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COMPANY OF THE DAY : SAMSUNG ELECTRONICS

Samsung reported record operating profits in Q2, driven by strong memory demand and pricing and a resurgent smartphone business.

See Complete Analysis for Samsung Electronics
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FORECAST OF THE DAY : UNILEVER'S SKIN & HAIR CARE MARKET SHARE

Unilever's skin and hair care market share has been steady at around 9% in recent years, which we expect to continue as brand expansion offsets increased competition.

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RECENT ACTIVITY ON TREFIS

S Logo
Sprint's Postpaid Adds In Focus As Competition And Promotions Mount
  • By , 7/28/17
  • tags: S TMUS VZ
  • Sprint  (NYSE:S), the smallest of the four nationwide U.S. wireless carriers, is expected to publish its fiscal Q1 results on August 1, reporting on a quarter that saw relatively intense competitive activity in the U.S. wireless market. While we expect Sprint’s net losses to narrow year-over-year, amid operating cost reductions and revenue growth from its recent postpaid subscriber additions, there is a possibility that postpaid phone net additions will be somewhat muted this quarter. Below we take a look at some of the key factors to watch as the carrier publishes earnings. See our complete analysis for Verizon  |  AT&T | T-Mobile |  Sprint   We have a $8 price estimate for Sprint, which is slightly below the current market price. Postpaid Phone Business Could Fend Off Competition With Aggressive Promotions While Sprint largely turned around its postpaid phone business, posting average net additions of ~300k over the last three quarters of FY’16, its net adds slowed down considerably for the quarter ended March 2017, coming in at just ~42k. It is possible that the company will face further pressure during Q1, with competitive activity mounting. This will mark the first full quarter since the AT&T and Verizon unveiled unlimited plans, after a hiatus of close to five years, potentially reducing the need for customers to defect to smaller rivals such as Sprint. That said, Sprint’s unlimited plans remain the cheapest in the market, and the carrier has been offering extremely aggressive promotions to bring new subscribers on board. For instance, in June, Sprint offered Verizon subscribers who switched to its network a full free year of unlimited voice and data service for up to five lines, with practically no contractual commitments. While plans such as these could hurt Sprint’s revenue growth and ARPU in the medium-term, they should help in terms of subscriber acquisitions (related: Is Sprint Going Too Far To Win Over Subscribers With Free Service? ). Prepaid Business Could See Further Recovery  The prepaid phone segment has been a source of growth in the U.S. wireless market in recent years and Sprint has generally underperformed its peers, as it de-emphasized the pay-as-you-go segment, letting go of many lower-value customers. However, the business turned a corner during fiscal Q4 (quarter ended March 2017), adding around 180k prepaid subscribers, compared to a loss of roughly 264k subscribers in the prior year period. The growth was driven by Sprint’s premium prepaid brands – the Boost brand (which has ARPU of close to $40) saw net subscriber adds during Q1, while the Virgin brand saw lower subscriber losses. We will be closely watching the progress of the carrier’s prepaid brands this quarter. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    BUD Logo
    AB InBev's Revenues Rise Despite Market Share Loss In The US
  • By , 7/28/17
  • tags: BUD KO PEP DEO
  • Anheuser-Busch InBev (NYSE:BUD) delivered mixed second quarter results on July 27, posting earnings of $0.95, 2 cents short of expectation, and revenues of $14.18 billion, in line with estimates. As expected, the growth accelerated in the quarter, driven by premiumization efforts, which helped boost the growth in both developed and developing economies.   The company was able to deliver substantial growth in profits, from $152 million in the corresponding prior year quarter to $1.5 billion, as a result of its merger with SABMiller. The integration of the two companies is carrying on as planned, with savings of $335 million reported in the quarter, far more than the first quarter’s figures. Earlier in the year, the company raised its savings target from $2 billion to $2.8 billion; however, given the significant savings already captured, it is highly likely the end total exceeds $2.8 billion. Since the combination of the two beer giants, the company sells twice as much beer as its next closest rival – Heineken. Looking ahead, the second half of the year looks bright for the company, given the strong growth rates achieved in China, Europe, and its new market – South Africa. Furthermore, its bigger brands, such as Stella, Corona, Budweiser, and Hoegaarden, are expected to drive growth in the future. Global Brands Lead The Brigade Revenues of the three global brands of the company – Budweiser, Corona, and Stella Artois – increased almost 9%. Budweiser revenues grew by 5.7%, with 11.7% growth in revenues outside of the US. This was driven by strong growth in China, as well as improvement in Brazil and the UK. Stella Artois revenues grew by 6.6%, driven mainly by growth in Argentina and South Korea. Corona had a solid quarter as well, with revenues growing 16.6%, with 26.2% growth in revenues outside of Mexico, as a result of strong growth in the UK, Australia, and China. The company continues to fuel the growth of these brands by leveraging their enormous commercial platforms, while also expanding to new markets such as Australia, Peru, Colombia, and South Africa. US & Brazil Disappoint, But Other Markets Deliver Slowdown in the sales in the US, at a higher rate than that in the market, resulted in market share loss of ~105 basis points in the quarter, and 85 basis points in the first half. Despite soft top line results in the US, margins improved as a result of better cost management, and increased sales of its ‘Above Premium’ segment. Beer volumes increased, with significant growth seen in South Africa, Mexico, and Australia, despite a decline witnessed in the US, Brazil, and Colombia. Brazil was the only market to see profit declines, owing to a challenging political and macroeconomic environment. Diversifying The Portfolio BUD recently announced the acquisition of organic energy drink maker Hiball, which is expected to close in the third quarter of this year. While this is a small deal ( Hiball has 20 employees and had sales of $40 million in the past 12 months ), it is newsworthy as it implies a move towards non-beer categories. The company may also want to jump on the organic/natural drinks bandwagon. Anheuser has the distribution network to make Hiball increase its scale immensely. The company already sells carbonated soft drinks in the Latin American market, where it is a bottler for PepsiCo. BUD also struck a deal with Starbucks last year to make, bottle, and distribute the ready-to-drink Teavana tea line. The company is also trying to make in-roads in the craft beer industry, with partnerships with 10 craft breweries. The company’s craft portfolio is growing ahead of the industry, at double digit rates, driven by organic growth, as well as expanded distribution. Have more questions on Anheuser-Busch InBev? See the links below. Here’s How AB InBev Trimmed Business To Make Room For SABMiller The Year That Was: Anheuser-Busch InBev Brazil Slowdown Weighs On AB InBev’s Financials, As Earnings Decline By More Than Expected Notes: Get Trefis Technology
    AAPL Logo
    Key Trends To Watch As Apple Reports Q3 Earnings
  • By , 7/28/17
  • tags: AAPL GOOG SSNLF
  • Apple  (NASDAQ:AAPL) is scheduled to publish its Q3 fiscal 2017 earnings on August 1, reporting on a quarter that is typically seasonally soft for the company, as it prepares to launch its updated iPhones in the fall. Apple has guided for revenues of between $43.5 billion and $45.5 billion for the quarter, marking an improvement of around 5% at the mid-point over last year. Below we take a look at some of the key factors we will be watching when the company publishes earnings.
    YAHOY Logo
    Yahoo! Japan: Mobile Boosts Revenues Across Advertising, Commerce Businesses
  • By , 7/28/17
  • tags: YAHOY
  • Yahoo Japan Corporation  (OTC:YAHOY) reported its fiscal Q1 results on July 28. The company reported that its revenues grew 4.1% year over year (but a 4.5% decline Q-o-Q) to ¥212.73 billion ($1.91 billion). Additionally, operating income grew by 2.2% y-o-y to ¥52.2 billion ($470 million). Mobile revenues continued to boost overall revenues during the quarter as consumers increasingly used smartphones for shopping and browsing. The key takeaways from the earnings are as follows: Mobile transactions accounted for over 52%  of the company’s transaction value for the quarter. Furthermore, the increasing penetration of mobile devices aided in the growth of mobile ad revenue, as the smartphone revenue ratio continued to exceed 54% and contributed ¥38.6 billion (54.8%) to ad revenues. The company is increasing its content, especially video content, for the mobile platform. As a result, 66% of Yahoo! Japan’s daily unique users use mobile phones (60.29 million). The company will likely be able to leverage its position in the Japanese Internet landscape to drive mobile revenue growth in the coming years. The company’s transaction value across the shopping, auction, and listing businesses grew by 16% year over year to ¥498 billion ($4.48 billion). A successful collaboration with Softbank helped the company to post 40% growth in its shopping transaction value to ¥140 billion ($1.26 billion). Additionally, with an increase in the number of stores (store ids grew by 32% to 558,140), the number of products listed on Yahoo! Sites swelled to 290 million (28% growth). Since online sales only account for 5% of all retail sales in Japan, the untapped market for the company presents a huge opportunity to grow its business in the coming years. In Q1, the credit card transaction value for the company increased by 104% to ¥211.9 billion ($1.90 billion) as the number of valid card holders increased by 50% to 3.82 million. The number of Yahoo Wallet Accounts (37.32 million accounts) and transaction value (¥321.8 billion) also grew during the quarter, signaling strong adoption in the Japanese market. This translates into ¥861 per account, up from ¥823 a year ago. We expect this trend to continue in the coming quarters. See our complete analysis of Yahoo! JAPAN here   Understand How a Company’s Products Impact its Stock Price at Trefis View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
    SBUX Logo
    Starbucks Misses Estimates In Q3 2017, Lowers Full Year Guidance
  • By , 7/28/17
  • tags: SBUX DNKN MCD
  • After two straight quarters of slowing comparable sales growth in the U.S., Starbucks’  (NYSE:SBUX) Q3 2017 results, which were announced on July 27 th, were encouraging. While the company missed consensus estimates on earnings per share (EPS) – which stood at $ 0.47 as against an expected number of $ 0.55, comparable sales grew at 5% in the U.S., higher that the 3% number for the past two quarters. However, this growth was entirely due to higher ticket sizes and not due to an increase in traffic, indicating that the company was not able to attract new customers to its stores.  Below is a summary of the company’s financial performance for Q3 2017:   The above 8% year on year growth in revenues was due to an increase in comparable sales and revenues from new stores opened during the year. Below is a summary of comparable sales growth for the company in Q3 2017:   The entire growth in comparable sales is attributable to an increase in ticket size and there has been no change in the number of transactions. While the company has shown significant improvement in comparable sales growth in the U.S. and EMEA (Europe, Middle East and Asia), the China/Asia Pacific segment has been disappointing. This is despite a 7% increase in China comparable sales growth driven by a 5% increase in transactions, which was offset by softness in Japan.  Below is a summary of the company’s regional performance in Q3 2017:     Going Forward: Starbucks announced certain strategic decisions in this quarter as it looks to drive long term growth: The company is assuming full ownership of its Mainland China market by acquiring the balance 50% of Shanghai Starbucks Coffee Corporation, which it already did not own. As the company looks to drive growth in China, it appears to be preferring a company operated model in the region, as it gives the management more control over execution and innovation in the region. Starbucks is closing down all its 379 Teavana retail stores by the spring of 2018 as this segment continues to underperform. However sales of Teavana branded beverages continue to grow at its restaurants and the company plans to continue innovating in beverages of this brand. The company is working on updating its digital ordering and payment platform and new functionalities include a guest checkout feature for first time users. This will give it access to a new pool of customers who do not want to store their personal information on the app. Based on the choppiness in results for Q3 and early Q4 the company revised its full year GAAP EPS to now be in the range of $ 1.96 and $ 1.97 and revenue growth to be in the lower end of its guidance of 8% to 10%. We will be updating our model based on these results which can result in a change to our price estimate for the company. For more details, see our complete analysis for Starbucks   View Interactive Institutional Research (Powered by Trefis):
    NDAQ Logo
    Highlights From NASDAQ's Q2 Earnings
  • By , 7/28/17
  • tags: NDAQ CME ICE
  • After an impressive start to the year, NASDAQ  (NASDAQ:NDAQ) continued its strong performance in the second quarter, with revenue of $602 million up 8% over the same period last year. The company’s focus on growing its non-trading lines of business has helped it perform strongly despite a somewhat less volatile period leading to low trading volume. The rise in non-trading business segments – including Corporate Solutions, Market Technology and Information Services – is attributable to both organic growth as well as acquisitions. The Market Services segment saw revenue growth solely due to acquisitions, and otherwise would have seen a decline driven by unfavorable trading conditions. The company’s operating margins improved by nearly 9 percentage points, primarily due non-trading business margin expansion, as well as restructuring expenses in the prior year period. Non-Trading Businesses Continued Growth Due To Acquisitions, Proprietary Products NASDAQ’s non-trading business lines generate around 63% of the company’s overall revenues. These businesses grew by around 4% in the second quarter. The growth in the Information Services segment was supported by increased adoption of its in-house products such as IR Insights and Influencer. The Corporate Services segment grew primarily due to the revenue addition from the acquisition of Marketwired and Boardvantage. The Market Technology segment grew organically due to increased uptake of software licensing and support, surveillance, and advisory. Increased demand for data and technology-related products and services is likely to sustain the growth momentum for these segments. Market Services Has Grown Due To Acquisitions The company generates about  37% of its revenue from Market Services, and the segment has grown by over 14% year on year. The growth due to acquisitions was partially offset by the decline in trading volumes resulting from unfavorable economic conditions and increased competition. The equity options volumes picked up pace following the acquisition of ISE, which gave NASDAQ a 42% market share in the U.S. equity options market. Please refer to  the full Trefis analysis for Nasdaq View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap
    WDC Logo
    Western Digital's Q4 Earnings Highlighted In 5 Charts
  • By , 7/28/17
  • tags: WESTERN-DIGITAL STX NTAP
  • Western Digital (NASDAQ:WDC) announced its fiscal fourth quarter 2017 earnings on Thursday, July 27, reporting a 39% annual increase in net revenue to $4.8 billion. Revenue was in line with the guidance given by the company at the end of the March quarter, while the gross margin for the quarter exceeded guidance. See our complete analysis for Western Digital 1. Key Financial Metrics Strong revenue growth was complemented by a 10 percentage point improvement in the non-GAAP gross margin. The  addition of SanDisk’s product portfolio to the company’s business has helped boost revenues as well as gross margins, given that SanDisk’s flash-based storage hardware has higher margins than WD’s hard disk products. As a result, Western Digital has observed a surge in gross margins through fiscal 2017. The company’s operating profit margin (non-GAAP) also increased by almost 12 percentage points to 24.5% for the quarter, driven by a limited increase in operating expenses. Expense synergies from the SanDisk acquisition were primarily responsible for restricting non-GAAP operating expenses to around WD’s targeted range of around $800 million. Resulting net income and earnings per share were significantly higher on a y-o-y basis, as shown below. 2. Unit Shipments Hard disk drive (HDD) shipments for laptops and desktops combined were down 1% y-o-y to 19.2 million units. Shipments for this segment have remained low for Western Digital and rival hard drive manufacturer Seagate (NASDAQ:STX) over the last couple of years. Enterprise HDD unit shipments were up 3% on a y-o-y to 6.2 million HDDs for the June quarter. Sales in this segment have been driven by robust demand for the cloud-based storage and data center storage over the last few quarters. Shipments for consumer electronics HDDs and branded HDDs combined were down 5% on a y-o-y basis to 13.9 million units. 3. Capacity Shipments WD reported a massive 36% increase in capacity shipped for datacenter and enteprise storage to 33.5 exabytes for the quarter. The company has reported a strong demand for its 10TB and 12TB Helium drives over the last few quarters. Comparatively, client devices and client solutions segments observed a mild exabyte growth, as shown below. 4. Revenue By Segment Western Digital observed significant revenue growth from the Client Devices revenue stream, which includes notebook and desktop hard drives, consumer electronics hard drives, solid state drives (SSDs) for non-enterprise customers, embedded storage and wafer sales. Combined revenues for Client Devices were up 52% to $2.4 billion, with significant growth coming from SanDisk’s client SSD product portfolio. The Client Solutions segment – which primarily includes products sold via the retail channel including branded HDDs, branded flash products and removable storage products (such as memory cards and USB flash drives) – reported strong growth in revenues, despite a fall in unit shipments of HDDs. Product sales were up over 50% y-o-y to $1 billion in the June quarter, with retail products driving growth. Datacenter and enterprise revenues were up 14% y-o-y to $1.4 billion, driven by strong demand for cloud-related storage . 5. Guidance For September Quarter Western Digital’s management expects revenues of around $5.1 billion for the September quarter, which is 9% higher on a y-o-y basis. Gross margin is expected to be around 12 percentage points higher over the year-ago period to around 41%. The company expects non-GAAP operating expenses to be flat sequentially at around $810 million due continued expense synergies with the integration of SanDisk. Disciplined expense management, higher revenues and healthier gross margins could help the company achieve its expected diluted earnings per share of $3.30, which is over 100% higher over the September quarter of last year. View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
    NYT Logo
    New York Times Beats Expectations On Digital Growth
  • By , 7/28/17
  • tags: NYT NWSA
  • The New York Times Company ‘s (NYSE:NYT) stock hit a nine-year high after reporting solid fiscal second quarter results on July 27. The company’s stock has gained more than 46% in 2017 and is up 73% since the U.S. election. NYT again reported unprecedented growth in digital subscriptions, which helped the company stabilize its subscription revenues in the second quarter. The company’s total subscription revenues increased 14% year-over-year (y-o-y) in the quarter, with digital-only subscription revenue growing strongly at 46% y-o-y to $83 million. In addition, the company’s other revenues grew 22% y-o-y largely due to affiliate referral revenue associated with the Wirecutter and Sweethome acquisition in 2016. NYT’s advertising revenue grew 1% y-o-y, primarily due to strong 23% growth in digital advertising, partially offset by continued headwinds in print advertising (-11%). The company’s overall revenues grew 9% y-o-y to $407 million, driven by very strong digital revenues. In terms of total subscriptions, the company now has around 3.3 million total subscriptions (print and digital), an increase of 37% since the same quarter last year. On the expense side, the company’s operating costs increased 11% in the quarter, due to higher marketing costs, increased compensation costs and costs from acquired companies, partially offset by lower print production and distribution costs. NYT’s adjusted operating profit increased 23% to $67 million in the second quarter, driven by the growth in digital and print subscription revenues. The company also posted adjusted earnings of 18 cents, up 64% y-o-y compared to the same quarter last year. Overall Advertising Revenues Grew For The First Time Since Q3 2014 NYT’s print advertising revenue decreased 11% y-o-y while digital advertising revenues grew 23% in the second quarter. The lower print advertising revenue was mainly due to declines in display advertising (-11%), primarily in the luxury, real estate, technology and telecommunications and travel categories. The increase in the company’s digital advertising was driven by gains in smartphone branded content, marketing services and programmatic. Digital Subscriptions Boost Subscription Revenues NYT’s digital-only subscriptions grew 63% y-o-y in the quarter, a net increase of 93,000 subscriptions to the digital news product. This increase in new subscribers in Q1 led to growth in NYT’s overall Circulation revenues, which contribute more than half of the company’s total revenues. Moreover, the increase in home delivery revenues in the quarter, which primarily resulted from a price increase in early 2017, also led to an increase in overall circulation revenues, as it more than offset volume declines. However, the newspaper witnessed a reduction in the number of print copies sold during the quarter. Q3 Guidance NYT expects its digital subscription revenue to grow at a solid 40% y-o-y. However, the company also expects its overall advertising revenues to decline, despite double-digit growth expectations for digital advertising. Have more questions? Please refer to  our complete analysis for New York Times  See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    JCI Logo
    Johnson Controls' Stock Price Falls On Sales Miss
  • By , 7/28/17
  • tags: JCI LEA MMM
  • Johnson Controls  (NYSE:JCI) released its third quarter earnings, for the three months ended June 2017, on July 27, wherein it met consensus estimates on earnings, but missed on sales. The diluted EPS of the company came in at $0.71, up 16% over the prior year, while the net sales of $7.67 billion reflected a growth of 1% over the second quarter of the previous year. Organic sales of the company grew at a similar rate, with organic growth of a little over 2% in Buildings being offset by a decline of 2% in Power Solutions. The company was able to deliver significant progress on the Buildings organizational structure, post the merger with Tyco, delivering savings of approximately $80 million, or about $0.07 per share. The company is on track to achieve the higher end of its savings target range of between $250 and $300 million in the year, totaling to roughly $0.27 per share. Why Did The Stock Fall On The Earnings Announcement? Sales Miss- Slower than expected revenue growth resulted in a sales miss of roughly $50 million. Building sales were down marginally to $6.06 billion, from $6.08 in the corresponding prior year quarter. Continued momentum of the global HVAC business was offset by a decline in the Fire and Security business, which fell by low single digits. While the integration with Tyco has resulted in some cross-selling wins, there have also been teething issues, which may have resulted in the orders falling by 4% for Tyco. Trimming EPS Guidance- JCI has trimmed the upper end of the range for its forecast for full-year earnings per share, from $2.60 to $2.68 stated in April to $2.60 to $2.62. This is despite the fact that the FX headwinds expected are far lower than what was predicted in April – of $160 million versus $380 million. This has been caused by a slowdown in the organic growth, now expected to increase by 2%, instead of 3%. Such a state of affairs is again caused by the integration of the two companies. The company will continue to offset the revenue shortfall by its productivity gains, which remain on track. AGM Batteries To Power The Future The Power Solutions segment has managed to grow substantially in recent years, driven by a demand for their AGM (Absorbent Glass Mat) batteries, which are used in vehicles with the start-stop technology. Approximately 24% of all batteries sold are paired with this start-stop system. The company expects the batteries with the start-stop technology to increase from 24% today to over 60% in 2020. A number of factors work in the favor for this technology. As stated by Lisa Bahash, group vice president and general manager Original Equipment of Johnson Controls, strong growth is expected from this technology, as it requires minimal changes to the vehicles, and costs considerably less than battery systems in hybrid or electric cars. It is also the best solution to aid automotive manufacturers to meet environmental regulations. These AGM batteries are also able to handle the higher usage that comes along with the new technical features being added to cars. The electrical vehicle boom, and the opportunities provided by the Chinese market, make this business poised for substantial growth in the future. According to Ray Shemanski, a vice president of Johnson Controls, about 40% of new vehicles in China will be fitted with the ‘start-stop’ technology by 2020, the same year when the Chinese government requires automakers to further lower the average fuel consumption, from the current 6.9 liters per 100 kilometers to 5 liters per 100 km. AGM batteries witnessed 17% growth in the quarter. However, this rate could have been even higher if the capacity had been available to the company. Keeping this capacity constraint in mind, JCI has undertaken significant investment to boost the production of these batteries. The company has guided for $1.25 billion to $1.30 billion in capital expenditure this financial year. Click here to see our complete analysis of Johnson Controls Have more questions on Johnson Controls? See the links below: Johnson Controls Beats Expectations, Trims Guidance Why Did 3M Acquire Johnson Controls’ Scott Safety? Will The Merger With Tyco Result In Improved Margins For Johnson Controls? Johnson Controls: A Focus On China
    PG Logo
    Key Takeaways From Procter and Gamble's Q4 Earnings
  • By , 7/28/17
  • tags: PG UL KMB CL
  • Procter & Gamble (NYSE:PG) reported better-than-expected fiscal fourth quarter earnings, as its earnings per share and revenue both beat consensus estimates. The company’s stock moved slightly up after the announcement. Below we highlight some of the most notable items from the earnings release: In Q4, the company’s net sales were flat compared to the prior year period. Organic sales were up 2% year on year on 2% volume growth, but that was offset by a 2% adverse foreign exchange impact. Global macroeconomic uncertainty – related to issues such as Brexit and geopolitical uncertainty in some key markets such as Brazil – remained challenging for the company in fiscal 2017. In Beauty, the company’s organic sales grew in high single-digits in Skin & Personal Care, driven by the continued growth of the super-premium SK-II skin care brand and increased pricing behind product innovation. While the organic sales increased low single digits in Hair Care, primarily due to increased pricing across multiple regions and brands. The Grooming segment revenues fell 2% y-o-y, due to reduced pricing in Shave Care, driven by lower pricing in the  U.S., partially offset by increased volume globally. Feminine Care organic sales increased low single digits due primarily to favorable product mix from the growth of Always Discreet and other premium innovation, whereas  Baby Care  organic sales decreased low single-digits as volume declined mainly due to competitive activity. For the full year, the company’s net sales were flat at $65 billion, and organic sales grew 2% y-o-y. It also reported diluted earnings per share of $5.59, up 59% y-o-y, primarily driven by the gain on the sale of the Beauty Brands to Coty in the second fiscal quarter. The company’s online sales grew 30% y-o-y to over $3 billion for the year. Online sales represented more than 5% of the company’s total business in fiscal 2017. P&G expects its organic sales growth to be in the range of 2% to 3% in fiscal 2018. It also expects all-in sales growth of around 3% for the same period. In terms of the bottom line, the company expects its core earnings per share growth to be in the 5 to 7% range. In addition, the company also expects its core operating profit growth to be 5% to 6%, compared to the 2% core operating profit growth in fiscal 2017. See   our complete analysis for Procter & Gamble See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    ADP Logo
    PEO Services Continue To Boost ADP's Revenues And Profits
  • By , 7/28/17
  • tags: ADP PAYX
  • ADP  (NASDAQ:ADP) announced its fourth quarter and full year fiscal 2017 financial results on July 27. The company posted a 6% growth in its annual as well as quarterly revenue, beating the consensus expectations by a small margin. The rise in ADP’s revenue was largely driven by the growth in its PEO Services, the division which has witnessed a consistent growth of around 12%-13% in each of the last few years. On the profitability front, the company managed to grow its adjusted EBIT margin to 19.8%, 30 basis points higher than the last year, despite lower-than-expected new business bookings during the year. Going forward, ADP expects its revenues to grow at a steady rate of 5%-6%, and its adjusted diluted EPS to improve by 2%-4%. In addition to this, the company stock rose to almost $120 per share on July 27, before closing 9% higher than the previous trading day, as William Ackman, a billionare investor, bought a large stake in the company. While the size of his position has not been disclosed, there is a possibility that Ackman, through his hedge fund Pershing Square Capital Management, could try to overhaul ADP’s management. See Our Complete Analysis For ADP Here Performance Across Revenue Streams As anticipated, ADP reported a stable growth of 6% in its 2017 revenue to $12.38 billion, primarily driven by a double digit rise in PEO Services during the year. The PEO Services business has been expanding rapidly over the last few years as more employers are exploring the option of using HR outsourcing. In 2017, the company’s average worksite employees increased 12% to about 462,000, resulting in a 13.3% jump in its PEO Services revenue to $3.46 billion. The division also saw a margin expansion of 80 basis points because of operational efficiencies during the year. As a result, ADP remains positive about the future of its PEO Services, and foresees a revenue growth of 11% to 13% from this segment in 2018. In addition, ADP’s interest on client funds grew by 5.3% y-o-y to $397 million, backed by a 3% rise in the average client fund balances during the year. The client fund balance rose due to wage inflation, which was partially offset by the impact of client losses and pressure from improving employment environment. However, the average implied annualized yield on the client funds remained flat at 1.7% for the year. Going forward, ADP expects its interest on client funds to increase about $40-$50 million in 2018 due to its extended investment strategy. Lastly, ADP payroll processing operations grew by 3.5% y-o-y to $8.52 billion, consistent with the past trend of a low-to-mid single digit revenue growth. The company attributed the growth of its core operations to a 2.4% improvement in the number of clients it served during the year. In 2018, ADP expects its payroll processing division to deliver a steady revenue growth of 2% to 3%.   Guidance For 2018 ADP estimates its revenue to grow by 5% to 6% in 2018, but expects to remain in the lower range of the guidance in the first half of the year. The company foresees a rise of 5% to 7% in its new business bookings during the year, which is likely to drive its revenue expansion. Further, the company’s PEO Services business is estimated to expand by 11% to 13% during the year, while its payroll processing segment will continue to deliver a stable growth of 2% to 3%. The total impact of ADP’s client funds extended investment strategy is expected to result in incremental revenue of $30-$40 million in 2018. Also, ADP expects its adjusted EBIT margin to contract by 25 to 50 basis points in 2018, with majority of the margin contraction concentrated in the first half of the year. The company expects its payroll processing margins to decline by 50 to 75 basis points, while the operational efficiencies from its PEO Services are likely to offset this reduction by 25 to 50 basis points. Consequently, ADP expects its adjusted diluted EPS to grow by 2% to 4% y-o-y in 2018. View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
    EXPE Logo
    Expedia's Investments Are Reaping Benefits While The Company Displayed Steady Growth In Q2
  • By , 7/28/17
  • tags: EXPE PCLN TRIP CTRP TZOO
  • Trivago (Expedia’s metasearch arm where it has a majority stake) is one of the fastest growing metasearch platforms. After going public last year, in Q1 2017, Trivago registered a 62% Y-o-Y growth in its revenues to $286 million while its EBITDA soared by a whopping 169% to $21 million. In Q2, Trivago’s revenues grew by 64% to $328 million. It exceeded $1 billion in revenue in the trailing 12 months for the first time in its history. Because of its aggressive pursuit of growth which is coming through its TV and other advertising, Trivago’s adjusted EBITDA fell by 78% to $2 million. Recent Investments SilverRail Technologies In May, the company entered into an agreement to acquire the London-based rail service distributor, SilverRail Technologies. Last year, Expedia had started a distribution partnership with the same company. The move can pay off well for Expedia’s long term growth as rail travel is one of the most important modes of transport in Europe and Asia. Expedia’s investment in the online booking sector for rail would imply more innovative and expanded offerings. Currently, SilverRail witnesses over 1 billion online searches for rail and around 25 million bookings, annually. It distributes tickets for more than 35 rail providers and carriers and handles over 1,500 corporate customers globally. Traveloka The company announced yet another investment yesterday. This time, a $350 million minority investment in  Traveloka, the leading OTA in Indonesia and which is expanding in Southeast Asia. The two entities will coordinate on the supply of hotels in the Asian markets. Expedia is focusing on Asia owing to the fact that over 50% of the world’s millennials, known for being tech-savvy, reside in the continent. According to Euromonitor International, the Asia-Pacific market is currently the fastest growing region for online travel agents. Notes: See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
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    Are The German Automakers In Trouble Once Again?
  • By , 7/28/17
  • tags: DAI VLKAY GM TM TTM F BMW DDAIF TSLA
  • Germany’s automotive manufacturers seem to be in deep trouble again, and this time they’re under fire for alleged collusion . Just a few days after Daimler’s announcement to upgrade three million Mercedes-Benz cars with reduced emission features and less than two years after Volkswagen’s admission that it rigged its diesel engines to bypass emission tests, this is a new development that has resulted in the declining of share prices for all the big names in Germany’s automotive industry. German car makers are now being suspected of colluding on technology for over decades. EU antitrust officials have started their investigations for a possible cartel among these car makers and for a breach of regulatory standards. The European Commission had confirmed that along with the Bundeskartellamt (German cartel office), it is currently assessing the information that they’ve received on this matter. In case the allegations turn out to be true, this can spell a significant loss to these car makers, along with a resultant setback for Germany’s industrial sector. What Is The Nature Of The Alleged Collusion? According to a report last Friday by Der Spiegel, a German news outlet, there might have been an industrial collusion between Volkswagen, Audi, BMW, Porsche, and Daimler. These entities have been blamed of agreeing upon parameters such as costs, suppliers, technologies, as well as the prices of diesel emission treatment systems. Till now, only BMW had denied the claim while the rest of the car makers have chosen to remain silent about the issue. What Are The Possible Consequences? The confirmation of such a collusion can cost a significant amount to both the car makers as well as Germany’s economy. The regulatory commission is known as the top antitrust agency in the EU and the confirmation of the allegations can result in the car manufacturers paying fines of up to 10% of their worldwide turnovers along with the imposition of changes in how they conduct their businesses. The automotive industry is an important one for Germany and it contributes around one-fifth of the nation’s total industrial revenues, while employing around 800,000 people. There Were Collusion Related Scandals In 2016, As Well In the last few years time, Germany’s automotive industry faced fines worth billions of euros, both in Europe and in the U.S. on the allegations of collusion in lighting systems, bearings, and engine coolers. In July last year, the European Commission had fined around €2.93 billion to companies such as MAN, Volvo/Renault, Daimler, Inveco, and DAF for their collusion on truck prices. Notes: See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    MO Logo
    Price Increases Boost Revenues For Altria In The Second Quarter
  • By , 7/28/17
  • tags: MO PM
  • Amid a backdrop of declining smoking rates and hence, cigarette volumes,  Altria (NYSE:MO) has been able to increase its earnings year after year. In the second quarter, the tobacco giant’s smokeable products (cigarettes and cigars) volume declined by 2.7%, but this segment’s revenues after excise taxes grew by a little over 3%, driven by increases in the product price. This factor has also helped to boost the margins of the company, which improved by 96 basis points in the quarter. Its smokeless products segment, which contributed to roughly 10% of the revenues in the quarter also posted strong growth rates. A factor that will continue to boost the earnings in the future are the significant buybacks the company has authorized. In the second quarter alone, Altria repurchased $1.05 billion worth of shares, reducing its share count by 14.4 million. This week, the Board authorized buybacks of another $1 billion, taking the total up to $4 billion, which is set to be completed by the second quarter of FY 2018. Impact Of The California Tax Hike The California cigarette market is the second largest in the nation, after Texas, and constituted roughly 7% of the US cigarette market before the tax was implemented. Thereafter, the volume contribution of the state fell to 5%, which drove down the total cigarette industry volume by approximately 4.5% in the quarter. Since Marlboro has a 50% share in the state, it disproportionately affected the brand, contributing to its 0.3 percentage points decline in the national retail share. These dynamics are expected to negatively impact Marlboro’s performance in the second half of the year as well. Based on past experience, tax increases of this magnitude impact the most in the short term, after which the rate of volume decline slows down. For the full year, the company estimates a 1% negative impact on the industry volumes resulting from the excise tax hikes, in California in April and in Pennsylvania back in August. Innovative Products Effort In e-vapor, Nu Mark’s MarkTen brand continued to grow its volume and retail share. It is currently the number two e-vapor brand in the country, with a national retail market share of ~13% in mainstream channels. MarkTen is now present in stores representing nearly 65% of e-vapor volume in those channels. And among stores, with MarkTen distribution through the full second quarter, the brand’s retail share was approximately 24%. In heated tobacco, the FDA has begun its review of Philip Morris’ modified risk tobacco product application for iQOS in late May. Once iQOS gets a go ahead, Altria will get exclusive rights to sell this product in the US. According to Reuters, Philip Morris is the first company to seek US approval to market a tobacco product as being less harmful than traditional cigarettes since the new laws were introduced. And hence, logically, if they are also the first company to receive approval from the FDA, they will hold a significant marketing advantage over other reduced risk tobacco products. Altria is also trying to get a favorable tax policy from the states for iQOS, in order to encourage people to shift to the less harmful  product. See Our Complete Analysis For Altria Have more questions? Have a look at the links below: Higher Prices Drive Altria’s Growth, But Results Miss Expectations How Will The Hunter’s Bill Help Tobacco Companies? How Will The California Cigarette Tax Hike Impact Altria? Notes:
    VZ Logo
    Verizon's Reintroduction Of Unlimited Data Pays Off
  • By , 7/28/17
  • tags: VZ T TMUS
  • Verizon  (NYSE:VZ), the largest U.S. wireless carrier, published its Q2 2017 results on Thursday, meeting expectations on earnings and beating revenue projections as it witnessed strong uptake for its unlimited data plans. The carrier’s revenues remained almost flat year-over-year at around $30.5 billion, while adjusted EPS grew by roughly 2% to $0.96.  Below we discuss the performance of the carrier’s postpaid business, which accounts for a bulk of its operating profitability. We have a  price estimate of $53 for Verizon’s stock, which is about 10% ahead of the current market price. See our complete analysis for   Verizon  |  AT&T  | T-Mobile |  Sprint   Verizon’s postpaid wireless operations performed well, adding a net of 358k postpaid phone users, amid a strong uptake of its unlimited data plans, which saw their first full quarter of availability over Q2. In comparison, the carrier posted its first-ever net loss of postpaid phone subscribers (289k losses) during the first quarter. The improvement over this quarter is noteworthy, as smaller rivals ran aggressive promotions that were targeted squarely at getting Verizon’s customers to switch. For example, Sprint offered Verizon customers a year of free unlimited data and voice service if they switched to its network, while T-Mobile offered to pay off the balance device payments and early termination fees of Verizon users if they ported out. The fact the Verizon was able to add subscribers and maintain its churn figures (postpaid churn was flat y-o-y at 0.94%), despite the competition and its higher pricing (Verizon’s unlimited plans start at $80, compared to $60 for some rivals) indicates that its subscribers are willing to pay a premium for its stronger network performance and coverage. That said, the return of unlimited plans does appear to be having an impact on the carrier’s revenues. These plans put a ceiling on ARPU for high-spending subscribers who were on more expensive tiered plans previously, while limiting the high-margin overage fees that are charged when customers exceed their monthly data quotas. ARPU for the quarter, including equipment installment plan billings, fell by 1.5% year-over-year to about $165, while service revenues were down 6.7% to to $15.6 billion. That said, Verizon could partially offset this impact as more subscribers upgrade to its unlimited offerings.
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    Roche Continues Steady Growth
  • By , 7/28/17
  • tags: RHHBY BMY MRK
  • Roche’s  (NASDAQ:RHHBY) recently released Q2 2017 earnings emphasize its research-centric robust business model, which has kept its results afloat despite competitive concerns. We believe that Roche’s mix of defensive and aggressive strategies positions it well as the pharma industry undergoes a shift – with new biosimilars getting approval and drug pricing concerns emerging in the U.S. Roche has successfully monetized combination therapies in the past that offer incremental benefits, in order to protect pricing and revenues of its existing drugs. It has consistently expanded in the adjuvant therapy area, and in general, has been successful in expanding use cases through research. This continues to reflect in its quarterly results, with Perjeta growing nearly 17% to more than CHF 1 billion. Roche has also been successful at launching new drugs and has a strong position in the growing cancer therapy market. The initial performance of recently launched Ocrevus suggests that the company is looking to expand this lead in other therapeutic areas as well. The drug is aimed at treating multiple sclerosis, and raked in nearly $200 million in revenue in the first quarter of its launch. We estimate the drug’s peak sales to be north of $6 billion. In addition, new cancer drug Tecentriq continued its impressive ramp up. However, Roche’s legacy behemoths – Avastin, Herceptin, and Rituxan – will soon face biosimilar competition. While Roche’s efforts to defend its existing franchises are commendable, we have previously stated that investors should focus on the company’s commitment to its pipeline and new launches. It appears that with the impressive Q2 results of new drugs, the company did emphatically signal that commitment. Our price estimate of $33 for Roche implies a slight premium to the market. See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
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    First Solar Posts Strong Q2, Increases Full Year Guidance
  • By , 7/28/17
  • tags: FSLR SPWR
  • First Solar  (NASDAQ:FSLR), the largest U.S.-based solar panel manufacturer, posted a better than expected set of Q2 2017 earnings, driven by improving demand and some recent price stabilization in the solar module market as well as better price realizations for its solar projects. While revenues declined by 30% sequentially to $623 million, net profits grew to about $52 million, from around $9 million. The company also increased its full-year guidance, projecting revenues of between $3 billion and $3.1 billion, $150 million higher than its prior forecasts, and adjusted earnings per share of between $2 and $2.50, up from the $0.25 to $0.75 that it had forecast previously. We have a  $45 price estimate for First Solar, which is below the current market price. See Our Complete Analysis For Solar Stocks  First Solar  |  SunPower First Solar’s panel sales to third parties grew, driven by robust demand from the U.S., where project developers have been placing advance orders to hedge against the Section 201 case that calls for setting a price floor for solar imports into the country. Demand for tier-1 and high-efficiency solar products  from China has also been relatively strong. This has led to the firming up of module prices, after some declines in recent quarters. That said, First Solar’s module gross margins declined to 17% in Q2 versus 26% in Q1, driven partly by ASP declines from volumes that were booked in prior quarters. First Solar noted that it has booked a total of 1.5 Gigawatt DC in capacity (systems and modules) over the last three months, bringing its total backlog as of July 27 to 3.7 Gigawatt DC. First Solar has also largely cleared out its remaining supply of Series 4 modules (it has just about 0.3 to 0.5 GW Series 4 supply that remains to be booked) as it prepares to transition to its next-gen Series 6 modules from Q2 2018. First Solar’s project revenues were driven by the sale of the  179 MW Switch Station 1 and 2  solar projects. While project revenues declined sequentially, project margins improved, allowing the company’s overall gross margins to rise to about 18%. Price realizations for solar projects have been improving, particularly in the U.S., as utility companies have been increasing the solar component of their resource mix while corporates are also looking to increase utility-scale solar exposure to hedge their energy costs. First Solar expects to sell its 40 megawatt Cuyama and 280 MW California Flats projects by the end of this year, and the projects will likely see higher prices than the company had originally forecast. View Interactive Institutional Research (Powered by Trefis): Global Large Cap   |  U.S. Mid & Small Cap   |  European Large & Mid Cap More Trefis Research
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    Baidu Delivers A Strong Quarter Driven By iQiyi, Transaction Services
  • By , 7/28/17
  • tags: BIDU GOOG NFLX YELP BABA SINA
  • Baidu (NASDAQ:BIDU) announced its Q2 2017 earnings on Thursday, July 27, reporting a 14% year-over-year increase in net revenues to RMB 20.9 billion. Strong revenue growth was complemented by a significant improvement in the company’s operating income, as shown below. Operating profit (GAAP) was up 47% on a y-o-y basis to RMB 4.2 billion, leading to a massive 83% increase in Baidu’s net income for the quarter. The company’s earnings per ADS was up 72% y-o-y to RMB 11.31 per ADS for the quarter. Strong Operating Metrics Help Drive Earnings Baidu has witnessed strong growth in its online video streaming platform iQiyi, as well as its transaction services business, over the the last few years. At the end of the previous quarter, Netflix and Baidu signed an agreement which would allow Netflix to stream some of its programs in China pending regulatory approval. This could further fuel revenue growth in Baidu’s online video business. Strong revenue growth in these segments has been complemented by high cost of revenues and operating expenditures in these businesses. Baidu has made significant expenditures for content acquisition and bandwidth costs for the video business, traffic acquisition for transaction services, as well as marketing and promotions. As a result, Baidu has operated its streaming video and transaction services businesses at a loss over the past few years. Baidu’s total cost of revenues remained high during the quarter at RMB 10.6 billion, which was over 20% higher than the prior year period. Within cost of revenues, Baidu successfully reduced traffic acquisition costs from RMB 2.9 billion in Q2’16 to under RMB 2.5 billion in Q2’17. Additionally, Baidu’s total operating expenses were down 9% to RMB 6.1 billion, as shown below, mainly due to a 30% reduction in SG&A expenses to under RMB 3 billion. SG&A expenses were lower due to a decrease in promotional spending by the company. As a result of healthy operating metrics, Baidu’s company-wide operating profit margin expanded by 450 basis points to just over 20% for the quarter. Positive Outlook For Q3 & Full Year Baidu’s management expects its September quarter revenues to be over 28% higher on a year-over-year basis to around RMB 28.4 billion. Strong growth is expected from the core business as well as smaller revenue streams including iQiyi and transaction services. According to Reuters’ consensus estimates, Baidu’s net earnings per ADS could be over 35% higher on a y-o-y basis to RMB 9.34 as shown below. For the full year, we forecast the company to register 20% growth in revenues driven by strong performance from its non-core businesses including iQiyi and transaction services. In addition, we expect Baidu to continue to improve its operating efficiency, which would help the company report healthier margins. We forecast the company’s adjusted EBITDA margin to expand by around 450 basis points over 2016 levels to around 21%. See our complete analysis for Baidu View Interactive Institutional Research (Powered by Trefis): Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap More Trefis Research
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    Key Takeaways From Verisign's Q2 Earnings
  • By , 7/28/17
  • tags: VRSN
  • After a positive start to the year,  VeriSign  (NASDAQ:VRSN) performed decently in the second quarter with revenue of $288 million, implying slight growth over the same period last year. The company’s net income saw a 9% increase to around $123 million. Below we highlight some of the key takeaways from the earnings release. Key Highlights: Verisign renewed its .net Registry Agreement with the Internet Corporation for Assigned Names and Numbers (ICANN), and will will remain the sole registry operator for the .net registry for the next 6 years. In the quarter, domain name registrations for .com and .net together grew 1% year over year to 144.3 million. VeriSign processed 9.2 million new domain name registrations for .com and .net, a increase from 0.6 million processed in the prior year quarter. The renewal rate for Q1 2017 stood at about 72.5%, down by about 2 percentage points. That news only comes now as renewal rates are not completely measurable until after 45 days from the end of the quarter. Domain growth is primarily driven by internet adoption rates, economic activity globally and e-commerce activity. For the reported quarter, the exact renewal rate figures will be available in the coming weeks. The company estimates that it will be around 73.9% compared to 73.8% in the year-ago quarter. The company announced an increase in the annual fee for .net domain name registrations from $8.20 to $9.02, effective Feb. 1, 2018 per its agreement with ICANN. Additionally, this quarter marks 20 straight years in which the company maintained 100% .com and .net availability. As more and more companies begin to rely on digitally growing their business, maintaining availability is going to be important. Given the company’s track record so far, it could be a while before we see this number slip. The company holds a prime position in the highly regulated .com and .net domain industry. We expect the contract renewal and price hikes for .com and .net domain names will continue to boost the top line going forward. Additionally, VeriSign has the potential to greatly benefit from the growth opportunities in the Distributed Denial of Service (DDoS) security market. For 2017, the company expects to record revenues in the $1.155 billion to $1.165 billion range, while non-GAAP operating margin is expected to be between 64.5% and 65.25%. View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
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    Twitter's Stock Tanks On Revenue Decline, Weak MAU Growth
  • By , 7/28/17
  • tags: TWTR
  • Twitter (NYSE:TWTR) once again failed to report growth across its user base and revenues in Q2. As a result of its disappointing results, the stock price declined by 15% in aftermarket trading. The key takeaways from the results are as follows: The company’s total revenue declined by 5% year-over-year (y-o-y) to $574 million, as U.S. advertising revenue declined by 14% y-o-y to $269 million. As a result, total advertising revenues declined by 8% to $489 million. Twitter’s adjusted EBITDA increased marginally on the back of a decline in R&D and marketing costs due to a lower headcount. However, its net loss widened to $116.5 million in the quarter. In terms of users, Twitter’s average monthly active users (MAUs) grew 5% y-o-y to 328 million in Q2 2017. However, on a sequential basis, the company’s U.S. MAUs actually declined by 2% to 68 million. It was largely the lack of user growth that drove the company’s stock lower after the release. On the bright side, advertising metrics continued to report improvement as total ad engagements increased 95% year-over-year, driven by a shift in mix toward video ad impressions, higher click through rates, better targeting, and ad relevance. Average Cost Per Engagement decreased 53% year-over-year, reflecting a higher mix of video ad engagements. In Q2, Twitter delivered more than 1,200 hours of live video from its existing and new content partners. The company announced 40 live-streaming partnerships, including two 24×7 networks and 10 international deals during the quarter. The company continues to strengthen its content portfolio and has announced the launch of a sports network called Stadium. It is also planning to launch a 24/7 global news network in partnership with Bloomberg. Video consumption has been growing tremendously over the past few quarters on Periscope as well as on the Twitter platform with the launch of auto-play videos. It will be interesting to see if this also translates into higher advertising revenue growth going forward. Have more questions about Twitter? Please refer to  our complete analysis for Twitter See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
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    Norfolk Southern's Q2 2017 Earnings Review: Volume Growth And Productivity Improvement Initiatives Drive Earnings Growth
  • By , 7/27/17
  • tags: NSC CSX UNP
  • Norfolk Southern reported a sharp increase in its second quarter earnings driven by top line growth and the success of the company’s ongoing productivity improvement initiatives. Coal and intermodal shipments drove the growth in Norfolk Southern’s shipment volumes. The demand for coal from utilities has risen considerably amid rising natural gas prices. In addition, market share gains for Norfolk Southern further boosted the company’s coal shipments, which reported a 27% year-over-year increase in Q2 2017. Improving economic conditions and highway to rail conversions (shifting freight transportation from trucks to rail) drove a 6% growth in the company’s intermodal shipments. Besides an increase in shipment volumes, the company continued to make progress towards its target of $100 million productivity savings for the year. Fleet rationalization (the company has lowered its locomotive fleet by 150 units this year) and the closure of ancillary infrastructure such as hump yards consistent with a smaller fleet, workforce rationalization, the increasingly fuel efficiency of operations, and network optimization have helped the company manage operating expenses, translating into a 230 basis point year-over-year improvement in its operating ratio. Going forward, the company plans to maintain its thrust on improving productivity in order to complement top line growth. The management plans to achieve an operating ratio of 65% by 2020. Given the favorable prevailing business environment and the continued emphasis on productivity improvement, Norfolk Southern is set to report strong results in the coming quarters. Have more questions about Norfolk Southern? See the links below. What’s Driving U.S. Rail Shipments This Year? President Trump’s ‘America First’ Agenda Is A Boon For Metals & Mining And Railroad Sectors Notes: See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology  
    F Logo
    Key Takeaways From Ford Motors’ Q2 2017 Results
  • By , 7/27/17
  • tags: F GM TTM
  • Ford Motor Company (NYSE: F) announced its Q2 2017 results on July 26 th and the company beat analysts’ expectations for both EPS (earnings per share) and revenues. Diluted EPS for the quarter stood at $ 0.51, slightly higher than the $0.49 number for the same period last year and revenues were at $ 39.85 billion, again marginally higher than the $39.48 billion number for the same period last year.  The higher EPS was primarily due to lower income tax paid by the company for this quarter. Below is a summary of the company’s performance for this quarter: Wholesale units sold in Q2 2017 were lower by 3% compared to the same period in the previous year, however revenues were marginally higher. The company’s global market share declined by 0.1 percentage points in this quarter due to loss of market share in North America, Europe and Middle East, it gained market share in Asia Pacific and South America. Higher commodity costs and unfavorable exchange rates led to a lower pre-tax income in this quarter compared to the same period in the previous year. Regional Performance: Below is a summary of Ford’s regional performance for Q2 2017: Note: YOY change for numbers in percentages is the percentage point change. China: China remained a bright spot for Ford in Q2 2017. The company reported the best ever June sales in the region and the best ever quarterly sales for its Lincoln brand, which is gaining popularity in the country.  Growth in market share in Asia Pacific was primarily due to higher share in China. Europe : While GM has exited Europe, Ford Motors took a bold decision to continue in the region include troubled areas such as Russia. Results from the region have been weak in Q2 2017 with declining revenues due to a significant decrease in volumes as the economy suffers from the Brexit impact. Ford launched the “All New Fiesta” in Europe in this quarter and has received good initial reviews of the model. Going Forward: Operating under a new management team Ford is now focusing on certain key priorities as the business is viewed with “fresh eyes” Using data modeling to identify sweet spots between volume, mix, and price to deliver higher transaction prices in an increasingly competitive market. Renewed focus on innovation: Ford’s Chief Technology Officer will now report to the CEO as it works towards merging mobility and computing for future digital services. Ford has changed its EPS guidance for 2017 from $1.58 to a range of $1.65 to $1.85. This change is primarily due to a favorable tax rate of 15% as against a normal adjusted effective tax rate of 30% for the company. Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to  our complete analysis for Ford Motor See More at Trefis  |  View Interactive Institutional Research  (Powered by Trefis) Get Trefis Technology
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    Lear’s Strong Momentum Continues For Q2 2017, Increases Full Year Financial Outlook
  • By , 7/27/17
  • tags: LEAR LEA F GM
  • Lear Corporation (NYSE:LEA) reported its Q2 2107 results on July 26 th, beating consensus estimates with revenues of $5.1 billion (up 8% year on year) and EPS (earnings per share) of $4.49 (up 20% year on year). The company continued to grow its sales faster than industry production and improved its margins in both its segments of operation. Below is a summary of the company’s financial performance for Q2 2017: While the gross margin was slightly lower compared to the same period in the previous year, lower administrative expenses led to a higher net income for this quarter. South America and Asia have been the bright spots for Lear in terms of revenue growth. Global sales increased 8% year on year and this figure would have been 10% if the impact of foreign exchange is excluded. Collectively the acquisition of Grupo and AccuMED contributed around $110 million to the company’s top line in this quarter. The company’s industry leading cost structure ensures that higher margins are maintained throughout the revenue growth cycle. Below is a summary of the segment-wise performance of Lear: Income is defined as pretax income before equity in net income of affiliates, interest expense and other expense. Improvement In Future Guidance In 2017, the company expects $20 billion in sales and an adjusted net income of $1.1 billion as it expects an improved financial performance post acquisition of Grupo Antolin’s seating business. Revenue guidance is being increased by $500 million due to the impact of the acquisition. Further, the guidance for core operating income is being increased by $50 million reflecting its continuing strong performance. Lear’s unique product capabilities allow the company to capitalize on emerging industry trends. Its unique software and electronic capabilities enable the seat to transfer information to and from the occupant for a more enjoyable and safer driving experience. This unique synergy between both its segments is likely to be a key growth driver for the company in the long term. Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to  our complete analysis for Lear Corporation   See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology  
    KO Logo
    Coca-Cola's Revenue Declines, But Core Business Remains Solid
  • By , 7/27/17
  • tags: KO PEP DPS
  • The Coca-Cola Company  (NYSE:KO) posted its second quarter earnings on July 26, reporting a 16% fall in the revenues, hit by headwinds of 17% from the refranchising of its bottling operations, and of 2% from foreign currency. On the positive side, organic revenues grew 3% driven by its price/mix growth and concentrate sales, while core business organic revenues improved by 4%. Meanwhile, the operating margin of the company fell by over 335 basis points, and its comparable operating margin increased by almost 380 basis points. This improvement was driven by the divestiture of its low margin bottling business, and better expense management through its productivity initiatives. The company continues to transform its beverage portfolio, by reducing its sugar footprint, and focusing on no or low calorie drinks. Refranchising Bottlers Coca-Cola is refranchising many of its bottling operations in a bid to move away from the capital intensive and low margin business of bottling, and focus more on the concentrate business, as the consumption of carbonated drinks continues to slow down, especially in developed markets. Coca-Cola’s net sales growth has been hurt in the last few quarters due to structural changes. The company is divesting from these operations in the US, and intends to complete the process by the end of the year. Earlier in the month, KO also completed the refranchising of all its company-owned bottling operations in China with the sale of the Shanghai bottler. The refranchising efforts and other structural impacts are expected to cause as much as an 18% to 19% headwind to the top line this year, but what remains the silver lining for the company is the expected stable growth for its core business. Organic revenue is expected to grow 3% in 2017, with a 7% to 8% growth in comparable currency neutral income before taxes (structurally adjusted), driven by strong operating performance. Launch Of Coca-Cola Zero Sugar In The US KO is replacing its Coke Zero in the US, in an effort to attract customers who are looking for non-sugary drinks. Its Coca-Cola Zero Sugar is already popular in Great Britain, Mexico, and 25 other markets around the world, and will hit the US shores in August. Volume sales of Coca-Cola Zero Sugar have grown by double digits globally year-to-date, with the strongest growth in Europe and Latin America, regions where this product is most widely available. On the other hand, Coke Zero was one of the top 10 US sparkling brands in 2016, posting 3.5% sales growth, according to Beverage Digest. While both these drinks are sugar-free and contain the same artificial sweeteners, Coca-Cola Zero Sugar tastes more like the original Coke, and has a similar red packaging, as opposed to black of Coke Zero. The new name is intended to better communicate the zero sugar in the drink to the customers, to remove any ambiguity, as consumers move away from the sugar-loaded drinks, and municipalities impose sugar tax on sweetened drinks. The company launched Coke Zero in 2006, but its gains have not made up for the loss in volumes from its other sweetened beverages. Hence, given the fact that this new product tastes like the original, but without the sugar, it may help to attract customers. Furthermore, given the impressive growth rates seen across Europe, the company hopes to emulate it in the US as well. As the beverage industry undergoes a transformation with carbonated soft drinks losing their position and consumer’s preferring “healthier” beverages, Coca Cola is also looking to focus on innovation to introduce new/modified beverages which will attract consumers. Earlier in the year, the company laid out its plans for its transformation. It is focusing on flavored water, bottled water, and dairy beverages to diversify its portfolio. The company’s new management structure is aimed at the company’s strategy to drive growth via newer products, in line with changing consumer preferences. Have more questions on Coca-Cola? See the links below. Why You Should Look Beyond Coca-Cola’s Declining Revenue Coca-Cola’s Structural Changes Eat Away At Profits, But Big Plans Ahead To Improve Efficiency Coca-Cola Faces The Sugar-Tax Problem In South Africa Coca-Cola Set To Enter The Coffee Market In Brazil Notes: See More at Trefis  |  View Interactive Institutional Research  (Powered by Trefis) Get Trefis Technology
    X Logo
    U.S. Steel's Q2 2017 Earnings Review: Favorable Business Conditions Translate Into Earnings Improvement
  • By , 7/27/17
  • tags: X MT
  • U.S. Steel reported a considerable improvement in its second quarter earnings driven by improved business conditions for steel makers in the U.S. and Europe. The improved business conditions were reflected in the sharp increases in steel prices reported by both the U.S. Flat-rolled and U.S. Steel Europe divisions. The firming of steel prices in both the U.S. and Europe is largely due to regulatory intervention aimed at discouraging unfairly traded steel imports. The imposition of antidumping duties on unfairly traded steel imports over the course of 2016 helped negate the competition from these low-priced imports to the domestic steel industries in both the U.S. and Europe, allowing prices to rise with improving demand conditions. However, despite the favorable demand conditions, shipments from the U.S. Flat-rolled division remained subdued as a result of a lowering of production levels amid the company’s ongoing asset revitalization program. The asset revitalization program, which is aimed at improving the reliability and efficiency of the company’s facilities, entails higher capital expenditure and lower production levels while the company upgrades its production facilities. While the U.S. Flat-rolled and U.S. Steel Europe divisions reported favorable results, the company’s U.S. Tubular Steel division reported an operating loss as oil and gas drilling activity still remains fairly subdued. Going forward, the company management stated its intent to continue to lobby the federal government to take action against unfairly traded steel imports. However, though the business environment for steel companies is quite favorable as a result of regulatory action taken by the government, U.S. Steel’s ongoing asset revitalization program is likely to weigh on the U.S. Flat-rolled division’s production levels in the near term. Thus, U.S. Steel is unlikely to take full advantage of favorable business conditions in the coming quarters as it continues to upgrade its production facilities. Have more questions about U.S. Steel? See the links below. Underperforming Amid Favorable Business Conditions: The Curious Case Of U.S. Steel U.S. Steel’s Q1 2017 Earnings Review: Unexpected Decline In Flat-Rolled Shipments Weighs On Results Notes: See More at Trefis  |  View Interactive Institutional Research  (Powered by Trefis) Get Trefis Technology