Q4 2018. The decline can primarily be attributed to sub-par performance of Investment Banking division towards the second half of FY 2018. We estimate Credit Suisse’s revenues to grow at 8.3% sequentially (q-o-q) to reach CHF 5.2 billion in Q1 2019. However, this figure is 7.7% lower than what it reported a year ago. How have Credit Suisse’s total expenses changed, and what’s the forecast for Q1? One of Credit Suisse’s primary objectives over the recent years has been to reduce its non-interest expense. CS has been successful in accomplishing this objective, with non-interest expense falling from CHF 26 billion in 2015 to CHF 17 billion in 2018 (CAGR: -12.6%). This has reduced the cost/income ratio from 98.2% in 2015 to 76.9% in 2018. Non-interest expense fell from CHF 5.1 billion in Q4 2017 to CHF 4.1 billion in Q4 2018, representing a decline of 18% (y-o-y). We expect total expenses to remain flat at current levels in Q1 2019. Which are the key revenue and expense drivers to watch out for in Credit Suisse’s Q1 results? Key Driver #1: Net Interest Income: This represents interest earned through loans and other assets net of interest paid to deposits. Net Interest income has remained relatively stable over the past few quarters. However, net interest income surged by 54%(y-o-y) to CHF 2.4 billion in Q4 2018 primarily due to higher deposit margins on slightly lower average deposit volumes and stable loan margins on stable average loan volumes. We expect net interest income to be CHF 1.8 billion in Q1 2019, 13% higher than what it reported a year ago. Key Driver #2: Net Fee & Commission Income: This income includes fees for general banking products, services and revenues from wealth structuring solutions and other asset management-related fees. Net Fee & Commission income has been the largest contributor to Credit Suisse’s revenues over recent quarters, contributing approximately 55% of total revenues over 2018. We forecast the net fees to decline by 5% (y-o-y) to approximately CHF 3 billion in Q1’19. Key Driver #3 Compensation and Benefits: This includes salaries and benefits paid out to employees. Compensation Expense is the bank’s single biggest cost driver, and was roughly 46% of total revenues over 2018. We expect CS to report CHF 2.2 billion of compensation expense in Q1 2019, 3% higher than what it reported in Q4 2018. What is the impact of the uncertain macroeconomic environment on Credit Suisse’s revenues? UK’s anticipated withdrawal from the EU and escalating U.S.-China trade tensions have an adverse impact on investor confidence and client activity levels. These heightened global geopolitical and macroeconomic uncertainties are likely to weigh on CS’s revenues, primarily its Investment Division revenues. Additionally, the low interest rate environment in many European countries is also adversely impacting Credit Suisse’s net interest income. What will be the impact of the above on Credit Suisse’s EPS? We expect the earnings to be CHF 0.29 per share on an adjusted basis in Q1. This reflects 10% growth to the prior year quarter. The growth in earnings will likely be led by improving margins and lower tax rate. We currently have a price estimate of $15 per share for CS, which is slightly ahead of the current market price. We have summarized our quarterly and full year expectations for Credit Suisse based on the company’s guidance and our own estimates, on our interactive dashboard  How Is Credit Suisse Likely To Have Fared In Q1? You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Financial Services Data here. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    VRSN Logo
    Will New Domain Name Registrations Drive Verisign’s Growth in Q1?
  • By , 4/18/19
  • tags: VRSN
  • Verisign (NASDAQ: VRSN) is scheduled to announce its first quarter results on Thursday, April 25. The company continues to see strong growth, and now has approximately 153.0 million .com and .net registrations in the domain name base driven by continued growth in online advertising, e-commerce, and the number of internet users. This note details Trefis’ forecasts for Verisign, as well as some of the key trends we will be watching when the company reports earnings. How have Verisign’s revenues changed over recent quarters, and what’s the forecast for Q1 2019? Total Revenues for Verisign have largely trended higher over recent quarters. Revenues grew from $299 million in Q1 2018 to $308 million in Q4 2018. The growth can primarily be attributed to surge in domain name registrations and improved renewal rates. We forecast the revenues to grow to $303 million in Q1 2019 (+1.2% y-o-y) as a result of the increased volume of domain registrations and continued growth in the domain name base. How have Verisign’s total expenses changed over recent quarters, and what’s the forecast for Q1 2019? Total operating expenses for have remained fairly stable around $112 million over the last 8 quarters, with the exception of Q4 2017, when the operating expenses were relatively high ($119 million) due to a surge to in sales and marketing expense. We forecast the operating expenses to decline by 5.6% (y-o-y) primarily due to decrease in advertising and marketing expenses. Which are the key factors to watch out for in Verisign’s Q1 results? Increasing Domain Name Registrations During 2018, Verisign processed 38.2 million new domain name registrations for . com  and . net, which represents an increase of 4% increase compared to 2017. We expect this increasing trend to continue in Q1 2019. Domain name growth will likely be driven by continued internet growth and marketing activities carried out by Verisign and its registrars. Moreover, improving renewal rates for .com domain names will further aid top-line growth for Verisign. Improving Profitability EBT surged by 31% (q-o-q) to $234 million in Q4 2018 primarily due to one-time pre-tax gain of $55 million recognized on the sale of Verisign Security Services customer contracts. Verisign’s pre-tax profit has largely trended upwards over the recent quarters and we expect this increasing trend to continue. We forecast EBT to increase by 23.7% (y-o-y) to $189 million driven by increase in revenues and lower sales and marketing expenses. What will be the impact of the above on VRSN’s EPS? We expect the earnings to be $1.26 per share on an adjusted basis in Q1. This reflects a 15.6% growth to prior year quarter. The growth in earnings will likely be due to higher revenues and improved margins. We currently have a price estimate of $171 per share for VRSN, which is approximately 10% behind the current market price. We have summarized our quarterly and full year expectations for VRSN based on the company’s guidance and our own estimates, on our interactive dashboard   What Has Driven Verisign’s Revenues & Expenses Over Recent Quarters, And What’s the forecast for Q1?  You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Internet & Software Services Data here .
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    Will Subdued Client Activity Adversely Impact UBS In Q1?
  • By , 4/18/19
  • tags: UBS
  • UBS  (NYSE: UBS) is expected to publish its Q1 2019 results on April 25. This note details Trefis’ forecasts for UBS, as well as some of the key trends we will be watching when the company reports earnings. How have UBS’ revenues changed over recent quarters, and what’s the forecast for Q1 2019? Total Revenues for UBS have largely trended lower over recent quarters. Revenues fell from CHF 8.2 billion in Q1 2018 to CHF 7.0 billion in Q4 2018. The decline can primarily be attributed to sub-par performance of Trading division towards the second half of FY 2018. We forecast UBS’ revenues to decline by 14.2% year-over-year to CHF 7.0 billion in Q1 2019, as negative market sentiment and subdued client activity continue to adversely impact UBS’ Investment Division revenues (constituting 27% of total revenues in 2018) How have UBS’ total expenses changed over recent quarters, and what’s the forecast for Q1 2019? Total Expenses for UBS have remained fairly stable around CHF 5.9 billion over the last 12 quarters. We expect the trend to continue in Q1 2019. We estimate UBS’ total expenses to be CHF 5.8 billion for the quarter; a figure 4.6% lower than what it reported a year ago Which are the key revenue and expense drivers to watch out for in UBS’ Q1 results? Key Driver #1: Net Interest Income: This represents interest earned through loans and other assets net of interest paid to deposits. Net Interest income has remained relatively stable over the past few quarters. However, this figure fell sharply in Q2 2018 due to higher funding costs for long-term debt and lower banking book interest income, partly offset by higher deposit revenues. We expect net interest income to be CHF 1.5 billion in Q1 2019, a figure 17.7% lower than what it reported a year ago. Key Driver #2: Net Fee & Commission Income: This income includes fees for general banking products, services and revenues from wealth structuring solutions and other asset management-related fees. Net Fee & Commission Income has been the largest contributor to UBS’ revenues over recent quarters, contributing approximately 59% of total revenues over 2018. We forecast the net fees to decline by 7.3% (y-o-y) to approximately CHF 4.4 billion in Q1’19. Key Driver #3: Personnel Expense: This includes salaries and benefits paid out to employees. Personnel Expense is the single biggest cost driver, and was roughly 53% of total revenues over 2018. We expect UBS to report CHF 4.0 billion of personnel expense in Q1 2019, 4.2% higher than what it reported in Q4 2018. What is the impact of the uncertain macroeconomic environment on UBS? Brexit uncertainty and the escalating U.S.-China trade disputes have an adverse impact on investor confidence and client activity levels. These heightened global geopolitical and macroeconomic uncertainties are likely to weigh on UBS’ revenues, particularly its Trading Division revenues. Additionally, the low interest rate environment in many European countries is also adversely impacting UBS’ revenues, primarily from net interest income. What will be the impact of the above on UBS’ EPS? We expect the earnings to be CHF 0.25 per share on an adjusted basis in Q1, which reflects a 39% decline from the prior year quarter. The fall in earnings will likely be due to lower revenues and lower net income margin. We currently have a price estimate of $17 per share for UBS, which is almost 25% ahead of the current market price. We have summarized our quarterly and full year expectations for UBS based on the company’s guidance and our own estimates, on our interactive dashboard  How Is UBS Likely To Have Fared In Q1?. You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Financial Services Data here
    PEP Logo
    PepsiCo Beats Consensus In Q1 2019; Maintains FY 2019 Outlook
  • By , 4/18/19
  • tags: PEP KO
  • PepsiCo Inc. (NYSE: PEP) released its Q1 2019 results on April 17, 2019, followed by a conference call with analysts. The company beat market expectations for revenue as well as earnings. PEP reported revenue of $12.88 billion in Q1 2019, marking a year-on-year growth of 2.6%. Higher revenue was mainly driven by strong growth of 5.5% in the Frito-Lay segment, effective net pricing and higher volumes for healthy snacks, juice and water products, and non-carbonated drinks (NCDs). The company’s core EPS came in at $0.97 per share in Q1 2019, slightly higher than $0.96 in the year-ago period and much higher than the consensus of $0.92 per share. Higher earnings were primarily a reflection of stronger revenue growth, productivity savings, and lower interest burden, partially offset by an increase in the effective tax rate. We have summarized the key announcements in our interactive dashboard – How did PepsiCo fare in Q1 2019 and what is the outlook for the full year? In addition, here is more  Consumer Staples data . Key Factors Affecting Earnings Frito-Lay North America Revenue from Frito-Lay North America (FLNA), which contributes a little over a quarter of the company’s total revenue, increased by 5.5% (y-o-y) in Q1 2019. Higher revenue was primarily driven by effective net pricing and volume growth of 2%. Higher volume was driven by strong sales of its trademark Doritos and Ruffles, partially offset by a double-digit decline in Santitas. Operating margins increased marginally in Q1 2019 due to net revenue growth and productivity savings, partially offset by certain operating cost increases. Quaker Foods North America Net revenue declined by 1.2% (y-o-y) in Q1 2019, mainly driven by volume decline of 1% and unfavorable mix, partially offset by favorable net pricing. Volume decline was driven by a double-digit decline in ready-to-eat cereals, partially offset by modest growth in Aunt Jemima syrup and mix. Operating margin continued its declining trend reflecting certain operating cost increases, impact of higher commodity costs, and the net revenue performance North America Beverages Net revenue increased 2.2% in Q1 2019, driven by effective net pricing, partially offset by a 2% decline in volume. Lower volume was driven by a 4% decline in carbonated soft drink volume, partially offset by 1% volume increase in non-carbonated beverage. Operating margin was marginally lower in Q1 2019 compared to Q1 2018 due to higher commodity costs and increased advertising and marketing expenditure. Latin America Net revenue increased by 1.4% reflecting effective net pricing, partially offset by impact of unfavorable foreign exchange. Operating margin increased sharply in Q1 2019 reflecting the net revenue growth, productivity savings, and impact of an insurance settlement recovery related to the 2017 earthquake in Mexico. Europe Sub-Saharan Africa Net revenue increased 1.5%, reflecting a 7-percentage-point impact of the SodaStream acquisition, as well as effective net pricing, partially offset by the impact of unfavorable foreign exchange. The y-o-y increase in operating margin in Q1 2019 is due to the net revenue growth, productivity savings, and impact of an insurance settlement recovery in Russia. Asia, Middle East and North Africa In spite of volume growth and effective net pricing, segment revenue declined by 0.6% in Q1 2019 reflecting unfavorable foreign exchange and refranchising of a portion of the beverage business in Thailand. Operating margins increased, primarily reflecting the volume growth, productivity savings, and the effective net pricing, partially offset by certain operating cost increases, higher advertising and marketing expenses, and the impact of higher commodity costs. Profitability On a sequential basis, net income margin saw a sharp drop from 35.1% in Q4 2018 to 11% in Q1 2019. This was primarily due to a significant rise in the effective tax rate from -254.9% to 23.9%. PEP received significant tax benefits in Q4 2018 following the implementation of the TCJ Act, which translated into a negative effective tax rate. However, in Q1 2019, with a tax expense of $446 million, margins saw a sharp drop. On a y-o-y basis, in spite of a higher effective tax rate, margin was slightly higher due to productivity savings and lower interest burden in Q1 2019. Full Year Outlook For the full year, we expect the company’s revenues to grow by 3.1% to $66.7 billion in 2019, driven by growth in the company’s healthy snacks, sports drinks, and non-carbonated beverage portfolio. An effective tax rate of 21% in 2019 (compared to tax benefits received in 2018), incremental investments by the company to strengthen its business, and absence of gains from sale of assets (unlike in 2018), is expected to lead to a sharp drop in net income margin to 8.5% in 2019 from 19.4% in 2018. However, gains from the company’s recently announced new productivity plan are expected to support margin growth going forward. Trefis has a price estimate of $120 per share for PepsiCo’s stock. Though the stock rallied after the announcement of Q1 results, we believe that the stock price could come down, closer to our estimate, as the company has reaffirmed its 2019 guidance that it shared earlier this year, which might be indicative of the possibility of performance in the coming quarters being subdued.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? 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    What To Expect From Kimberly-Clark In Fiscal 2019
  • By , 4/18/19
  • tags: KMB PG CL UL
  • Kimberly-Clark  (NYSE: KMB) is scheduled to announce its fiscal first quarter results on Monday, April 22. In 2018, the company’s net sales grew marginally year-over-year to $18.5 billion, negatively impacted by a difficult environment – particularly significant commodity inflation and negative foreign currency effects. In addition, the company’s organic sales grew more than 1% y-o-y, driven by changes in product mix, net selling prices, and sales volumes. In terms of operating segments, the company saw gains in the K-C Professional segment and Customer Tissues, which was offset by flat results in the Personal Care segment. In terms of the bottom line, Kimberly-Clark’s adjusted earnings per share grew 6% y-o-y, driven by cost savings and reduced overhead spending. Our $113 price estimate for Kimberly-Clark’s stock is slightly below the current market price. We have created an interactive dashboard on What Is The Outlook for Kimberly-Clark For 2019?, which outlines our forecasts for the company’s full-year fiscal 2019 results. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation, and see  more Trefis Consumer Staple data here.  In Q1,  we expect Kimberly-Clark’s revenues to decline slightly on the back of continued declines in the Personal Care segment in Q1. In addition, commodity costs, foreign exchange challenges, and transportation costs may persist in Q1, which could impact the company’s growth rates. Fiscal 2019   Expectations Net Sales Forecast: For full-year 2019, Kimberly-Clark expects its total sales to decline 1% to 2%, including an expected 3% to 4% headwind from currencies. In addition, the company also plans to grow its organic sales by 2% and achieve a higher net selling price of at least 3% in the same period. Operating Profit Forecast:  Further, the company also plans to grow adjusted operating profit by 1% to 4% in fiscal 2019, of which commodities and currencies in total could be a headwind to operating profit of about 20%. EPS Forecast:  Kimberly-Clark is targeting full-year adjusted earnings per share of $6.50 to $6.70 and diluted earnings per share of $4.85 to $5.35. Overall, we expect the environment to remain challenging for the company in 2019, although better than in 2018. Margin Pressure To Continue:  Kimberly-Clark’s full-year gross margin was 33.2%, down 270 basis points y-o-y. The primary reason for this decline was higher pulp and raw material cost and inflation – commodities were a drag of $795 million for the year.  We expect the continued cost pressure from inflation in raw materials and input costs to hurt the company’s margins going forward, as the company has guided for its full-year commodity inflation to fall in the range of $300 million to $400 million in 2019. In addition, some big-box retailers’ aggressive pushes towards launching their own private-label products could impact Kimberly-Clark’s shelf space, which could also put pressure on margins. Growth In Cost Savings Program: In 2018, Kimberly-Clark achieved $510 million of cost savings, which include its FORCE and Restructuring program savings. The company had  announced  its restructuring program as part of a multi-year cost savings target, whereby it set a four-year cost savings target of more than $1.5 billion. These savings are to be achieved by improving productivity at manufacturing facilities, optimizing raw material and product design costs, generating benefits from procurement activities and improving distribution efficiencies. Kimberly-Clark expects the program to generate annual pre-tax cost savings of $500 million to $550 million by the end of 2021, through workforce reductions in the range of 5000 to 5500, or about 12% to 13% of its total workforce. This program is expected to broadly impact all of the company’s business segments and organizations in each major geography. For 2019, the company is targeting to deliver $400 million to $450 million of total cost savings. This includes FORCE savings of $300 million to $325 million and restructuring savings of $100 million to $125 million. In addition, supply chain related restructuring activities and savings are also expected to ramp up in 2019. Growth In Emerging Markets  Markets outside North America remain an area of strength for the company, as almost 48% of total sales are observed here. In 2018, Kimberly-Clark’s organic sales grew 2% y-o-y in emerging markets, compared to 1% y-o-y growth in developed markets. The company is looking at developing and emerging markets to drive growth, as it grapples with weak pricing and market saturation in the North American market. The company has strong growth prospects in markets such as China and Brazil, primarily due to low penetration of its category products in these regions, and the likely increase in the consumption of these products with economic development. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    What Key Factors Drove E-Trade’s Q1 Results?
  • By , 4/18/19
  • tags: ETFC SCHW AMTD
  • E-Trade (NASDAQ:ETFC) released its first quarter results on April 17, with net revenues and EPS of $755 million and $1.09 increasing by 6.7% and 24.5%, respectively, over the prior year quarter. Growth was driven by net interest income, fees and service charges, slightly offset by trading commissions. The Trefis price estimate for E-Trade stands at $57 per share, which is above the market price. You can view our interactive dashboard on How Has E-Trade Fared In Recent Quarters? to observe the quarterly revenue trends and modify yearly earnings to gauge the impact on the stock price, and see more of our financial services company data here. What Drove E-Trade’s Revenue Growth?   Net Interest Income: E-Trade’s net interest income is earned largely through investment securities and margin receivables, which together contribute around 92% of interest-earning assets. For the quarter, net interest income came in at $492 million, growing by 10.5% over the prior year quarter and supported by an increase in average balances of investment securities and average yield. For margin trading accounts, the average yield has increased from 4.15% in 2017 to 4.71% in 2018, and 5.24% this quarter, supported by a series of rate hikes by the Fed last year. Fee and Service Charges: The company charges for order flow, sweep deposits in money market accounts, advisor management, mutual funds, and foreign exchange services. The revenues for this segment increased by 12% over the prior year quarter to $118 million. In the past three years, growth has been driven by order flow revenue, advisor management fees, and mutual fund services. Trading Commissions: Trading commissions have been consistently declining for the past three years, with average commission per trade dropping by 33% to $7.07 per trade in 2018. The trading revenues for the quarter came in at $122 million, decreasing by 11% over the prior year quarter and remaining the same sequentially. Commission revenues were driven by a moderate improvement in average commission per trade and almost flat DARTs. Improving Operating Margin E-Trade’s total expenses as a percentage of total revenues declined from 53% in the first quarter of 2018 to 48% this quarter ( provision for loan losses included in the metric ), improving the operating margin 5% over the prior year quarter. The company’s advertising expenses declined by $6 million over the prior year quarter, and management guided for $200 million in advertising and marketing expenses for the full year. Marketing and advertising expenses have been increasing at a 20% growth rate for the past two years, and retaining the prior year figure of $200 million would bring a significant upside to operating profits. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    Is Verisign Fairly Valued?
  • By , 4/17/19
  • tags: VRSN
  • Verisign (NASDAQ: VRSN) reported solid financial results in FY 2018, driven by growth in domain name registrations and improved renewal rates compared to the previous year, a trend which we expect to continue into 2019. In Q4, the company comfortably beat earnings estimates ($1.21), with non-GAAP earnings of $1.58 which surged 64.6% from the year-ago quarter. Revenues increased 4.1% year over year to $307.5 million but failed to meet the top-line mean consensus estimates of $309 million. We currently have a price estimate of $171 per share for VRSN, which is approximately 10% behind the current market price. We have summarized our full year expectations for VRSN based on the company’s guidance and our own estimates, on our interactive dashboard  Verisign’s Fiscal 2019 Outlook . You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Internet and software company data here. Key Performance Metrics From Fiscal 2018 Verisign recorded revenues of $1.2 billion in 2018, which represents an increase of 4% compared to 2017 while operating income surged by 8% to $767.4 million. The company added 38.2 million new domain name registrations for .com and .net, ending 2018 with 153 million .com and .net registrations in the domain name base, an increase of 4% from 2017. Non-GAAP EPS increased by 29% year-over-year to $4.75 in 2018 thanks to the impact of lower taxes, surge in non-operating income and share repurchases. Net income grew by 27.5% primarily due to one-time pre-tax gain of $55 million recognized on the sale of Verisign Security Services customer contracts. Other Key Factors and Earnings Guidance For FY 2019 Verisign entered into Amendment 35 to the Cooperative Agreement, allowing VeriSign to engage with ICANN to amend the COM Agreement and to raise .com registration and renewal prices 7% in the back four years of each six-year period. Thus, providing Verisign with more pricing power. VeriSign also renewed its contract with ICANN to remain the sole .net operator until 2023, which should further aid growth in domain name registrations – as more companies rely on growing their businesses digitally. The company completed the sale of its Security Services Business, primarily comprising of Distributed Denial of Service Protection and Managed DNS services, to Neustar with the objective of focusing more on its core domain name registry services business. For FY 2019, Verisign expects revenue to be in the range of $1.215 billion to $1.235 billion, partially offset by the loss of revenue associated with the sale of Security Service customer contracts. Non-GAAP operating margin is expected to be between 67.5% to 68.5%, while EPS is expected to grow by 10% to $5.20 in 2019. Moreover, the company expects its domain name base growth rate to be between 2.25% and 4.25% for full year 2019. We estimate the fair value for Verisign’s stock to be $171 based on our Non-GAAP diluted EPS estimate of $5.2 for full-year 2019, and using a forward P/E multiple of 33x. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    Key Takeaways from L’Oreal’s Q1 Results
  • By , 4/17/19
  • tags: LRLCY EL AVP REV
  • L’Oreal reported its first quarter results on April 16, with total sales increasing by 11.4% to €7.55 billion over the prior year quarter. Ignoring the impact of consolidation and currency fluctuations, the growth in total sales was 7.7%, which is higher than the first quarter of 2018 where the comparable sales growth was 6.8%. Among the four product lines, L’Oreal Luxe and Active Cosmetics remain the strongest growing segments and together contribute around 40% of total sales. Geographically, New Markets continue with the strong growth trajectory by reporting a 20% increase in sales over prior year quarter. This supports the company’s mission to acquire a billion new customers, double the existing figures, where a major portion is expected from the Asia-Pacific region. The company’s e-commerce business posted a jump in sales of 43.7% over the prior year quarter and contributes around 11% of total sales. The Trefis price estimate for L’Oreal stands at $54 per share, which is in line with the current market price. You can view our interactive dashboard on How Has L’Oreal Fared In Recent Quarters? to observe the quarterly revenue trends and modify yearly earnings to gauge the impact on the stock price, and see more of our Consumer Discretionary Sector data here. Product Line Performance The group operates a portfolio of 36 brands that are split into divisions as per consumption universe and distribution channels. Professional Products: This division targets professional hair salons and contributes around 12% of total sales. The division’s sales have grown by 4.8% to €835 million over the prior year quarter, but has been witnessing a decline in recent years. This is in line with the overall industry trend, as the growth in professional care has been limited. Consumer Products: This division targets the mass market with makeup, skincare, and hair care products. It contributes around 44% of total sales and reported €3.28 billion of sales, growing by 7% over the prior year quarter. On an annual basis, this division has been reporting subdued performance in the past few years. L’Oreal Luxe: This is the fastest-growing division, with quarterly sales of €2.68 billion, 19% over the prior year quarter. The division leverages selective distribution and has the biggest brand portfolio of generalist brands, aspirational brands, and specialized brands. This division has been observing strong growth in the past two years, growing consistently at ~10% levels. Active Cosmetics: This division includes brands that sell derma-cosmetic products exclusively through specialty drugstores, pharmacies, and dermatologists. The segment reported quarterly sales of €751 million, 14% over the prior year quarter. Together with L’Oreal Luxe, this division has been consistently reporting 10% annual growth for the past two years. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    What To Expect From Philip Morris' Q1 2019 Results?
  • By , 4/17/19
  • tags: PM MO
  • Philip Morris International (NYSE: PM), manufacturer of cigarettes and other nicotine containing products including reduced-risk products, is set to announce its Q1 2019 results on April 18, 2019, followed by a conference call with analysts. We expect the company to report revenue of close to $6.75 billion in Q1 2019, which would mark a decline of 2.1% on a year-on-year basis. Sequentially, net revenue is expected to decrease by about 10%. Lower revenue is likely to be a reflection of decreasing sales of cigarettes and a slower than expected sales growth in the heated products segment due to regulatory uncertainty. Market expectation is for the company to report earnings of $1.01 per share in Q1 2019, marginally better than $1.00 per share in the year-ago period. Marginal improvement in earnings would most likely be driven by lower interest expense following repayment of high-cost debt in 2018. We have summarized our key expectations from the earnings announcement in our interactive dashboard – How is Philip Morris expected to fare in Q1 2019 and what is the outlook for the full year?   In addition, here is more  Consumer Staples data . Key Factors Affecting Earnings Declining cigarette sales Revenue from the company’s combustible products segment is expected to drop by 1.2% in the first quarter of 2019 compared to the previous-year period, and by 10.6% compared to Q4 2018. The decrease would primarily be driven by lower cigarette volume sold. As millennials are moving away from combustible products to e-vapor/heated tobacco products due to health concerns, the cigarette shipment is expected to continue its downward trend. Though cigarette units are expected to be somewhat flat on a y-o-y basis, they are expected to drop by over 13% on a sequential basis. Marlboro, the company’s flagship brand, which has witnessed a decrease in its market share over the last couple of quarters, is expected to continue the trend in 2019 as well, adversely affecting segment revenues. Slow pick up in IQOS Revenue for the company’s Reduced Risk Products (RRP) segment is expected to decline by 6.8% on a year-on-year basis due to lower volume and price realization. The company’s primary vapor product, IQOS, has not been able to see its sales pick up the way the market had expected, mainly due to regulatory uncertainty surrounding heated tobacco products. Recently, with the FDA cracking down on vapor companies, sales are expected to head south in early 2019. Though IQOS is a brand that is expected to drive PM’s growth over the long term, the segment is projected to face dwindling sales in the short-term due to lower price realization on the back of heavy discounts offered to promote the product in the market. Margin improvement Net income margin is expected to increase from 22.6% in Q1 2018 to 26% in Q1 2019, driven by lower interest expense. As a step towards optimizing its capital structure, the company used its high cash balance to pay off $2.5 billion of its 10-year U.S. bonds in 2018, which with a coupon of 5.65%, was the most expensive debt instrument on the company’s books. Though an increase in marketing costs weighed on the margin in Q4 2018, interest saving is expected to provide an uptick to profitability in 2019. Full Year Outlook For the full year, we expect net revenue to increase by 3.9% to $30.8 billion in 2019, from $29.6 billion in 2018, as sales under the company’s heated tobacco segment are expected to pick up in the second half of the year with expectations of regulatory clarity with respect to the product. Lower interest and tax outgo, coupled with a gradual phasing out of the discounts on IQOS is expected to drive profitability with net income margin expected to be ~27% in 2019, up from 26.7% in 2018. Trefis has a price estimate of $87 per share for Philip Morris’ stock. Expectations of high growth in e-vapor in the long term, along with measures to improve profitability, is expected to provide support to the company’s stock price over the next one year.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    What To Expect From Union Pacific's Q1
  • By , 4/17/19
  • tags: UNP CSX NSC
  • Union Pacific Corporation (NYSE: UNP) is set to release its Q1 financial performance on April 18. This note details Trefis’ forecasts for Union Pacific, as well as some of the key trends we will be watching when the company reports earnings. You can view our interactive dashboard analysis ~   How Is Union Pacific Likely To Have Fared In Q1?  ~  for more details on the expected performance of the company. In addition, you can see more of our  data for industrial companies here. How have Union Pacific’s revenues changed over recent quarters, and what’s the forecast for Q1 2019? Total Revenues for Union Pacific have largely trended higher over recent quarters. Revenues grew from $5.5 billion in Q4 2017 to $5.8 billion in Q4 2018. The growth can primarily be attributed to the capacity constraints in the trucking industry, which benefited railroad companies at large. We estimate total revenues to be $5.7 billion for Q1; a figure 4% higher than what it reported a year ago. What are Union Pacific’s key sources of revenues? Union Pacific generates its revenues primarily from various commodities freight, including energy, industrial, premium, and agriculture. Premium segment includes intermodal freight, which refers to the shipment of containers that can be moved from one form of transport to another. The segment also includes automotive freight. Energy segment refers to shipments related to coal, crude oil, sand, and petroleum products. Industrial freight revenues are derived from the shipment of industrial commodities. Agriculture refers to grains, fertilizers, ethanol, and biofuel related shipments. What to expect from the Agriculture segment? Agriculture revenues grew from $1.01 billion in Q4 2017 to $1.12 billion in Q4 2018. We forecast the revenues to decline in low single-digits to $1.1 billion in Q1 2019. This can be attributed to uncertainties related to Agriculture exports. The U.S. government has imposed several foreign tariffs, which will likely impact the grain exports at large, and in turn impact the railroad shipments. What to expect from the Energy segment? Energy freight revenues declined from $1.21 billion in Q4 2017 to $1.10 billion in Q4 2019. This can be attributed to weaker coal and sand shipments. We forecast the segment revenues to grow in mid-single-digits in the near term. While we don’t expect any significant growth in coal, petroleum products shipments will likely trend higher. The decline in domestic coal demand can largely be attributed to the trends in natural gas prices. The benchmark Henry Hub natural gas price is currently trading under $3 levels, falling from the highs of $4.50 in late 2018. With gas prices being more attractive, the dependency on coal as an energy source continues to come down. EIA estimates  603 million short tons  (mst) coal consumption in 2019, which will be the lowest coal consumption over the past few decades. Coal exports have been trending higher in the recent quarters, but it may see a slight decline in 2019, thereby impacting the overall volume. How much can industrial freight grow? Union Pacific’s industrial freight grew from $1.28 billion in Q4 2017 to $1.40 billion in Q4 2018. This can partly be attributed to higher fuel surcharge in the recent quarters, given the movement in crude oil prices. We forecast the revenues to grow in mid-single-digits in Q1. This growth will likely be led by chemicals, metals, and forest products, as an expected growth in construction will likely bode well for the railroad shipments. The U.S. construction sector is forecast to  grow  in mid-single-digits over the next three years. How much can Premium segment revenues grow? Premium segment revenues have grown from $1.52 billion in Q4 2017 to $1.75 billion in Q4 2018. This can primarily be attributed to capacity constraints in the trucking industry amid driver shortage after the full implementation of the ELD Mandate. This trend will likely continue in the near term. We forecast the segment revenues to grow in mid-to-high single-digits in Q1 2019. What will be the impact of the above on Union Pacific’s EPS? We expect the earnings to be $1.91 per share in Q1. This reflects 14% growth to the prior year quarter. The growth in earnings will likely be led by higher revenues, and higher margins. The company last year launched Unified Plan 2020  aimed at better efficiency. This plan should help improve margins and create more reliability for customers, and aid the company’s overall earnings growth in the coming years.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    What To Expect From Intuitive Surgical's Q1?
  • By , 4/17/19
  • tags: ISRG BSX ABT MDT
  • Intuitive Surgical  (NASDAQ:ISRG) is expected to publish its Q1 2019 results on April 18. This note details Trefis’ forecasts for Intuitive Surgical, as well as some of the key trends we will be watching when the company reports earnings. You can view our interactive dashboard analysis ~ How Is Intuitive Surgical Likely To Have Fared In Q1? In addition, you can see more of our  data for Healthcare companies here. How have Intuitive Surgical’s revenues changed over recent quarters, and what’s the forecast for Q1 2019? Total Revenues for Intuitive Surgical have largely trended higher over recent quarters. Revenues grew from $892 million in Q4 2017 to $1.05 billion in Q4 2018. This can primarily be attributed to growth in the installed base. We estimate Intuitive Surgical’s revenues to be $951 million for Q1; a figure 12% higher than what it reported a year ago. What are Intuitive Surgical’s key revenue sources? Intuitive Surgical generates its revenues primarily from three sources: system sales, instruments & accessories sales, and services. System sales refers to da Vinci surgical systems, which are computer assisted systems that help surgeons perform minimally invasive surgeries by controlling the device from a console. Instruments & accessories sales includes EndoWrist devices, which have tools such as forceps and scissors attached to them, in order to provide better control to surgeons. Accessories include sterile drapes, camera heads, vision products, light guides, and other devices. Services includes full-time support to its customers, from installing the surgical systems to repairing and maintaining them. What to expect from the instruments & accessories business? The segment revenues have grown from $457 million in Q4 2017 to $539 million in Q4 2018. We forecast the revenues to be $516 million in Q1 2019, reflecting low double-digit growth (y-o-y). Instruments & accessories segment has seen steady growth in the recent past, led by higher installed base. This trend will likely continue in Q1 as well. The company’s installed base grew 13% in 2018, and it will likely grow in low double-digits in 2019. This can be attributed to the advantages of minimally invasive surgeries through da Vinci Surgical Systems. They entail fewer and smaller incisions, less blood loss, shorter hospital stays, faster recoveries, and fewer scars than traditional open surgery. How much can systems sales grow? da Vinci systems sales grew from $285 million in Q4 2017 to $341 million in Q4 2018. We expect the sales to be $277 million in Q1, reflecting high teens growth over the prior year period. Sequentially the revenues will likely be down in high teens. Q1 is a seasonally weak quarter for Intuitive Surgical with patient deductibles being reset. Services segment should see mid-single-digit growth  Services segment revenues can also be linked to the company’s installed base. However, we forecast slower growth for services, as compared to other segments. This can be attributed to the trends in average service revenue per installed unit. The figure has declined at an average annual rate of 1% over the last five years. What will be the impact of the above on Intuitive Surgical’s EPS? We expect the earnings to be $2.65 per share on an adjusted basis in Q1. This reflects 9% growth to the prior year quarter. The growth in earnings will likely be led by higher revenues. However, we expect a slight decline in margins, in line with the company’s guidance.  The margins are expected to be lower due to costs associated with the expansion in the emerging markets, primarily China, India, and Taiwan.     What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    What To Expect From Netflix Post-Q1 Results
  • By , 4/17/19
  • tags: NFLX
  • Netflix ‘s (NASDAQ: NFLX) Q1 earnings per share and revenues both beat consensus estimates in its Q1 results. The company reported net streaming additions of 9.6 million in the quarter. In Q1, the company’s revenues grew a robust 22% year-over-year (y-o-y) to $4.5 billion, driven by growth in subscribers across both the U.S. and international streaming markets. The international subscriber base continued to increase at a rapid pace (33% y-o-y) once again, while the domestic subscriber base growth stabilized in the low double digits. Netflix saw its stock gain nearly 35% over the course of 2019. We have a  $378 price estimate for Netflix’s stock, which is slightly ahead of the current market price. We have created an interactive dashboard on What Has Driven Netflix’s Recent Results, which outlines our forecasts for the upcoming quarter and full-year 2019. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation, and see  more Trefis Media data here .  Q2 Expectations  Netflix expects 5 million global paid net additions (around 300k net adds in the U.S. and 4.7 million internationally), compared to a 5.4 million consensus estimate. The company has guided for its total revenues to reach $4.9 billion in Q2 2019. The company also expects an operating margin of 12.5% in Q1. Netflix also raised its prices in the U.S. and some Latin American markets. Netflix’s new pricing in the U.S. will be phased in for existing members over Q1 and Q2, and its U.S. prices for new members are increasing across the board – the Standard plan (two HD streams) is increasing from $10.99 to $12.99 per month ; the Premium plan (up to four Ultra HD streams) is increasing from $13.99 to $15.99 per month; and the Basic plan (with a single non-HD stream) is increasing for the first time, from $7.99 to $8.99 per month. This will help boost the company’s average revenue per customer over the coming quarters. We forecast Netflix to reach 64 million subscribers (including free trials) in the U.S., with an average monthly fee per subscriber of over $11.50, translating into $2.2 billion in domestic streaming revenues for Q2. In addition, we also estimate nearly 100 million subscribers in international markets with an average monthly fee per subscriber of $8.70, translating into about $2.6 billion in international streaming revenues in the same period. Netflix has been growing its subscribers by leveraging its original content slate, and we expect this to continue in the near term as well. On the other hand, Netflix’s DVD business is expected to continue to lose steam, and its revenues will likely decline to just over $77 million. Fiscal 2019 Expectations We expect the company to report close to $20.5 billion in revenues in 2019, with $9.3 billion revenues in the domestic streaming segment and $11 billion in the international streaming segment. The U.S. market for streaming content is getting more saturated due to strong competitive pressure, which is expected to intensify once Disney launches its own direct-to-consumer offering Disney+. This service is also priced significantly cheaper than Netflix (at $7 per month versus $13) Netflix reported negative cash flow of $3 billion for 2018 and now expects 2019 free cash flow deficit to be modestly higher at approximately -$3.5 billion, due to higher cash taxes related to the change in its corporate structure and additional investments in real estate and other infrastructure. The company expects free cash flow to improve in 2020 and each year thereafter, driven by its growing subscriber base, revenues, and operating margins. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    Key Takeaways From Ericsson's Q1 Results
  • By , 4/17/19
  • tags: ERICSSON ERIC NOK
  • Ericsson  (NASDAQ:ERIC) published its Q1 FY’19 earnings on Wednesday, reporting a stronger than expected set of results. Below, we take a look at some of the key trends that drove the company’s performance. How did Ericsson fare in Q1 2019? Revenues grew by about 13% year-over-year to SEK 48.9 billion ($5.3 billion) Adjusted EPS came in at $0.09, vs. consensus of $0.05 How did the Networks business fare? The Networks business accounts for over 65% of Ericsson’s total revenue mix. Networks revenues grew ~17% year-over-year, driven by sales of 5G equipment in North America where commercial deployments are gathering steam. However, this was partially offset by weakness in Europe, where a lack of spectrum hurt growth. Ericsson now expects the Radio Access Network (RAN) market to grow by 3% in 2019, up from an earlier 2% estimate. Networks gross margin improved to 43.2%, up 280 bps year-over-year, driven by higher hardware capacity sales and IPR revenues. How did the Digital Services business fare? Reported revenues grew by about 8% year-over-year to SEK 7.8 billion ($850 million) Growth is being driven by momentum for the new portfolio of 5G-ready and cloud-native products. While operating margins remained negative, at about –23.0%, the company is looking to turn around its operations via a revised strategy for its business support systems operations (related: How’s Ericsson’s Digital Services Business Faring? ). View our interactive dashboard analysis on How Did Ericsson Fare In Q1 2019 And What’s The Outlook Like For Q2?  You can modify key drivers and arrive at your own estimates for the company’s EPS and revenues for the coming quarter. In addition, you can also see all of our  data for Information Technology Companies here . What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    What Does The Settlement With Apple Mean For Qualcomm?
  • By , 4/17/19
  • tags: QCOM AAPL
  • Qualcomm  (NASDAQ:QCOM)and Apple  (NASDAQ:AAPL) reached a surprise  settlement on their two-year long licensing dispute, in what we believe is a win-win for both companies. Below we take a look at some of the developments and what it could mean for the companies. View our interactive dashboard analysis on  What is Qualcomm’s expected performance over 2019?  We note that our model for Qualcomm has not been updated for the settlement with Apple. You can modify our forecasts to arrive at your own estimates for the business, and see all of our  Technology company data here . What does the settlement entail? While all of the details of the deal have not been made public, below are some highlights: Apple and Qualcomm will dismiss all litigation worldwide. Apple has forged a six-year agreement to license Qualcomm’s patents, effective from April 1, 2019, with a two-year option to extend. The companies have also signed a multiyear chipset supply agreement. How does Qualcomm benefit from the deal?  The litigation was taking a meaningful financial toll on Qualcomm, with its adjusted EPS down 14% over the last fiscal year due to a lack of high-margin royalty payments from Apple. Apple is estimated to have withheld over $7.5 billion in royalties owed to Qualcomm, via its contract manufacturers, and a settlement could possibly address these payments. Qualcomm’s new deal to supply Apple with baseband chips will help the chipset business, which saw revenues drop 20% in Q1’19 following Apple’s shift to Intel modems on the latest iPhones. Apple is the largest mobile vendor by value with ~$160 billion in annual iPhone revenues, and having Apple as a customer will be crucial for Qualcomm’s growth in the 5G era. Moreover, a potential loss against Apple in the patent dispute could have set a precedent, jeopardizing Qualcomm’s lucrative licensing model. How does Apple benefit from the deal?  Qualcomm has been a leader in the 5G space, enabling Android vendors such as Samsung to launch their first 5G devices this year. Apple’s current modem vendor, Intel, was believed to be at least a year behind in this race, meaning that a 5G iPhone was only likely around 2021. With the new deal, Apple should be able to launch a 5G device sooner. A long-term licensing and chip supply agreement may also enable Apple to get more competitive pricing from Qualcomm (although this has not been disclosed). Apple was previously paying roughly $7.50 per iPhone in licensing fees to Qualcomm. What are the financial implications for Qualcomm? Apple will make a one-time payment to Qualcomm, although the amount was not disclosed. It’s also not clear whether this relates to the unpaid royalties over the last two years. Qualcomm indicated that annual EPS could rise by $2 as modem-chip shipments begin Qualcomm stock soared by 23% to over $70 in Tuesday’s trading, reflecting the more positive outlook. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    T Logo
    WarnerMedia, Postpaid Business In Focus As AT&T Reports Q1 Results
  • By , 4/17/19
  • tags: T TMUS VZ S
  • AT&T  (NYSE:T) is expected to publish its Q1 2019 results on Wednesday, April 24. Below, we take a look at some of the key trends we will be watching when the company reports results. What to expect from Q1 results Consensus revenues of $45.1 billion, marking an increase of about 18% year-over-year due to the Time Warner acquisition. Consensus EPS of $0.86, roughly flat year-over-year. What will drive the results? Warner Media: Business should fare well, on better cost management and stronger revenues Communications: Stronger performance of wireless business likely to be offset by potential declines in pay TV and legacy wireline How will the communications business fare? The communications business accounts for over 70% of AT&T’s revenue and will be the biggest driver of results AT&T’s bread-and-butter postpaid business has been underperforming rivals ( 134k postpaid phone adds in Q4’18, vs 1 million for T-Mobile) and it’s likely that trend will continue. Churn levels could remain under pressure due to higher competition and relatively limited promotional activity. Prepaid business could benefit from strong sales of Cricket Wireless and a focus on higher-value customers. How will the WarnerMedia business fare? Turner should see gains in subscription revenues, driven by higher domestic affiliate rates, although ad revenues may see pressure HBO results could face some headwinds due to the carriage dispute with Dish Network, which caused it to withdraw HBO and Cinemax from the pay-TV operator While Warner Bros benefited from strong theatrical performances over the holidays, it could see a sequential slowdown View our interactive dashboard analysis on What’s driving AT&T’s valuation?  In addition, you can view  Trefis data for Telecommunications companies  and  Consumer Staples companies For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    Would A Slowdown In The Aluminum Market Dampen Alcoa's Q1 2019 Results?
  • By , 4/16/19
  • tags: AA CLF FCX
  • Alcoa (NYSE: AA) will release its Q1 2019 earnings on April 17, 2019, followed by a conference call with analysts. We expect the company to report revenue of $2.82 billion for the quarter, which marks a decline of 8.7% on a year-on-year basis. Lower revenue would likely be driven by a sharp reduction in revenue from the company’s aluminum segment due to a significant drop in global aluminum prices. Market expectations are for the company to report a loss of $0.06 per share in Q1, driven by a decrease in revenue, lower shipments, decrease in price realization, and higher expenditure to improve the existing asset base. We have summarized our key expectations from the company’s earnings in our interactive dashboard – How is Alcoa expected to fare in Q1 2019 and what is the outlook for the full year?  In addition, here is more  Materials data . Key Factors Affecting Earnings Alumina Revenue Revenue from third-party alumina sales is expected to come in at close to $1 billion, which would be a decline of over 11.5% sequentially, driven by an 11.3% drop in price realization and lower shipments. However, on a year-on-year basis, alumina revenue is expected to increase by 9.2%, mainly due to a much lower price level during Q1 2018. Alumina shipments are expected to decrease from 2.38 million tons in Q1 2018 to 2.35 million tons in Q1 2019. Lower volume is expected to be driven by lower demand for alumina with many aluminum companies shedding capacity in China (alumina is a raw material for aluminum companies). With a year of being in deficit, alumina prices increased significantly during most of 2018. However, currently due to lower demand, alumina is expected to be in surplus (excess supply) from Q1 2019, which has in turn led to a sharp drop in prices. Thus, we expect price realized per ton of alumina to decrease to $425 in Q1 from $479 per ton in the previous quarter. However, the price would still be higher than $385 during Q1 2018. Aluminum Revenue Revenue from third-party primary aluminum sales is expected to decrease by 23.3% (y-o-y) to $1.51 billion in Q1 2019, compared to $1.97 billion in the year-ago period. Decrease in aluminum revenue is expected to be driven by a drop of close to 24% in price realized per ton of aluminum sold. The decrease in price realization is in line with a sharp drop in global aluminum prices since December 2018. With aluminum exports from China being at record highs (exports exceeded 500kmt in seven of the last eight months) due to very low domestic demand driven by a drop in industrial and construction activity, the metal is in excess supply world-over. This has led to a sharp drop in the price of aluminum to below $1,900/ton in Q1 2019 from its high of over $2,620/ton in mid-2018. We expect Alcoa to realize $1,890/ton of aluminum in Q1 2019, significantly lower than $2,483/ton in Q1 2018. Such a sharp reduction in price is expected to completely overshadow a marginal increase in shipments to 800kmt for the quarter. What Is In Store For The Year? For the full year, we expect revenue to decrease by close to 14% (y-o-y) to $11.5 billion in 2019, led by slowdown across all its operating segments for the year. A drop in total shipments is expected to adversely affect the company’s profitability as the total cost would be attributed to lower volume. Expectations of net income margin declining from 1.7% in 2018 to 1.2% in 2019 would also reflect increased expenditure from the company to improve its asset base, though this would provide benefits in the form of margin improvement in the long-term. Net income would likely be around $138 million on the back of lower revenue and drop in margins. Trefis has a price estimate of $37 per share for Alcoa’s stock, which is higher than its current market price. Alcoa has been able to beat consensus estimates in each of the last four quarters. We believe that the company’s stock price could see a short term improvement if it manages to beat the consensus this time as well. Additionally, the company’s plans to focus on improving its asset base and reducing cost, along with the recently announced $200 million share repurchase program (of which $50 million worth of shares have been repurchased) would continue to support the growth in its stock price.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    What To Expect From PepsiCo’s Q1 2019 Results?
  • By , 4/16/19
  • tags: PEP KO
  • PepsiCo Inc. (NYSE: PEP) is set to announce its Q1 2019 results on April 17, 2019, followed by a conference call with analysts. The company is expected to report revenues of $12.7 billion in Q1 2019, marking a growth of 1.3% on a year-on-year basis. Revenue growth is likely to be driven by increased sales across all its operating segments, especially with higher growth in emerging markets. Increased demand for health snacks, sports drinks, and non-carbonated drinks (NCDs) is expected to lead to healthy growth in the company’s healthy snacks and beverages portfolio. Revenue would be significantly lower compared to Q4 2018, mainly due to seasonality, with the fourth quarter being the best performing quarter for the company. Market expectations are for the company to report earnings of $0.92 per share in Q1, slightly lower than $0.96 per share in the previous year period. Lower earnings would likely be a reflection of a higher effective tax rate, incremental investments to strengthen its business, partially offset by cost savings due to refranchising of the bottling business. We have summarized our key expectations from the announcement in our interactive dashboard – How is PepsiCo expected to fare in Q1 2019 and what is the full year outlook?  In addition, here is more  Consumer Staples data . Key Factors Affecting Earnings Frito-Lay North America Frito-Lay North America (FLNA), which contributes a little over a quarter of the company’s total revenue, is expected increase its sales by 1.6% (y-o-y) in Q1. Higher revenue would primarily be driven by effective net pricing and volume growth in variety packs and its trademark Doritos. However, we expect margins to continue to decline and remain subdued in the near future, driven by higher transportation costs and commodity prices, especially potatoes and motor fuel. Quaker Foods North America Net revenue of Quaker Foods has been declining over the last three years, reflecting lower volume and unfavorable net pricing and mix. The lower volume was driven by decline in trademark Gamesa and ready-to-eat cereals, partially offset by the growth in oatmeal. We expect segment revenue to marginally increase in Q1 2019, compared to the previous year period, with the oats market projected to grow at a CAGR of 5.5% over the next 10 years, partially offset by a slowdown in ready-to-eat cereals. Operating margins are expected to remain lower due to high commodity prices, partially offset by productivity savings. North America Beverages We expect revenue to grow by 0.8% in Q1, driven by healthy growth in the segment’s juice and sports drinks portfolio, partially offset by lower sales of carbonated soft drinks. We expect operating margins to improve, driven by cost savings under its new productivity plan. However, they are unlikely to touch historical highs due to rising advertising and marketing expenditure. Growth in Latin America Net revenue is expected to increase by over 2% in Q1 in the absence of major foreign currency headwinds (with the dollar relatively stable) and the company’s campaign focus on healthy snacks and NCDs. In spite of low revenue, operating margins were high in Q1 2018 mainly due to one-time insurance settlement recoveries related to the 2017 earthquake in Mexico. We expect margins to decline in the absence of any non-recurring benefit unlike last year, and higher spending on advertising. Europe, Sub-Saharan Africa (ESSA) and Asia, Middle East and North Africa (AMENA) Though the ESSA segment saw impressive growth through 2018, we expect revenue growth to be muted at 1.9% in Q1 2019, driven by the effects of refranchising of all its beverage bottling and snacks distribution operations at Czech Republic, Hungary, and Slovakia (CHS) in 2018. Revenue in the AMENA segment is projected to increase by 1.3% in Q1 driven by projected double-digit growth in snacks volume in India, China, and Pakistan, along with increasing sales of NCDs (non-carbonated drinks) in the region, partially offset by loss of volumes due to refranchising a portion of the beverage businesses in Thailand. We expect both the segments to continue growing their operating profit margin, benefiting from productivity gains and cost savings due to refranchising of their high-cost bottling business. Lower Profitability We expect net income margin to decline to 10% in Q1 2019, which is a sharp drop from 35.1% in Q4 2018 and slightly lower than 10.7% in Q1 2018. The primary factor driving margins lower would be the effective tax rate, which is expected to be 21% throughout 2019, compared to -254.9% in Q4 2018. The one-time tax benefit in Q4 related to net tax benefits resulting from the reorganization of PEP’s international operations and the implementation of TCJ Act. Full-year picture For the full year, we expect the company’s revenues to grow by 3.1% to $66.7 billion in 2019, driven by growth in the company’s healthy snacks, sports drinks, and non-carbonated beverage portfolio. An effective tax rate of 21% in 2019 (compared to tax benefits received in 2018) and incremental investments by the company to strengthen its business is expected to lead to a sharp drop in net income margin to 8.5% in 2019 from 19.4% in 2018. However, gains from the company’s recently announced new productivity plan are expected to support margin growth going forward. Trefis has a price estimate of $119 per share for PepsiCo’s stock.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? 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    What To Expect From Abbott In Q1?
  • By , 4/16/19
  • tags: ABT BSX ISRG MDT
  • Abbott Labs  (NYSE:ABT) is expected to publish its Q1 2019 results on April 17. This note details Trefis’ forecasts for Abbott, as well as some of the key trends we will be watching when the company reports earnings. How have Abbott’s revenues changed over recent quarters, and what’s the forecast for Q1 2019? Total Revenues for Abbott have largely trended higher over recent quarters. Revenues grew from $7.6 billion in Q4 2017 to $7.8 billion in Q4 2018. The growth can primarily be attributed to higher sales of its medical devices. We estimate Abbott’s revenues to be $7.8 billion for Q1; a figure 6% higher than what it reported a year ago. Which are the key revenue drivers to watch out for in Abbott’s Q1 results? Medical Devices and Diagnostics segments will be the key growth driver for Abbott in the near term. What to expect from the Medical Devices segment? Abbott’s Medical Devices segment primarily includes products for vascular and diabetes. The segment revenues have grown from $2.7 billion in Q4 2017 to $2.9 billion in Q4 2018. We forecast the revenues to be a little under $3 billion in Q1 2019, reflecting high single-digit growth (y-o-y). Medical devices segment has seen steady growth in the recent past, led by higher electrophysiology, structural heart, and Freestyle Libre sales. This trend will likely continue in Q1 as well. Electrophysiology growth will likely be led by Confirm RxTM Insertable Cardiac Monitor (ICM), while structural heart should continue to benefit from Amplatzer (TM) Occluder and higher sales of MitraClip. MitraClip was recently  approved  by the U.S. FDA for the treatment of heart failure in patients with clinically significant secondary mitral regurgitation. This should further aid the segment sales. What to expect from the Diagnostics business? Abbott’s Diagnostics business includes sales of diagnostic equipment used in diagnosis of diseases, conditions, or infections. The segment revenues have grown from $1.9 billion in Q4 2017 to a little under $2 billion in Q4 2018. We forecast the sales to remain a little under $2 billion, reflecting high single-digit growth from the prior year quarter. Abbott’s newly launched Alinity systems will likely aid the segment sales growth.  With Alere acquisition in Q4 2017, Abbott has added the tests for heart attacks, influenza, and drug abuse to its suite of diagnostic products. This will further boost its sales. What will be the impact of the above on Abbott’s EPS? We expect the earnings to be $0.76 per share on an adjusted basis in Q1. This reflects 28% growth to the prior year quarter. The growth in earnings will likely be led by higher revenues, and higher margins. The company has seen slight improvement in its margins over the recent quarters, and this trend should continue in Q1 as well. You can view our interactive dashboard analysis ~  How Is Abbott Likely To Have Fared In Q1? for more details on the key drivers of the company’s expected Q1 performance. In addition, you can see more of our  data for Healthcare companies here. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    Breaking Down Shutterfly’s Key Revenue Drivers
  • By , 4/16/19
  • tags: SFLY
  • Shutterfly (NASDAQ: SFLY) delivered a strong financial performance in fiscal 2018. The company’s revenue surged by 63.8% year-over-year to reach approximately $2 billion, primarily driven by the acquisition of Lifetouch. Trefis’ model for the company breaks its key value drivers down to three key components: Consumer Segment Shutterfly Business Solutions Segment (SBS) Lifetouch Segment (created in 2018) As we summarize below, we expect the company’s total revenues to grow at 10.6% and cross $2.1 billion in 2019. We currently have a price estimate of $51 per share for SFLY, which is almost 20% ahead of the current market price. We have summarized our revenue expectations for Shutterfly, based on the company’s guidance and our own estimates, on our interactive dashboard  Summarizing Shutterfly’s Revenue Breakdown . You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Internet & Software Services Data here . Total Revenue: Shutterfly saw a total revenue increase of more than $800 million from 2016 to 2018 (CAGR of 31%) while recording $1.9 billion in revenue in FY 2018. Revenue growth was driven by the better-than-expected performance from the Lifetouch acquisition and strong performance of its Business Solutions segment, partially offset by a lower-than-expected performance from its Customer segment. Lifetouch and SBS are expected to continue their robust growth in FY 2019, while the consumer segment is also expected to improve from its sub-par performance in 2018. Consumer Segment Consumer segment revenue decreased by $25 million year over year to $972 million in fiscal 2018, primarily due to weak performance of the Tiny Prints boutique, a premium cards and stationery brand. This segment contributed more than 80% of total revenues over 2015-2017. However, this contribution shrunk to less than 50% in 2018 due to the Lifetouch acquisition and growth of the Business Solutions Segment. We expect the segment’s revenue to decline by 0.5% to $967 million in FY 2019, with average price per order increasing to $44 due to a favorable product mix and larger basket sizes. Total number of orders for Shutterfly declined by 11.4% (y-o-y) in 2018, and we expect the number of orders to further decline by 6% to approximately 22 million in 2019. Shutterfly Business Solutions Segment (SBS) This segment has seen robust growth in recent years, with revenues increasing from under $100 million in 2015 to $231 million in 2018 (CAGR of 33%) SBS grew revenues by 19% in 2018 to $231 million, driven by higher than expected volumes from existing customers. We expect similar trends going forward, with 2019 revenues of $277 million, growing at an average rate of 12% in next 3 years. Despite the acquisition of Lifetouch in 2018, the segment’s contribution to total revenues has increased from less 10% in 2015 to approximately 12% in 2018. We expect this figure to further increase to 13% in FY 2019. Lifetouch Segment Shutterfly acquired Lifetouch, a national leader in school photography, in April 2018 for $825 million. The company reported the financials for Lifetouch under the newly created Lifetouch segment. Lifetouch generated $799 million of non-GAAP revenue for the nine months ended December 31, 2018 with strong performance in schools, preschool, offset by a modest decline in Studios and a continued decline in Church. Shutterfly expects Lifetouch revenue growth to be relatively flat in FY 2019 with net revenue ranging from $915 million to $935 million. However, this excludes $25 million of Lifetouch acquisition revenue synergies expected to be achieved in 2019. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Research Like our charts? Explore  example interactive dashboards  and create your own.