A unique interactive experience

Investors leverage our research to quickly see what really drives a company's value, test what-if scenarios, and make better investment decisions. At the core of each piece of content is a rigorous and deep analytical model, but what makes our research different is the Trefis Interactive Experience. The Trefis Interactive Experience transforms those analytical models into a format that lets you drill down into the data and create your own "what-if" scenarios. We cover hundreds of large-cap stocks and our content is trusted by millions of investors and executives globally on numerous leading online brokerage platforms, as-well-as on platforms such as Thomson Reuters and Forbes.


COMPANY OF THE DAY : PEPSICO

PepsiCo announced that it has agreed to acquire SodaStream for $3.2 billion, as part of its push for healthier products.

See Complete Analysis for PepsiCo
Screenshot of forecast demo
To use this tool, please upgrade Adobe Flash Player here.

FORECAST OF THE DAY : LULULEMON'S RETAIL STORE COUNT

Lululemon's retail store count stagnated in 2017, but we expect long-term growth driven by international expansion.

Read more...
Screenshot of forecast demo
To use this tool, please upgrade Adobe Flash Player here.

RECENT ACTIVITY ON TREFIS

EL Logo
Strong Brand Performance By Estee Lauder in Q4 Results
  • By , 8/21/18
  • tags: EL
  • Estee Lauder  (NYSE: EL) continued with its growth momentum in Q4 2018 reporting a 14% jump in sales to $3.30 billion from $2.89 billion in the same period last year and diluted net earnings per common share increased 20% to $.61. The company’s earnings were driven by strong performance in the skin care segment, growth from online and travel retail segments, and emerging markets particularly Asia (China). The performance this quarter reflected robust global demand across their portfolio, with virtually all their brands posting sales growth. Each of its three biggest brands grew globally, with exceptional growth in Estée Lauder. Driven by this Q4 performance, Estee Lauder has forecast growth in its full fiscal 2019 sales to increase between the band of 7% – 8% with net earnings per share between $4.62 and $4.71. Please refer to our dashboard  Key Takeaways from Estee Lauder’s Q4 results. Skincare segment drives top line with 29% y-o-y growth The skin care segment, which constitutes over one-third of Estee Lauder’s sales, posted 29% growth in sales in the fourth quarter. The company posted this exceptional performance driven by strong innovations, increasing demand from younger consumers, and gains from its hero products: Estée Lauder, La Mer, Origins, and Clinique brands. Driven by continued success of the recent launches — Advanced Night Repair Eye Concentrate Matrix — the Estee Lauder brand saw strong growth from China and the travel retail segment. La Mer saw growth coming from new products in the Genaissance collection and launch of The Moisturizing Matte Lotion. In addition, Origins generated sales growth from every geographic region, led by Asia. Makeup segment saw 4% jump in sales The makeup segment of the company continued to see increased sales from the acquisitions of Too Faced and BECCA of the last fiscal year. Double-digit increases were driven by strong double-digit increases from Estée Lauder and Tom Ford,  Too Faced, BECCA, and La Mer. Net sales for the Fragrance segment also increased 11%, primarily due to strong double-digit gains across all geographic regions from luxury brands. Hair care segment also increased by 8% primarily due to the successful launch of new Aveda products. Asia-Pacific region leads sales increase Geographically, sales from the Asia-Pacific region led top line growth by rising 29%. Europe, Middle-East and Africa also saw sales rise by 19%. Sales from the Americas saw more modest growth at 2%. We anticipate rising disposable incomes in the emerging markets of Asia-Pacific to continue to boost sales growth from the Asia-Pacific region as it constitutes a growing share of Estee Lauder’s top line. Outlook for the full fiscal 2019 The company forecasts the full fiscal 2019 sales to rise between 7% to 8% (excluding currency translation and impact from the adoption of the new revenue recognition) versus the prior-year period, reflecting the strong momentum behind the company from solid performance in 2018. The continued emphasis on a digital-first approach and on fast-growing markets and channels is also expected to contribute to this growth.   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.
    PEP Logo
    Why Is PepsiCo Paying Such A High Price For SodaStream?
  • By , 8/21/18
  • tags: PEP SODA KO KDP
  • As the beverage industry undergoes a transformation with carbonated soft drinks losing their position and consumers preferring “healthier” beverages, cola giants have focused their attention on other avenues to spur their sales. One such route is the sparkling water category which has witnessed spectacular growth rates. The market for sparkling water is set to continue its strong growth in the next few years, driven by the introduction of new and innovative flavors, as well as its image as a healthy alternative to carbonated drinks.  The Coca-Cola Company  (NYSE:KO) and  PepsiCo (NYSE:PEP) have to play catch-up to established brands such as Perrier, San Pellegrino, and National Beverage’s LaCroix brand. While Coca-Cola announced the acquisition of premium sparkling mineral water brand Topo Chico in the beginning of October 2017, PepsiCo launched its own sparkling water brand called Bubly. Given the enormous interest in this space, PepsiCo’s $3.2 billion acquisition of SodaStream  (NASDAQ: SODA), the number 1 sparkling water brand by volume in the world, and the leading manufacturer and distributor of Sparkling Water Makers, does not come as much of a surprise. We have a $122 price estimate for PepsiCo, which is higher than the current market price. The charts have been made using our new, interactive platform. You can modify the different driver assumptions by clicking here for our interactive dashboard on Our Outlook For Pepsi In 2018, to gauge the impact on the revenue, earnings, and price per share metrics. We have also created an interactive dashboard on Our Outlook For SodaStream In 2018 which shows the expected revenues and the P/E multiple used to reach the $144 per share acquisition price for the company. If you don’t agree with our forecast, you can modify the drivers to attain your own fair price for the company. Tremendous Scope For Growth In The Sparkling Water Market Sales of sugary, carbonated beverages have been on the decline for a while now, with consumer preferences tilting towards more healthier options such as teas and flavored waters. Diet drinks, which were once considered healthy, have received a lot of flak with increasing concerns about the dangers of artificial sweeteners. This shift away from carbonated drinks and diet sodas has precipitated the growth of the sparkling water category. Given that nationally, sparkling water has been growing at a much higher rate than the overall bottled water segment, 38% growth last year, compared to 7% for the whole category, it is definitely a significant market for PepsiCo to ply its trade. This tremendous growth is expected to continue in the future as well, as the soda sales contract, and consumers look toward sparkling water to satisfy their cravings for carbonation. For PepsiCo, SodaStream can be expected to form only a small portion of the North American Beverage revenues, once the acquisition is complete, given the fact that the latter has a very small presence in the U.S. This will result in a lower level of cannibalization for PepsiCo given the similar products offered by both companies. Looking ahead, SodaStream will be able to leverage PepsiCo’s massive distribution network to expand its presence in North America. SodaStream also makes countertop machines that enable consumers to easily transform ordinary tap water into sparkling water and flavored sparkling water. By marketing these products as ones that promote health and wellness, the company has been able to capture a significant market share. According to the company, once a consumer purchases its Sparkling Water Maker for roughly $60, the spending doesn’t stop there. Assuming a 10-year lifetime of the machine, approximately $40 per year is expected to be spent every year on accessories such as exchangeable CO2 cylinders, carbonation bottles, and flavors, taking the total revenue from a single unit to $460 . The company is also marketing its products on their environmentally friendly nature. The company sells reusable bottles, reducing the plastic waste, which holds a significant appeal to a number of consumers concerned about the escalating waste from plastic bottles and soda cans. Under CEO Indra Nooyi, PepsiCo has also been focusing on becoming more resource efficient and minimizing its environmental impact. See Our Complete Analysis For PepsiCo 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 More Trefis Research Like our charts? Explore  example interactive dashboards  and create your own.
    P Logo
    How Will Subscriber Growth Drive Pandora In The Second Half Of 2018?
  • By , 8/21/18
  • tags: P SIRI
  • Pandora (NASDAQ: P) recently reported better than expected Q2 results, beating both revenue and earnings consensus estimates. Revenues in the quarter came in at about $385 million (+2% year-on-year), while the company reported a loss of 15 cents per share on an adjusted basis. The narrower than expected loss was driven by strong growth of its premium subscriber base and ARPU, slightly dampened by subdued advertising revenue. Advertising revenue contributes nearly 75% of its overall revenue, and the company has seen its active monthly users and total listener hours decline steadily over the years. However, Pandora has seen strong growth in its premium subscribers. The company expects the advertising to improve as a result of its recently concluded acquisition of AdsWizz  – which should expand its addressable market. On the other hand, subscription growth is set to continue with growth in premium subscribers. Further, its partnerships with AT&T, Snap, Cheddar, and T-Mobile should help boost Pandora’s paying subscribers over the long run and provide a strong long-term growth opportunity. These various digital partnerships should also help Pandora lower its subscriber acquisition costs and retain subscribers. In addition, any changes to royalty payments should increase expenses for the company, but could limit damages charged in related lawsuits. Further, the organizational redesign should help it to improve margins. We have updated our model – raising our price estimate for Pandora to $8, which is slightly below the market price, based on the expected growth of its subscribers as a result of multiple partnerships with AT&T, Snap, Cheddar, and T-Mobile. Our interactive dashboard analysis of Pandora’s  Performance In Second Half Of 2018   details our expectations for the second half of 2018. You can modify the different driver assumptions, and gauge their impact on the company’s valuation. For the second half of 2018, Pandora remains optimistic about further expanding its subscriber base, driven by  podcast services, more device partnerships, multiple digital partnerships with AT&T, Snap, Cheddar, and T-Mobile, and increased music consumption. The AT&T deal, which bundles Pandora Premium with AT&T’s unlimited data plan, should boost its subscriber base and add significant value to the top line in the near term. Further, Pandora expects this partnership to provide subscribers with a higher lifetime value as a result of lower churn and lower acquisition costs. In addition, its co-marketing partnership with Cheddar should give Pandora access to a host of young subscribers. This should drive subscription trials for Pandora. However, the Snap partnership is unlikely to add significant value to the top line in 2018. The deal, over the long run, should boost ad revenues and could potentially boost Pandora’s paying subscribers, but is unlikely to move the needle much in the immediate term. The company’s recently concluded acquisition of AdsWizz – a digital audio ad tech company – which should likely improve its advertising capabilities and expand its addressable market. This should help draw more advertisers to the digital audio space. Given the fact that audio is the fastest growing format in digital advertising, this acquisition makes sense for Pandora. Furthermore, it is expected to be accretive to its earnings as it should help them generate higher revenues from free listeners and should provide decent medium-term growth opportunities. We expect the positive outlook for Pandora to continue into rest of 2018, driven primarily by the massive growth opportunity in the digital audio market, smart speakers, and increased consumption of podcasts. 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
    BABA Logo
    What To Expect From Alibaba's Q1 Earnings After A Strong End To Fiscal 2018
  • By , 8/21/18
  • tags: BABA AMZN EBAY GOOG BIDU ORCL
  • Alibaba  (NYSE:BABA) is scheduled to announce its fiscal Q1 2019 earnings on Thursday, August 23. The e-commerce giant reported a strong set of results through fiscal 2018 ended March, with high double-digit year-over-year growth in revenues across segments. While recent acquisitions (Lazada, Youku Tudou, Cainiao ) have fueled growth in some segments, Alibaba has also sustained impressive growth across its core commerce business. Going forward, this growth is expected to continue through the current fiscal year, with high double-digit revenue growth across segments. However, the company’s efforts to expand internationally, integrate acquisitions and spend on fast-growing revenue streams such as Digital Media and Innovation Initiatives is expected to take a toll on its profit margins. We have created an interactive earnings preview dashboard for Alibaba where we have summarized our expectations for the company’s Q1 FY’19 results. If you disagree with our forecasts, you can change expected segment revenue and margin figures to gauge how it will impact expected EPS for the full year. For the June ended quarter, we forecast core commerce revenue (including retail and wholesale in domestic and international markets) combined to increase 35% y-o-y to ¥58 billion ($8.5 billion). While the company has been successful in capturing a significant portion of the domestic online retail market (which is a ¥6.6 trillion, or just over $1 trillion, market ), Alibaba intends to foray into offline retail as well in the coming years. This should help drive growth in the long run. Similarly, we forecast Digital Media and Entertainment revenue (mainly from Youku Tudou) to increase at 35% to ¥5.5 billion ($800 million). In addition we expect Cloud Computing to continue to outpace overall growth, with a 70% increase in revenues to just over ¥4 billion ($600 million). We forecast adjusted EBITDA margins to be slightly lower than comparable prior year levels at just over 44%. Accordingly, we forecast net income and EPS to be around 8-10% higher on a y-o-y basis to ¥22 billion ($320 million) and ¥8.30 ($1.20), respectively. See Our Full Analysis For Alibaba View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    AAPL Logo
    New 6.1-Inch iPhone Could Be Apple's Most Important Device Since iPhone 6
  • By , 8/21/18
  • tags: AAPL SSNLF
  • Apple’s  (NASDAQ:AAPL) iPhone line-up looks set for a big refresh this fall, with the company expected to launch three new devices . While Apple is likely to introduce the second generation 5.8 inch iPhone X and a plus-sized version of the iPhone X, the company is also expected to launch a more affordable 6.1-inch all-screen LCD-based device, which we believe could be the most important new iPhone since the iPhone 6. Below we take a look at some reasons why that may be the case. Our interactive dashboard on  What’s Driving Our Price Estimate For Apple details our expectations for the company through the rest of the year and the factors influencing our price estimate.You can modify any of our forecasts or key drivers to see the impact that changes would have on Apple’s earnings and price estimate. Demand For A Fresh Looking iPhone At An Accessible Price Point The iPhone’s form factor and design play a significant role in driving sales, as more customers feel compelled to upgrade when the company launches a fresh looking device. Apple saw its last major upgrade cycle in FY’15 (financial year ends in September) driven by the iPhone 6, which featured larger displays, with shipments soaring by almost 37% year-over-year.  However, the basic design for the iPhone remained the same over the next two years, with shipments declining in FY’16 while growing by just 2% in FY’17. Although Apple launched the completely overhauled iPhone X in late 2017, the device hasn’t set off a major upgrade cycle considering its $1,000 price point, and we expect FY’18 iPhone shipments to only see low single-digit growth levels. However, a new 6.1 inch iPhone could drive a major upgrade cycle for Apple, considering that it is expected to offer iPhone X’s signature edge-to-edge display and potentially the FaceID biometric system, which could entice users of older devices to upgrade to a fresh looking phone without having to spend on a more expensive iPhone X. The Device Could Be Quite Lucrative While reports indicate that the all-new device could start from as low as $600, we expect that it will be priced closer to the iPhone 8 and 8 Plus, which start at $700 and $800, respectively. This is because Apple hasn’t had trouble selling devices at these price points, as the 8 Plus was its best selling handset in the U.S last quarter. Apple may also be able to keep margins on the new iPhone thick, as it is expected to eschew some costly features, including the OLED screens that it has had trouble procuring in favor of more widely available (and economical) LCD panels. The device is also unlikely to offer the 3D touch pressure-sensitive display that has been a staple of most iPhones launched since 2015, while only sporting a single camera, as opposed to the dual rear camera setup on the current iPhone X and 8 Plus models.  At the same time, product differentiation would also be reasonably strong for the iPhone X models (which should be priced at a ~$200 premium), as they could cater to users seeking cutting-edge camera and display technology.
    GPS Logo
    Old Navy To Drive Growth For Gap Inc. In The Second Quarter
  • By , 8/21/18
  • tags: GPS URBN AEO ANF
  • After a flurry of retail cheer in the first quarter results, the momentum expected by  Gap Inc.  (NYSE:GPS) proved to be a bit of a downer. The company anticipates comparable sales for fiscal year 2018 to be flat to up slightly . Although the company delivered its sixth consecutive quarter of positive comparable sales growth in Q1, its revenue growth was pressured as a result of the unseasonably cold weather conditions. Consequently, the ability of the company to reach the high end of its full-year guidance, of EPS to be in the range of $2.55 to $2.70, has become even more challenging. On the other hand, the company remained upbeat regarding its second quarter performance. Consequently, a 5.3% growth in revenue and a 24% improvement in earnings, aided by a reduced tax rate, is expected. We have a $33 price estimate for Gap Inc., which is slightly higher than the current market price. The charts have been made using our new, interactive platform. You can modify the different driver assumptions by clicking here for the interactive dashboard  Our Outlook For Gap Inc. In FY 2018 to gauge their impact on the revenues, earnings, and price estimate for the company. Factors That May Impact Future Performance 1. Higher Retail Sales: According to the U.S. Census Bureau, retail sales were up 6.6% in June 2018 versus June 2017, and 0.5% higher than May 2018. Categories with strong growth included clothing/clothing accessories, which rose 5.1% as compared to the previous year, a factor that should bode well for apparel retailers. 2. Continued Strength of Old Navy:  The brand was able to deliver comps growth of 3% in Q1, against a tough comparison of 8% last year. Growth was seen in all categories at Old Navy, with  Denim having the biggest quarter comp in the brand’s history . The fact that the brand’s merchandise tends to be skewed towards the affordable segment has worked in its favor. Seeing its impressive performance, Gap has accelerated Old Navy store openings, with over 30 opened in FY 2017, and 9 in Q1 2018. The company feels the brand remains under-penetrated when compared with its peers, and hence, plans to double the store openings as compared to FY 2017, which should help to increase the revenues. 3. Popularity Of Athleta:  According to the NPD group, the activewear industry is the “primary driver of growth opportunity” for the apparel industry . Sales in this category increased 2%, valuing the market at roughly $48 billion in 2017. Hence, it is no surprise that Gap’s Athleta brand has been performing well, in fact, at a much faster rate than that of the industry. The brand had another strong first quarter with double-digit growth, and we expect the momentum to continue through FY 2018. In line with its growth strategy detailed during FY 2017, the company expects store openings to be focused on Athleta and Old Navy, with closures weighted toward Gap and the Banana Republic. Given the strength of its athletic wear business, GAP CEO Art Peck has also stated that the company is looking for an acquisition in the space . 4. Margin Pressure at the Gap Brand: The operating model improvement process at the company’s namesake brand has been fraught with inventory problems. As a result, the company was saddled with excess inventory coming into the first quarter, which consequently impacted the company’s sales from this brand as well as its ability to optimize its margins, since it forced the brand to be more promotional. The overall gross margins of the company fell 20 basis points as compared to the previous year, or a decline of 120 basis points if the impact of the adoption of the new revenue recognition standard is excluded. While the company expects the margin pressure to remain in the second quarter, its magnitude should be reduced. 5. Improvement In Online Business:  The online and mobile business is the place to be these days, and Gap has ensured its presence is felt in the space. The company has one platform for all of its brands, ensuring customers can purchase items for any of them in one place. This has also ensured its new brands get the recognition that would not have been possible if they had had a separate web presence. An upshot of this is that the company was able to deliver strong growth from its online and mobile channels in the first quarter, and was able to beat its own target of reaching $3 billion in online revenues last year by over $100 million. The company has also focused its investment into the native mobile apps and on improving site speed. These factors should ensure the growth of this segment in the future. 6. Optimizing Store Fleet: Gap Inc. has continued the process of optimizing its store count, including reducing its exposure to low productivity stores. The company has also seen an opportunity for increasing the store count of Athleta, Old Navy, and the factory and outlet expressions at the Banana Republic and Gap. The company noted traffic trends in 2017 that were better than the levels seen in the industry, and this trend continued in the first quarter. See our complete analysis for Gap Inc.   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.
    VMW Logo
    What To Expect From VMware's Second Quarter Earnings
  • By , 8/21/18
  • tags: VMW MSFT CSCO HPE IBM SAP ORCL CRM
  • VMware (NYSE:VMW) is scheduled to announce its Q2 fiscal 2019 earnings on Thursday, August 23. The company reported a 14% increase in net revenues to just over $2 billion in the first fiscal quarter. License revenues rose 21% on a y-o-y basis to $774 million for the quarter, while Services revenues were up 10% to $1.2 billion. This has been the prevalent trend in recent quarters, with the virtualization and cloud computing provider demonstrating strength in its core business and reporting a high growth in areas such as network virtualization, hybrid cloud, hyper converged software and vSAN. The growth is likely to continue in the coming quarters as well. We have created an interactive earnings preview dashboard for VMware where we have summarized the company’s guided segment revenues and operating margin, and have used our forecasts to arrive at earnings for the quarter. If you disagree with our forecasts, y ou can change expected revenue, operating margin and income margin figures for VMware to gauge how it will impact expected EPS.  Based on VMware’s positive guidance for revenues and profit margins for the fiscal second quarter, License revenues are forecast to be up in the mid-teens to $875 million due to an expected increase in license bookings. Similarly, Services revenues are expected to be up by nearly 10% to $1.3 billion. In addition to the strong revenue growth, VMware’s non-GAAP operating margin is forecast to be nearly 3 percentage points higher over Q2’18 at 33.5%. In recent quarters, VMware’s operating profit margin (non-GAAP) has been at record high levels of around 33%. This trend is expected to continue through FY’19 due to a limited increase in SG&A expenses. As a result, net income and EPS should increase by around 25% on a y-o-y basis to $615 million and $1.49, respectively. See Full Analysis For VMware 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 More Trefis Research Like our charts? Explore  example interactive dashboards  and create your own
    TGT Logo
    What To Expect From Target's Q2 Earnings
  • By , 8/21/18
  • tags: TGT WMT AMZN
  • Target  (NYSE: TGT) is scheduled to announce its fiscal second quarter results on Wednesday, August 22. The retailer continued to perform well in its fiscal first quarter, as both its revenue and earnings per share (EPS) came in ahead of market expectations. Target has been looking to overhaul its business model with the expansion of small-format stores, in addition to revamping its existing stores and improving supply chain management, since the beginning of 2017. Target’s revenue increased 3% year-over-year (y-o-y) to $16.8 billion, primarily due to a 3.0% increase in comparable sales in the first quarter. The company’s digital comparable sales grew 1.1% y-o-y, while store comparable sales grew a robust 1.9% y-o-y. The fact that the company has been able to grow its store comparable sales, despite significant competitive pressure, suggests that its initiatives are resonating well with customers. In terms of the bottom line, the company’s GAAP EPS from continuing operations and adjusted EPS grew 9% y-o-y in Q1. Our $69 price estimate for Target’s stock is around 15% below the current market price. We have created an interactive dashboard on what t o expect from Target’s fiscal Q2 and fiscal 2018, which outlines our forecasts for the company. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation. Overview Of Performance Target saw its stock decline nearly 10% in 2017, but the company’s stock price has increased more than 20% over the course of 2018. The results of Target’s business transformation have started to show in the company’s financials from Q1. However, the retailer’s aggressive push to keep up with Amazon and Walmart, both online and in grocery, is leading to shrinking margins. In Q1, Target’s gross margin was 29.8%, down 20 basis points, largely due to increased fulfillment costs resulting from growth in digital sales. On the cost side, selling, general and administrative (SG&A) expenses grew 6% y-o-y, due to an increase in compensation expenses, reflecting investments in store hours, wage rates and team member incentives. Going forward, we expect this margin pressure to continue in Q2 as well. We also expect the company to continue to post an increase in its revenue growth rate in Q2. Target expects its comparable sales growth to accelerate into the low to mid-single-digit range in Q2, primarily due to increased sales in warm weather categories in May and an extra week of the back-to-school season in the quarter compared to last year. The company also expects a decline of about 40 basis points in its operating margin in the quarter. In addition, the retailer expects D&A expenses to come in about $40 million higher than last year, reflecting accelerated depreciation on assets taken out of service due to the remodel program. To add to that, the company expects its second quarter net interest expense to come in about $15 million lower than last year, and also expects an effective tax rate in the range of 22% to 25%. Altogether, the retailer expects GAAP and adjusted EPS of $1.30 to $1.50 in the second quarter. Fiscal 2018 Outlook Target plans to leverage its network of stores, and Shipt’s technology platform and community of shoppers, to quickly add same-day delivery to its capabilities. In addition, the company is looking to open 30 small-format stores and remodel close to 325 stores this year. Target is on track to deliver its previous guidance for a low-single-digit increase in comparable sales and GAAP and adjusted EPS of $5.15 to $5.45. We have forecast Target’s total revenue for fiscal 2018 by estimating the revenues from the company’s domestic sales. Further, we have calculated the retailer’s U.S. revenues by estimating the number of stores, square footage per store and revenue per square foot in fiscal 2018. We expect Target’s 2018 store count in the U.S. to be over 1840, with an average square footage per store of 300k and revenue per square foot of $132, translating into around $73 billion (+2% y-o-y) in domestic revenues in fiscal 2018.
    HPQ Logo
    What To Expect From HP's Fiscal Q3 Earnings
  • By , 8/21/18
  • tags: HPQ IBM MSFT HPE
  • HP Inc.  (NYSE:HPQ) is scheduled to announce its fiscal third quarter earnings on Thursday, August 23. In recent quarters, the company has reported growth across segments, with solid growth in compute and storage revenues. This trend continued in the April ended quarter as well, with the company reporting a 13% increase in net revenues to $14 billion. Much of the growth was driven by steady growth in the Computing and Printing segments, with both notebook and desktop sales contributing to growth. However, the company’s non-GAAP operating margin was down 20 basis points over the comparable prior year period to 7.6%. Despite the slightly lower operating profit margin, high revenue growth led net income and earnings per share to increase in double digits. This trend is expected to continue in the third quarter as well. We have created an interactive earnings preview dashboard for HP that highlights our expectations for Q3’18. You can modify drivers such as segment revenues and margin figures to see how the company’s earnings would be affected in the quarter. For the July ended quarter, we expect the company continues to focus on the consumer market for the Computing segment, which has helped drive revenues in recent quarters. We forecast Personal Systems (including sales of desktops, notebooks and workstations) revenues to increase 6-7% on a y-o-y basis to $8.9 billion. Within Personal Systems, notebook sales have increased in the last few quarters due to the robust demand for Spectre x360 and the new line of Omen X gaming laptops. Similarly, desktop and workstation revenues are also expected to increase due to a corresponding increase in unit sales. In addition, we forecast printing segment revenues to increase 6% to just under $5 billion. As a result, we expect net revenues to increase in high single digits to $14 billion. We forecast HP’s adjusted operating margin to be roughly flat over the prior year period at 8.5%. Resulting net income and EPS are expected to increase 12-13% over Q3’17 to $815 million and 49 cents, respectively, which is in line with consensus estimates . See our full analysis for HP 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
    LB Logo
    What To Expect From LBrands Q2 2018 Earnings
  • By , 8/20/18
  • tags: L-BRANDS LB
  • L Brands  (NYSE: LB), is scheduled to announce its second quarter 2018 earnings on August 22 . During the Q1 earnings the net sales of the company rose to $2.626 billion, up 8% from the prior-year quarter, with adjusted earnings per share at $0.17. This was driven by growth across its Bath and Body Works segment, a well-positioned customer strategy,   international diversification, and rising online sales. Store only comparable sales had also increased 3% year over year.  Even though the BBW segment continues to perform well, the results have been disappointing for Victoria’s Secret. On the other hand,  VS Stores still continue to be the most important segment for the company as it derives close to 50% of its revenues from this segment and it is striving to get it back on track. With the growth in its Q1 results, Management now envisions its Q2 earnings to be in between the band of $0.30 – $0.35 per share. Recent growth initiatives taken by L Brands viz: revamping the business by improving the store experience, localizing assortments, and enhancing direct business, will help it to generate incremental sales and increase store transactions through higher conversion rates in Q2 and beyond. Additionally, the company’s foray into international markets is likely to provide long-term growth opportunities and generate increased sales volumes. Please refer to our interactive dashboard: Our Expectations For LBrands’ Q2 2018 . Below are key factors that will likely drive L Brands’ second quarter earnings results. Bath & Body Works segment will continue to perform well  – Strong performances by the company’s home fragrance assortment drove this segment’s sales and hence Bath and Body Works sales rose by 21.4% to $1,23.6 million in Q1. This segment is likely to boost growth in the upcoming earnings as well. Revival in  Victoria’s Secret Performance –  The decline in traffic in brick-and-mortar stores has been a major cause of concern for VS, causing its sales to decline in Q1 earnings by 47.6% to $83.2  million. To revive the performance the company has since made attempts to improve their understanding of customers’ demands in order to make the products more relevant and relatable to them. VS is working on providing the most innovative and fashionable bras, in all its segments, which should positively impact its Q2 results. Increasing footprint in the International Markets –  With their sights set on the global marketplace, the international business will boost the company’s top line and could become a source for long-term growth and increased sales volumes. L Brands’ store operations around the world are a mix of company-owned and franchised locations both upholding the highest brand standards with no visible difference to the customer. Steady focus on delivering a differentiated customer experience will aid strong returns –  L Brands continues to revamp business by improving the store experience, localizing assortments, and enhancing direct business. These measures will facilitate it to generate incremental sales and increase store transactions through higher conversion rates.  A sustained focus on cost containment, inventory management, merchandise, and speed-to-market initiatives has kept L Brands afloat in a competitive environment. Looking ahead,  we believe that driven by the above trends the company is focused on improving performance in the Victoria’s Secret business, staying close to its customer, improving the customer experience in stores and online, and improving assortments in compelling new product launches with steadier footing this coming Q2 earning.   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.  
    DE Logo
    What Lies Ahead For Deere After Strong Q3 Results?
  • By , 8/20/18
  • tags: DE CAT
  • Deere (NYSE:DE) announced its fiscal Q3’18 earnings on August 17, reporting a massive 32% increase in net revenues to slightly over $10.3 billion. Agriculture and Turf revenue was up 18% y-o-y to under $6.3 billion while Construction and Forestry revenue nearly doubled to slightly under $3 billion. Deere’s Agriculture and Turf revenues have soared as a result of robust replacement demand for large agricultural equipment, increased investment by farmers into upgrading their crop spraying equipment, and a recovery in commodity prices. Comparatively, the Construction and Forestry segment saw robust revenue growth in recent quarters, largely due to the contribution from Wirtgen, coupled with increased investment in oil & gas, transportation, and housing. Going forward we expect this trend to continue through the end of the current year. We expect continued global tailwinds – increased global food consumption and higher population density that will drive a greater need for infrastructure development – to drive these results. We have summarized our expectations and forecasts for FY’18 results on our interactive results forecast dashboard for Deere . If you think differently, you can change expected segment revenue and margin figures for Deere to gauge how it will impact the company’s results for fiscal year 2018. Outlook For FY’18 And Beyond The Agriculture and Turf segment enjoyed a strong first three quarters of 2018, as margins improved as a result of a recovery in commodity prices and a favorable sales mix. Deere expects further improvement in the Agriculture segment, as a result of agricultural mechanization in developing countries and increased demand for food due to a rising population. This should result in strong order activity – increased replacement demand and demand for new equipment. Further, its most recent acquisition of Blue River Technology  should help farmers reduce costs by decreasing the use of herbicides, which could lead to increased demand for its crop spraying equipment and provide decent long-term benefits. In addition, the acquisition of King Agro should help farmers improve productivity, which should further increase the demand for its spraying equipment. Moreover, the acquisition of PLA  should fuel Deere’s commitment to providing cost-effective equipment, technology, and services to farmers, which should help farmers improve productivity. The acquisition further expands Deere’s market position in Latin America . We expect a positive outlook for Deere in the near term, driven by improving conditions of the agriculture market, and  increased global food consumption, which will likely spur demand for its agriculture products. The Construction Industry segment saw robust growth in the first three quarters of 2018, as a result of increased investment in oil & gas, housing, and transportation coupled with contribution from Wirtgen. Construction spending is projected to remain strong in 2018, due to the strengthening of the U.S. economy, which should boost the U.S. Housing market and construction spending . This growth, coupled with the Wirtgen acquisition, should boost Deere’s Construction business in the coming years. The implementation of tariffs on steel and aluminum will no doubt increase the costs for Deere’s Construction Industry segment, which is heavily reliant on steel. Moreover, the increase in raw material costs as a result of the steel tariffs should result in a hike in prices of the goods manufactured by Deere. See our complete analysis for Deere 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
    JPM Logo
    Securities Trading Revenues For Largest U.S. Investment Banks Exceeded $20 Billion For Second Consecutive Quarter
  • By , 8/20/18
  • tags: BAC C GS JPM MS
  • The five largest U.S. investment banks followed up their extremely strong securities trading performance for the first quarter of the year with another strong showing in Q2 2018, with these banks collectively reporting nearly $20.4 billion in trading revenues for the quarter. While this is well below the seasonally elevated figure of $24 billion for Q1 2018, it is roughly 10% ahead of the $18.6 billion reported in Q2 2017. Notably, the average securities trading revenues for these banks over the 18-quarter period from Q3 2013 was around $18.3 billion – illustrating the impact of upbeat market conditions over recent quarters on these revenues. We examine the trends in trading revenues for these banks as a part of our interactive model on securities trading revenues for the five largest U.S. investment banks . We highlight key observations related to their trading revenues below. The table below details the trend in total securities trading revenues (equity as well as fixed income) for each of these banks in the last five quarters. The green-to-yellow shading along a column highlights the relative performance of each bank in any given quarter. JPMorgan’s dominance in the securities trading industry is evident here. Notably, the diversified banking giant’s average trading revenues over the last twelve quarters was nearly $5 billion – a figure that is almost 30% more than that for its closest rival Citigroup ($3.8 billion). While the average revenue figure for Goldman Sachs and Bank of America over this period was nearly identical at $3.36 billion, Morgan Stanley saw an average figure just below $3.3 billion. JPMorgan has ranked #1 in nearly every quarter since Q4 2010 – with the exception of Q4 2012, when Goldman Sachs grabbed the top spot – primarily due to its strong presence in the global FICC (fixed-income, currencies and commodities) trading industry. Citigroup stands out in this list as the only bank to report lower trading revenues year-on-year. This can be attributed to the fact that the bank has a much smaller equity trading desk compared to its peers, and as Q2 was a particularly strong period for equity trading, Citigroup did not benefit to the same extent as the other banks. Details about how changes to Securities Trading Fees affect the share price of these banks can be found in our interactive model for  Goldman Sachs | Morgan Stanley | JPMorgan Chase | Bank of America | Citigroup Additionally, you can understand the impact of  Investment Banking Fees on the share price of these banks in our interactive model for  Goldman Sachs |  JPMorgan |  Morgan Stanley |  Bank of America | Citigroup 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
    CHL Logo
    How Has China Mobile Fared Thus Far In 2018?
  • By , 8/20/18
  • tags: CHL CHA CHU
  • China Mobile  (NYSE:CHL), the largest Chinese wireless carrier, had a relatively mixed first half of 2018, as growth in its core mobile business began to show some signs of slowing down, with its smaller rivals accelerating their subscriber additions. In this note, we take a look at how the company fared over the first half of the year and what lies ahead. Our interactive dashboard on what lies ahead for China Mobile in 2018 details our expectations for the company through the rest of the year. You can modify any of our forecasts or key drivers to see the impact that changes would have on China Mobile results. The carrier’s service revenues, adjusted for a new revenue recognition standard, grew by 5.5% to RMB 356 billion RMB ($52 billion), driven by a growing wireless and wireline broadband subscriber base. Meanwhile, its EBITDA margin expanded by 1% to 37.2%, driven by better control of marketing costs, lower equipment sales and lower base station operating costs. The company’s overall wireless ARPU fell from RMB 62.2 to RMB 58.1 ($8.45), despite a stronger mix of 4G users (75% subscribers were on 4G services at the end of H1, compared to 69% a year ago). The decline was due to lower handset data charges and the government’s move to cut roaming and long distance charges. With the growth in the core mobile business slowing down, China Mobile has been looking towards its wireline broadband operations and emerging businesses to drive future growth. On the broadband front, the company saw strong traction, with its subscriber base rising to 135 million in June 2018, from about 93 million in June 2017. The company noted that it accounted for about 57% of total household broadband net additions in China during the period. Notably, broadband ARPU also saw a marginal increase during the period to RMB 35. This is encouraging, considering that China Mobile had been playing the pricing card to win over new customers over the last few years. The company’s emerging businesses – such as video and mobile wallets also saw some traction, with revenues rising by 17.8% to about $4 billion. 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
    CHA Logo
    What Drove China Telecom's First-Half Earnings Beat?
  • By , 8/20/18
  • tags: CHA CHU CHL
  • China Telecom  (NYSE:CHA), the smallest of the three major Chinese wireless carriers, published its financial results for the first half of 2018 on Monday, beating market estimates. While operating revenues rose by 4.7% to RMB 193 billion ($28 billion) driven by a higher number of 4G subscribers, net profit grew by 8.1%.year-over-year on account of better cost management. Below, we take a look at some of the factors that impacted the company’s business and what lies ahead. We have also created an interactive dashboard analysis on  the outlook for China Telecom in 2018,  which allows users to modify key drivers and arrive at their own valuation estimates for China Telecom. Wireless Business Updates The company added about 32 million subscribers over the first half of the year, well ahead of its larger rivals China Mobile and China Unicom, who added just about 18.60 million and 18 subscribers, respectively, in the same period. China Telecom’s comparatively stronger growth is being driven by improving 4G coverage and its promotion of larger data traffic products, which are increasingly popular with subscribers. However, like the other two operators, the company’s overall ARPU faced pressure on account of lower data tariffs and the government’s move to slash mobile roaming and long distance charges. While overall ARPU declined by about 7.7% to RMB 52.4 ($7.65), 4G-only ARPU fell by 13% to 58.3 ($8.51). China Telecom’s 5G Plans The company also provided some updates on its plans to launch the next generation of 5G services, indicating that commercial trials could begin by 2019, with the commercial rollout beginning from 2020. The company intends to begin deployment in just a few locations where demand is likely to be higher while noting that both 4G and 5G will co-exist for an extended period with coordinated interoperability . China Telecom could have some advantages over its rivals in the rollout, considering that it is China’s largest broadband provider with the world’s largest fiber backbone network, which could act as backhaul for 5G data traffic. 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
    LOW Logo
    Can Lowe's Match Home Depot's Performance In The Second Quarter?
  • By , 8/20/18
  • tags: LOW HD
  • Lowe’s (NYSE:LOW) is scheduled to report its second quarter results on August 22, wherein a substantial rise in both revenues and earnings is expected. Unseasonably cold weather played a dampener in Lowe’s first quarter results, when the company missed consensus expectations on both revenue and earnings. The poor performance in the quarter, nevertheless, will not have an impact on the full year results. The company, in fact, revised its revenue and gross margin guidance slightly upward, though that was solely a result of the adoption of the new revenue recognition standard. For FY 2018, Lowe’s has now guided for a 5% growth in sales, 3.5% improvement in comps (deceleration compared to FY 2017), with a 60 basis points improvement in gross margin and continued decline in the operating margin. After an astounding performance by  Home Depot  (NYSE:HD) in the second quarter, much is expected from Lowe’s, as well. The latter has been playing catch up to the former in recent quarters, and the same trend is expected this time around as well, with analysts expecting a 7% increase in sales and a 29% growth in the EPS for Lowe’s, compared to 8% and 36%, respectively, posted by Home Depot. We have a  $108 price estimate for Lowe’s, which is higher than the current market price. The charts have been made using our new, interactive platform. You can click here for the interactive dashboard on Our Outlook for Lowe’s In FY 2018, to modify our driver assumptions to see what impact it will have on the company’s revenues, earnings, and price estimate. Factors That May Impact Future Performance 1. Rebound In Traffic:  Poor weather conditions during the month of April in some parts of the country had a considerable impact on the traffic, as well as on the sales of outdoor items, particularly in the gardening category in Q1. Lowe’s has a highly seasonal business, with 35% of Q1 and 40% of Q2 sales historically driven by outdoor categories . Consequently, the weather had a significant impact on the comps. On a more positive note, the company had stated that the comps in May were in the double-digits and we anticipate the fall in traffic in Q1 to be counterbalanced by strength in Q2. 2. Focus On Pro-Customers:  Professional customers place larger orders compared to the do-it-yourself segment, and better serving these customers can boost revenues for Lowe’s in the long term. While the recovery in the housing segment has benefited players such as Home Depot and Lowe’s, the latter’s growth has not been as stellar, primarily due to its focus on the do-it-yourself consumer segment. While the do-it-yourself segment is lucrative and accounts for the bulk of Lowe’s revenues, these customers are small ticket buyers and many are just one-time customers. On the other hand, pro-customers account for only 30% of Lowe’s revenues, but they enter into big-ticket transactions and are usually repeat customers. Keeping this in mind, the company has been focused on these customers, and was rewarded in the first quarter with accounts above the company average. 3. Soft Housing Market: The strength of the housing market can be gauged by looking at the residential construction spending and existing home sales, both of which were down in June (latest available data). The permits authorized for privately-owned housing units were down 2.2% sequentially, and 3% below the June 2017 level. Meanwhile, privately-owned housing starts in June were lower by a massive 12.3% versus May, and 4.2% below the corresponding figure for last year. The rising cost of construction materials is probably one of the main factors which has resulted in reduced confidence among builders. Moreover, according to the National Association of Realtors,  existing-home sales decreased for the third straight month in June, at a rate of 0.6% sequentially, and 2.2% versus June 2017. On the other hand, given the low housing turnover rate (about 5%), it implies that roughly 95% are staying at home and investing in the repair and renovation of their homes, which augurs well for Lowe’s. 4. Strong Macroeconomic Conditions: Unemployment is at its lowest level since 2000, and wages are improving. Although interest rate hikes make mortgages more expensive, on the whole, it is indicative of a strong economy. These factors signal a solid U.S. economy, and have given rise to supportive housing fundamentals. This bodes well for a company like Lowe’s that is heavily reliant on the improvement of the housing industry. 5. Digital Growth: Comps improved by 20% on the company’s website in Q1, which now accounts for 5% of the total sales. Lowe’s intends to continue upgrading the shopping experience, with features such as optimized search capability, expanded assortment, faster site speed, improved checkout, and next day delivery. Lowe’s also provides flexible fulfillment options of buy online, pick up in store, and buy online, deliver from store, besides making it easier for customers to engage with its in-home project specialists to request services. We expect strong growth from this segment to continue. 6. Stabilizing Gross Margins: Lowe’s has implemented new pricing and promotion analytics tools to ensure that the company is “competitive on highly elastic traffic driving products while increasing profitability across less elastic items.” This factor played a role in the stable gross margins witnessed in the first quarter. The metric also benefited from the adoption of the new revenue recognition standard. On the other hand, increased transportation costs had a negative impact on the gross margin. The company has guided for a gross margin expansion of 60 basis points for this year, along with 40 basis points of decline in the operating margin, as mentioned earlier. See our complete analysis for Lowe’s.   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.
    What Constellation Brands' Massive Investment In Canopy Growth Corp. Means For Both Companies
  • By , 8/20/18
  • tags: CONSTELLATION-BRANDS WEED CGC STZ TAP BUD DEO MO PM
  • Shares in Canopy Growth Corporation (TSX: WEED, NYSE: CGC) jumped over 30% after a $4 billion (~CAD 5 billion) investment by alcoholic beverage giant Constellation Brands  (NYSE: STZ) was announced. This heavy investment takes the share of the latter to 38%, while also providing further warrants that could take the stake to over 50%, from 9.9% previously, and makes it the biggest deal in the marijuana space till date. This news was not met favorably with investors of the liquor maker, on the other hand, whose shares tanked on the news of the over 50% premium paid to acquire the stake. With other beer makers entering the space, such as Molson Coors Brewing Co   (NYSE:TAP) and Heineken, this deal helps to strengthen STZ’s first-mover advantage. For Canopy, this investment gives them the money needed to achieve their global ambitions. We have a $47 price estimate for Canopy Growth Corp, which is slightly higher than the current market price. The charts have been made using our new, interactive platform. If you don’t agree with our analysis, you can click here for our interactive dashboard on Our Outlook For Canopy Growth Corp In FY 2019  (year ended March 2019) to modify our driver assumptions to see what impact it will have on the company’s revenues and price estimate. Canopy’s International Expansion Key To Its Lofty Valuation Canopy was an early mover in the Canadian and international marijuana market, which has helped it to become the biggest player in this field. In 2014, there were only a limited number of countries which had allowed cannabis usage in some form, including Canada, Israel, Czech Republic, Netherlands, and Uruguay. Since then, a number of other countries have relaxed their attitude to cannabis, and till date at least 20 additional countries including Argentina, Austria, Australia, Brazil, Denmark, Chile, Columbia, Germany, Greece, Israel, Italy, Jamaica, Lesotho, Mexico, Netherlands, Norway, Poland, Puerto Rico, South Africa, Switzerland, and Turkey have formally legalized medicinal cannabis access. Moreover, countries such as Belgium, Ireland, England, France, Portugal, Spain, and India are exploring the legalization for medical purposes. Such a prospect provides a tremendous avenue for growth, and enables Canopy to fulfill its lofty global aspirations. Constellation’s $4 billion investment will help the pot company to bolster its leadership position as it gives them the funds needed to strategically build or acquire key assets in the almost 30 countries pursuing a medical cannabis program. The money is also likely to be invested in cannabis edibles space. The appeal of the edibles market is expected to increase at a fast pace once legalized in Canada (expected to happen next year), given its growth in the U.S. For example, in Colorado, the share of edibles and concentrates went up from 11% and 13% at the beginning of 2014 to 15% and 29% by the end of 2017 . Furthermore, in California and Oregon, their combined share exceeds 35%. Constellation’s massive presence in the consumer goods industry will also help Canopy in better understanding customer trends and ensure better brand positioning. For Constellation, on the other hand, such an investment enables them to solidify their presence in an industry that is poised to boom. The liquor giant, who is dealing with falling revenues in its wine and spirits segment, and is faced with a declining beer market in the U.S., has an opportunity to offset this drag on its revenues, by introducing cannabis-infused drinks. Moreover, in a joint study of three universities, it was found that counties located in U.S. states where medical marijuana has been legalized, a 15% drop in monthly alcohol sales was reported. Although these products won’t be introduced in the U.S. until the federal law is changed, it is highly likely legislative changes could occur soon, with the two companies placed in the perfect position to be ready from day one.   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.
    NVDA Logo
    Expect GPUs To Continue To Drive Nvidia's Earnings Growth
  • By , 8/20/18
  • tags: NVDA INTC AMD
  • Nvidia  (NASDAQ:NVDA) is seeing solid growth in its GPUs segment of late, led by higher demand for its gaming GPUs. However, there has been a significant decline in sales of cryptocurrency-specific products. This trend will likely continue in the near term. The company has been a pioneer in introducing new advancements and catering to the high-end GPU market, and this should continue to drive Nvidia’s earnings growth. In fact, the company is expected to announce a new series of GeForce gaming GPUs today, which will likely be the  successors to the popular GTX 1080 series. We have created an interactive dashboard analysis ~  What Is The Outlook For Nvidia ~ on the company’s expected performance in 2018. You can adjust the revenue and margin drivers to see the impact on the company’s overall revenues, earnings, and price estimate. GPUs As Well As Tegra Products Will Likely Grow In Double Digits In The Near Term We forecast the GPU segment revenues to be north of $10.5 billion in fiscal 2019. This can primarily be attributed to growth in its gaming GPUs. The company has seen strong growth in the first half of fiscal 2019, due to higher demand for its Max-Q based notebooks. Also, Nvidia’s foray into data centers, expanding in both High Performance Computing (HPC) and the cloud is aiding the segment growth. The data center revenues were up a solid 80% in H1 FY19, led by an increased acceptance of its Volta architecture. It should be noted that Nvidia is a leader in artificial intelligence and deep learning, and has developed a range of products for the same. These products are gaining popularity, and we expect this trend to continue going forward. However, the company’s management in its recent earnings conference call stated that the contribution from cryptocurrency-specific products will be negligible going forward. Looking at the Tegra Processors, revenues have grown from around $560 million in fiscal 2016 to $1.5 billion in fiscal 2018. The recent growth can be attributed to its SOC modules, which are used in the Nintendo Switch console. The gaming console in particular has been a massive hit and has sold around 20 million units since its launch. In addition, the company’s automotive division has been doing well of late, and growing in mid-teens. The company’s automotive platforms remain on a sharp upward trajectory with AI (artificial intelligence) to be introduced in several vehicle lineups. As such, we expect the segment revenue to grow 25% in fiscal 2019. Overall, we expect the GPUs to drive the company’s near term as well long term growth, led by gaming. We currently forecast earnings of $7.18 per share in fiscal 2019, and a price to earnings multiple of 34.5x by the end of fiscal 2019, to arrive at our price estimate of $248 for Nvidia, which is slightly above the current market 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 Research Like our charts? Explore  example interactive dashboards  and create your own.
    LUV Logo
    What Will Drive Southwest's Growth In The Near Term?
  • By , 8/17/18
  • tags: LUV
  • Southwest Airlines  (NYSE:LUV) has had a very mixed year so far. While financials tended to remain positive in the first quarter, the overall business took quite a hit following the accident on April 17, in which a woman lost her life. Bookings have remained rather soft since. That said, management is certain that they’ll be able to recover from the rather unfortunate incident through the second half of the year. In this respect, the company decided to raise its guidance. We have created an interactive dashboard What Is The Outlook For LUV on the company’s expected performance in 2019. You can adjust the revenue and margin drivers to see the impact on the company’s overall revenues and earnings. As mentioned above, April marked the month in which Southwest recorded its first accident-related fatality. Naturally, the airline witnessed bookings in the quarter shrink post the incident. In fact, the company estimates that nearly $100 million in passenger revenues were lost as bookings took a hit, representing a near 3% decline in revenue per passenger seat mile (RASM), an important key metric. That said, we expect this metric to improve through the remainder of the year, much to shareholders’ relief, with the impact being all but negligible in the next year. In this respect, the company has employed a number of revenue management tools and techniques to help boost revenues by as early as Q3. Further, the airline hopes to generate incremental improvements in pre-tax results of $200 million in the year as the investment in the new reservation system begins to pay off. All in all, Southwest is positive that the remainder of the year will show improved results. For starters, RASM is expected to improve sequentially in the third quarter, with the key metric coming in almost flat. Further, the company believes that the figure has the potential to finally return to positive growth in Q4, continuing a positive run through 2019 as well. On the cost side, the airline now expects its non-fuel costs, which they have been maintaining quite well thus far, to rise by about 2-3% in Q3 and by about 0-1% for the full year, with the figure coming in flat in 2019. In terms of fuel costs, the company expects to pay about $2.25 per gallon in Q3, up from $2.07 a year ago, representing a much smaller headwind than what other airlines are facing, primarily because it incurred massive fuel hedging losses last year. We expect fuel costs to play a more minor role in increasing expenses going forward. Overall, it seems like the company should be in a much better financial position in 2019. While revenues did take a hit, we expect a resurgent economy, and the consequent strong demand trends to push the top line in the next financial year. Further, the company hopes that its expansion plans and the A320 MAX will help improve efficiency, and thereby positively affect margins in the coming 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 Research Like our charts? Explore  example interactive dashboards  and create your own.
    EL Logo
    What To Expect From Estee Lauder's Q4 2018
  • By , 8/17/18
  • tags: EL
  • Estee Lauder  (NYSE:EL) is scheduled to release its fourth quarter fiscal 2018 results on August 20 . During the previous Q3 earnings the company continued with its growth momentum reporting a 18% jump in sales to $3.37 billion from $2.86 billion in the same period last year and diluted net earnings per common share increased 24% to $.99. This growth was driven by strong performance in the skin care segment, online and travel retail segments, and emerging markets particularly Asia (China). This performance reflected robust global demand across their portfolio, with virtually all their brands posting sales growth. Each of the three biggest brands grew globally, with exceptional growth in Estée Lauder. Driven by this strong third quarter performance, Estee Lauder has forecast its net sales to increase for Full Year Fiscal 2018   between 15% and 16% and reported diluted net earnings per share to be in between the band of $2.78 and $2.86.  The continued emphasis on a digital-first approach and on fast-growing markets and channels is also expected to contribute to this growth. Please refer to our dashboard analysis on What To Expect From Estee Lauder’s Q4 2018 Earnings . Listed below are key drivers that we believe will continue to steer Estee Lauder’s growth this fourth quarter and for full year 2018 earnings: Skin care and Make up segments will continue to drive sales  – These segments will likely continue to post strong performance in the coming earnings in line with the last quarter where their sales advanced by 31% and 9% y-o-y, respectively. The main driver for the skin care segment were some of its existing products along with new launches from brands like Estee Lauder, La Mer, and Glamglow. The star performers for the Makeup segment, along with Becca and Too Faced, included Tom Ford and Estee Lauder. Growth in online & travel retail –  Estee Lauder is expected to further benefit from ongoing strong passenger traffic growth in the emerging markets. Driven by rising income levels and increasing disposable income in these markets, passengers in these markets are increasingly turning into buyers. This trend is likely to keep the company’s travel retail sales soaring for Q4 and further in 2019. In addition, given the company’s strong online business and growing popularity of online purchases, mobile sales are likely to continue to contribute to Estee Lauder’s growth in the coming quarter . Asia-Pacific region to continue to boost the sales – In the previous Quarter, sales from the Asia-Pacific region led top line growth by rising 38%. Europe, Middle-East and Africa also saw sales rise by 26%. We anticipate rising disposable incomes in the emerging markets of Asia-Pacific (especially China) to continue to boost sales growth from the Asia-Pacific region as it constitutes a growing share of Estee Lauder’s top line. Management thus anticipates continued strength from sales of luxury products  prompting it to continue to invest in these regions. In all, we expect Estee Lauder to continue its growth momentum in the coming earnings and in FY 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.
    MO Logo
    Here's Why We Believe Canadian Medical Cannabis Producer Aphria Is Worth CAD 12.60 Per Share
  • By , 8/17/18
  • tags: MO CONSTELLATION-BRANDS PM
  • As the date for legalization of recreational marijuana in Canada nears, investors are closely watching every move made by the cannabis companies in the country. This is the reason why Canadian medical cannabis producer, Aphria, witnessed a sharp plunge in its stock last week after it posted a drop in its adjusted profits. While the decline in profitability is a valid concern for investors, we believe that the company has a notable upside given the growth potential in the medical cannabis market, both in Canada and internationally, as well as the soon-to-open recreational marijuana market. This coupled with Aphria’s low cost structure is likely to drive its value in the long term and enable it to capture a sizeable share in the global markets. We currently have a price estimate of CAD 12.60 per share for Aphria using a 2019 P/E multiple of 35x . View our interactive dashboard – Aphria’s Price Estimate  and modify the key drivers to create scenarios to suit your assumptions. Preparing Well For The Legalization Of Recreational Marijuana In order to cater to the rising demand for cannabis post the legalization of marijuana for recreational purposes, Aphria had announced its plans for a  state-of-the-art Extraction Center of Excellence in Leamington, which is the greenhouse capital of Canada. The company highlighted in its recent earnings release that it is on track with its expansion plans and is expected to harvest in excess of 20,000 kgs per month by June 2019. With this expansion, the company’s combined annual cannabis production capacity will increase from its current 35,000 kgs to 225,000 kgs in early 2019. We expect this rapid increase in the processing capacity to boost Aphria’s revenue as well as earnings in 2019. In addition, Aphria has plans to introduce new products in the coming months to cater to the growing demand for new and innovative products. For instance, the company will launch dried flower, pre-rolls, oils etc. on 17th October, on the day of legalization of adult use of recreational cannabis. The company also is working on developing infused foods and beverages to attract the illicit market consumers to purchase legal cannabis products. Strong Distribution Agreements Aphria has entered into an agreement with Great North Distributors to serve as its exclusive cannabis representative in Canada post the legalization of recreational cannabis for adult-use. Great North Distributors, which is a subsidiary of Southern Glazer’s, North America’s largest wine and spirits distributor, has a strong reach across Canada, including established relationships with provincially owned and operated retailers as well as private retailers. This will provide Aphria exposure to all cannabis retailers across Canada as soon as the law is passed. Further, Southern Glazer’s plans to use its advanced data analytics capabilities to understand the retailers’ needs, as well as the consumers demands, and provide Aphria with a powerful data-driven approach to cannabis sales. Moreover, Aphria has recently signed a Manufacturer’s Representative agreement with We Grow,  a Vancouver-based licensed producer of premium cannabis, to become its exclusive sales representative across Canada. The deal has added another premium brand of cannabis to Aphria’s expanding portfolio of adult-use brands. Given its unmatched cross-Canada sales and distribution network for adult-use cannabis, the company is well-placed to leverage the premium cannabis from We Grow to tap into the recreational marijuana market. International Expansion Apart from tapping into the recreational marijuana market, Aphria is expanding its international presence to diversify its operations while augmenting its future growth. Recently, the company acquired industry-leading companies in Colombia, Argentina, Jamaica, and a right of first offer and refusal in Brazil through a definitive share purchase agreement with Scythian Biosciences Inc.  The deal will provide the company with access to world-class assets in strategic markets such as Colombia, Argentina, Jamaica, as well as the potential to expand its operations further in key Latin America and Caribbean markets. Further, Aphria has cemented ties with Australian companies such as Althea and Medlab Clinical Limited (Medlab) to supply high-yield cannabis extracts for medical as well as testing use. Additionally, the company entered into a joint venture with South African company, Verve Group of Companies (VGC), to supply high-grade low-cost cannabis isolates throughout the African continent and to markets across the globe using Aphria’s international distribution network. All these partnerships are expected to strengthen the company’s presence in these markets and complement its valuation.   Do not agree with our forecast? Create your own price forecast for Aphria by changing the base inputs (blue dots) on our interactive platform .  
    WMT Logo
    Can Wal-Mart Continue Its Strong Growth In The Second Half Of The Year?
  • By , 8/17/18
  • tags: WMT TGT AMZN
  • Wal-Mart  (NYSE:WMT) reported strong fiscal second quarter results on Thursday, August 16, as both its earnings per share and revenues came in ahead of market expectations. On a reported basis, the company’s revenue increased 4% year over year (y-o-y) to $128 billion, driven by growth in the domestic market due to its marketplace offerings. Wal-Mart’s adjusted EPS grew by 19% y-o-y to $1.29. Wal-Mart U.S. delivered a strong top-line performance, with comparable sales of 4.5%, driven by a 2.2% increase in customer traffic in Q2. Overall, e-commerce contributed approximately 100 basis points to the segment’s comparable sales growth in the second quarter. Globally, on a constant currency basis, the company’s e-commerce sales increased 40% in the quarter. In the company’s other segments, Wal-Mart’s international sales grew 4% y-o-y to $29 billion during the quarter, led by strength at Walmex. On the other hand, Sam’s Club revenues declined marginally y-o-y, negatively impacted by tobacco. However, Sam’s Club comparable sales grew 5.0% y-o-y (ex. fuel) in the quarter, led by solid traffic. Our $94 price estimate for Wal-Mart’s stock is slightly below the current market price. We have created an interactive dashboard on what to expect from Wal-Mart’s fiscal Q3 and fiscal 2019, which outlines our forecasts for the company. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation. Wal-Mart saw its stock gain nearly 50% in 2017, but it had declined more than 10% over the course of 2018 (prior to the Q2 earnings release) despite strong financial results. This was largely due to a relative slowdown in the company’s e-commerce growth in the fiscal first quarter, to 33% y-o-y from 60%+ in the first three quarters of fiscal 2018 (year ending January 2018). However, the retailer stock has now rallied by around 11% after posting strong fiscal Q2 results. Going forward, we expect the company to continue to post an increase in revenue growth rate in Q3, driven by growth across operating segments. We also expect the GAAP earnings pressure to continue, due to investments in technology and a rise in employee wages. We forecast the company to post adjusted earnings per share of around $1.05 in the third quarter, compared to $1.00 in Q3 fiscal 2018. Also, we expect online grocery to drive some growth for the company, though the accompanying expenses could result in margin pressure. Fiscal 2019 Outlook Wal-Mart has lifted its full-year adjusted EPS guidance to $4.90 to $5.05 from its previous range of $4.75 to $5.00. The retail giant also expects net sales growth of ~2%, compared to a prior range of 1.5% to 2.0%. In addition, the company expects the comparable sale of around 3%, which compares to the previous guidance of at least +2%. The retailer’s management is aggressively rolling out grocery pickup and delivery in the U.S. and expanding omnichannel initiatives in Mexico and China. We expect Wal-Mart to generate around $511 billion in revenues in fiscal 2019, and earnings of almost $14 billion. Of the total expected revenues in fiscal 2019, we estimate $330 billion in the Wal-Mart U.S. business, almost $120 billion for the Wal-Mart International business, and nearly $58 billion for the Sam’s Club business. Further, we have calculated the retailer’s divisional revenues by estimating the number of stores, square footage per store and revenue per square foot in fiscal 2019. We expect Wal-Mart’s fiscal 2019 store count in the U.S. to be over 4800, with an average square footage per store of 147k and revenue per square foot of $466, translating into $330 billion (+3% y-o-y) in domestic revenues in fiscal 2019. In addition, we also expect close to 6370 stores in international markets with an average square footage per store of 58k and revenue per square foot of $319, translating into $119 billion (+1% y-o-y) in international revenues in the same period. On similar lines, we expect Sam’s Club revenues to reach $58 billion (-2% y-o-y) in fiscal 2019, with 599 Sam’s Club stores, 134k square footage per store and $724 of revenue per square foot. We expect a decline here on the account of the  closing of 63 Sam’s Club locations . 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
    UTX Logo
    What Will Drive United Tech's Near Term Growth?
  • By , 8/17/18
  • tags: UTX
  • United Technologies  (NYSE: UTX) has had a great year so far. While things at Otis suffered slightly on the slowdown in China, all other segments managed to produce positive organic growth. Further, the company believes that the momentum gained thus far is expected to carry through the remainder of the year, as well. In this respect, the management decided to revise full year guidance upward for the second time. We have created an interactive dashboard What Is The Outlook For UTX on the company’s expected performance in 2019. You can adjust the revenue and margin drivers to see the impact on the company’s overall revenues and earnings. As mentioned above, all segments have been performing well in the year. In particular, Pratt & Whitney seems to have finally gotten things on track. After over a year of program delays, the GTF engine, Pratt’s main revenue driver at the moment, is now being produced at an accelerated capacity. With over 9,000 engines in backlog, we expect the program to generate significant business for the company over the long term. That said, China continues to hurt performance at Otis on sustained pricing pressure and an adverse mix. While this is a problem, the company has managed to mitigate some of the losses by taking in higher orders from North America and Europe. Additionally, as the global economy gains some momentum, we can expect to see business at the segment improve over time. Further, the company is expected to help both its top and bottom lines by acquiring Rockwell Collins. In general, the management and investors alike, are very excited about the integration. Collins Aviation (the name of the combined company), will give the conglomerate the chance to differentiate its products, by adding more intelligent services to its portfolio. This, in turn, will ensure an enhanced customer value, which is expected to help the company gain more market share over the long-term. Additionally, the deal is also expected to deliver at least $500 million in net cost synergies. Overall, we believe the company is treading forward on the right path. With good growth initiatives and strategic acquisitions, United Tech could be leading itself to a strong 2019.
    URBN Logo
    Improvement Expected In All Segments For Urban Outfitters In The Second Quarter
  • By , 8/17/18
  • tags: URBN GPS AEO ANF
  • Urban Outfitters  (NASDAQ:URBN) was among the top performing companies in the retail sector in the first quarter. Comparable sales growth for the company came in at 10%, higher than the 8.9% forecast by analysts, led by a 15% improvement at Free People, followed by 10% at Anthropologie, and 8% at its namesake brand. Moreover, it was the first quarter in four years that the company was able to post positive store comps at each of its brands . This growth was spurred on by higher consumer spending, despite a longer than normal winter, as well as easier comparisons versus the same period last year. These factors have continued to aid the retailer, with the company reporting in mid-June that the comparable sales growth in the retail segment had been  mid-teens positive . Consequently, substantial growth in the revenue and earnings metrics are expected in the second quarter – sales to grow 12.2% and EPS to increase by a whopping 75%. We have a $47 price estimate for Urban Outfitters, which is in-line with the current market price. The charts have been made using our new, interactive platform. If you don’t agree with our analysis, you can click here for our interactive dashboard on Our Outlook For Urban Outfitters In FY 2019  to modify our driver assumptions to see what impact it will have on the company’s revenues, earnings, and price estimate. Factors That May Have An Impact In The Quarter 1. Strong Sales Trend Reported: In its first quarter earnings conference call, the management stated that it expects to deliver sales comps fairly consistent with the first quarter rate. The easier comparisons versus last year, together with the current sales trends seen by the company, prompted the positive outlook. Moreover, the factors that benefited the gross margin, namely reduced markdowns and leverage in store occupancy costs, are expected to continue in Q2, helping the company post an improvement in the metric at a similar rate as in Q1. 2. Higher Retail Sales: According to the U.S. Census Bureau, retail sales were up 6.6% in June 2018 versus June 2017, and 0.5% higher than May 2018. Categories with strong growth included clothing/clothing accessories, which rose 5.1% as compared to the previous year, a factor that should bode well for apparel retailers. 3. Strength of Digital Segment:  The shift toward the online space has been pretty evident, with the digital penetration of URBN’s retail segment sales exceeding 40% for the first time in Q4 2018 (quarter ended January 2018). This strength continued in the first quarter as well. Free People and Anthropologie have benefited the most with this shift, and their digital penetration has increased to over 50%. To take advantage of the popularity of the online channel, URBN re-platformed its website, enabling better functionality for customers, including in-store pick-up capabilities, improved delivery options, a more responsive site, faster load times, and the addition of Apple Pay and Afterpay as alternative payment methods. While its successful implementation resulted in a strong double-digit increase in digital sales for the brand in the first quarter, its benefit can be expected to continue in the future. 4. Good Momentum In The Home Business: The Home products provided by Anthropologie delivered its 15th sequential quarter of positive comps, driven by an increased and innovative assortment, high double-digit growth in digital sales, and the mini-home showroom concept within certain Anthropologie stores, which is expected to be rolled out in more stores this financial year. The momentum in this business continues to be strong, and should drive the brand’s sales in the coming quarters. 5. Addition Of Anthropologie In Wholesale:  Anthropologie home wholesale was launched in North America in March, in partnership with Nordstrom. This follows the success of Anthropologie wholesale in the U.K. last financial year. While it is currently available in 15 Nordstrom stores and online, this assortment is anticipated to be included in additional stores by the end of the year, and should help to drive wholesale revenues. For Free People wholesale, there is significant opportunity to increase the domestic business through category expansions like FP Movement and denim. 6. International Growth Potential: URBN believes Anthropologie has the potential to derive half of its sales from outside the United States in the long term. Currently, all of the international sales are obtained from the U.K., but the brand is in the process of expanding in other countries, including opening its first store in Germany later this year. For its eponymous brand, in Europe, the brand opened its first freestanding store in Paris in February, and a first franchise store in the outskirts of Tel Aviv was launched in April. The company plans to open two additional stores in Europe and facilitate the opening of several additional franchised stores in Israel. For its Free People brand, the company intends to open its first two stores in Europe later this year or early next year. 7. Lower Markdowns: The management noted that the “total company markdown rate in Q1 was the lowest of any quarter in the last ten years.” This resulted in higher AUR (Average Unit Retail), one of the factors that resulted in positive store comps. A better assortment, higher consumer spending, and disciplined inventory control helped the company keep the discounting low. The company feels there is still scope for a reduction in this metric, and in the first quarter earnings conference call it was stated that the lower markdown trends had, in fact, strengthened in the second quarter to date. See our complete analysis for Urban Outfitters   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.
    After Financial And Risk Stake Sale, Can Thomson Reuters Achieve Faster Revenue Growth?
  • By , 8/17/18
  • tags: INFO SPIG TRIG
  • Thomson Reuters (NYSE: TRI) is a news, information and analytics provider for financial markets. The company’s customers include trading communities, investment, financial and corporate financials. In January 2018, the company announced that it entered into an agreement to sell a 55% stake in its Financial and Risk Division (the segment accounting for more than 50% of its revenues) in order to focus on other key segments and accelerate growth. In this note we take a look at the company’s business segments and the key revenue drivers for each segment. Our interactive dashboard provides an overview of Thomson Reuters’ revenue growth, including historical revenue details for its key segments and a base forecast for 2018 and 2019. You can modify any of these forecasts to arrive at your own estimates for the company’s future revenues. Thomson Reuters’ total revenue growth has not been especially high of late (around 2% and 4% in 2017 and 2018, respectively). Competitors S&P Global and Moody’s have been able to grow revenues by more than 5% during the same period. Prior to the Financial and Risk deal, Thomson Reuters was a much larger company than these two competitors. With the deal, the company is hoping to be more nimble and focusing on higher-growth areas. You can see comparative analysis of these companies in our dashboard How Does Thomson Reuters Compare With Its Peers? The primary reason for the relatively low revenue growth for Thomson Reuters has been the stagnancy in the Financial and Risk business. Competitive pressures from players such as S&P Capital IQ and Bloomberg and legacy technology products have impacted the business’ revenue growth. Thomson Reuters has been spending significantly to maintain the existing technology and invest in new technology; however, despite this high spend, the business was not seeing a commensurate rate of growth. We expect that leaner operations will allow the company to focus on its key growth areas and boost its overall growth. An Overview Of Thomson Reuters’ Operating Segments Legal : The main customers of this division are legal, investigation, business and government professionals globally. Between 2016-2017 revenues of this division grew by less than 1%. In Q2 2018, the segment reported a 2% year-on-year increase in revenues, which is an improvement but still modest. Growth for the division is likely to be driven by product innovation, as well as potential acquisitions in the future. For instance, the company recently launched a new product called Westlaw Edge. This product, built on more than 100 years of attorney-edited annotations and powered by AI, should drive some longer-term growth for the business. Investing further in innovation could provide a further boost as well. Tax and Accounting: This division provides integrated tax compliance and accounting information, software and services for professionals in accounting firms, corporations, law firms and government.  Similar to the Legal division, the business is largely subscription-driven, so customer retention and acquisition is key to future growth. This division accounted for nearly 15% of the company’s total revenues in 2017. It is the fastest-growing segment for the company, registering nearly 7% growth in 2017 and a 4% year-on-year increase in revenues in Q2 2018. Reuters and News: This is a relatively small segment, accounting for less than 5% of the company’s total revenues in 2017. The segment provides real-time news and information services to websites, newspapers and TV networks. Reuters has a reputation of being the fastest news network, giving it a competitive edge. Once the Financial and Risk deal is complete, Reuters news will enter into an arrangement with the new joint venture to sell its news for annual revenue of $325 million. This will provide a significant boost to the segment’s revenues, as its 2017 revenues were just $296 million. With the Financial & Risk deal, Thomson Reuters should become a leaner, more focused business. This should allow the company to target specific opportunities and drive growth for its core segments. Selling a majority stake in a lower-growth division and using some of the proceeds to invest in growth should pay off over the long run.   See our other dashboards on Thomson Reuters: Estimating The Valuation Of Thomson Reuters How Does Thomson Reuters Compare With Its Peers? 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.
    AXP Logo
    Payment Volumes For U.S. Credit Card Industry Could Cross $1 Trillion In Q4
  • By , 8/17/18
  • tags: AXP DFS MA V MC
  • The U.S. credit card processing industry resumed its growth trajectory after a seasonally slow first quarter to reach a record $927 billion in purchase volume over Q2 2018. This represents an almost 10% jump from the figure of $844 billion in Q2 2017 and $846 billion in Q1 2018. Given that the U.S. credit card purchase volume was $902 billion in Q4 2017, a year-on-year increase of 10.8% would nudge it past the $1-trillion mark in Q4 2018. Visa remains the undisputed market leader with a market share of over 53% – a figure that should continue to increase, as the company’s credit card payment volumes are growing at a faster rate than the industry. However, a shakeup in the rankings among the four incumbents is also in the cards for the first time in decades, as American Express is closing in on MasterCard’s #2 spot. This is primarily because of American Express’s new growth strategy. Our detailed interactive dashboard captures how Amex shareholders will benefit from its new growth strategy over coming years . The payments industry is seasonal, with purchase volumes peaking in the fourth quarter of the year due to the impact of holiday season shopping, before falling sharply in the first quarter. The figure then generally increases steadily over the second and third quarters. This trend is seen clearly in the table below, which captures the changes in credit card purchase volumes for these companies over the last five quarters. Visa’s dominance in the industry is also evident from the table above, as the company continues to process more credit card payments than its three rivals combined. While MasterCard and Discover have not been able to match Visa’s higher growth rate (which regularly exceeds 10% year-on-year), American Express has reported a growth rate of 10% for each of the last two quarters. This has helped the company nearly close the gap with rival MasterCard. American Express’ growth over recent years stands out in particular, as the company had a major setback from its loss of the lucrative Costco card partnership in 2016 – an event that had a notable impact on the company’s card balances as well as purchase volumes. The company has done extremely well to return to growth by regaining lost ground in its core affluent segment of cardholders, and through its recent efforts to grow its merchant base. AmEx’s work to attract more merchants on its payment platform by slashing fees has boosted card usage among its cardholders, which in turn has driven purchase volumes higher. Given the company’s new strategic push, we project it to become the second largest credit card processor in the U.S. by early next year. Details about how changes to U.S. Card Transaction Volumes affect the share price of these companies can be found in our interactive model for Visa | MasterCard  | American Express | Discover 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