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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 : STARBUCKS

Starbucks is scheduled to report earnings on Thursday, and will likely see further revenue and bottom line growth.

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FORECAST OF THE DAY : VERISIGN'S .COM AND .NET DOMAIN REGISTRATIONS

We expect continued strong growth in VeriSign's domain registrations driven by its dominant market position and favorable secular trends.

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RECENT ACTIVITY ON TREFIS

LUV Logo
What To Expect From Southwest's Q1 Earnings
  • By , 4/25/18
  • tags: LUV
  • Southwest Airlines  (NYSE:LUV) managed to post a better-than-expected earnings last time around. The company saw revenues and earnings beat the consensus estimates comfortably. Revenues in the previous quarter were driven by increased passenger demand from the holiday season, while the earnings benefited from better operational efficiency. Further, like many of its competitors, the airline realized a $1.4 billion one-time benefit to its net income on the recent corporate tax cut. To celebrate this moment, the company paid out about $70 million in bonuses to its employees. Through 2018, it looks as though the company is poised for healthy year-over-year revenue growth for much of the year. In general, the company’s main aim is to maintain positive unit revenues throughout. The company’s stock price has fallen considerably through the beginning of the year. While some correction in the stock price is warranted, we believe that the market has priced it quite unfairly at the moment. In this respect, we have created an interactive dashboard to help best put forth our reasoning behind this. Click on the link to come up with your own price estimate. Unit revenue is a very important metric used to determine an airline’s revenue generating capacity. Southwest has done well to maintain positive unit revenues over the last year, and expects to carry forth a similar momentum going forward as well. As mentioned previously, this is one of the company’s main priorities in the year. In this respect, management expects the key metric to lie between 1-2% for the first quarter of 2018. In keeping with the general trend of industry wide sector and capacity expansion, Southwest recently announced its intentions to begin flights to Hawaii very soon. While this is expected to add to revenues significantly, new operations usually tend to cause a rise in costs due to additional advertising costs and more salaries paid out. For Q1, the company expects costs to increase by about 0.5-1.5%. In general, fuel costs have been on the rise and this development has been spooking investors for some time now. However, much to their relief, Southwest, like many of its competitors, don’t expect to see much of an adverse impact from this. Management is certain that 2018 will see better protection against cash drop prices and energy prices without the forward exposure. In this respect, the company is expecting to see fuel prices rise by about $2.10-$2.15 in Q1. Lastly, like all the other airlines, Southwest too, is looking to increase capacity in 2018. The company aims to increase the key metric by about 5% for the full-year. This comes at a time when legacy airlines have decided to up their capacity growth significantly in order to maintain market share.   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.
    AAL Logo
    What To Expect From American Airlines' Q1 Earnings
  • By , 4/25/18
  • tags: AMR
  • American Airlines  (NASDAQ:AAL) reported a pretty decent earnings last time around. The company managed to beat the earnings and revenue estimates by a comfortable margin. That said, the airline witnessed its stock price plummet post the call on rising concerns over profitability. The airline posted profits in the amount of $258 million in the quarter, which was down by a significant 10.9% year over year. The fall was primarily the product of heavy increases in costs which came in notably higher at about 7% in the quarter. That said, the company is optimistic about its growth prospects in 2018. The company’s stock price has remained quite volatile through most of the year thus far. However, we believe that the price has much room to grow. In this respect, we have created an interactive dashboard to help us explain our reasoning behind this. Please click on the link to make changes to the key drivers and arrive at your own price estimate. In the previous quarter, the company managed to increase its RASM figure by almost 5.6% year over year, which was well ahead of management’s initial forecast. That said, we expect there to be a drop in momentum going forward. For Q1 2018, the company expects to increase RASM at around 2-4% year over year. As mentioned in the previous quarter, American will continue to raise capacity in 2018. This news didn’t go down well with investors that believe the trend of raising capacity across the industry will lead to pricing wars that could massively affect profits. While the company has assured that the rise in capacity will be maintained in the most efficient manner, margins in the upcoming quarter will shed more light on this. For Q1, it forecasts fuel prices to jump to almost $2.07-$2.12 a gallon, up from around $1.70 per gallon in the same period last year. Non-fuel costs are also expected to increase, albeit, at a diminishing rate. The net result is that the company forecasts its pre-tax margin will be around 2-4%, in comparison to 6.7% in Q1 2017.   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.
    VLKAY Logo
    What To Expect From Volkswagen’s Q1 2018 Results
  • By , 4/25/18
  • tags: VLKAY GM TM TTM F BMW DAI DDAIF TSLA
  • Volkswagen AG (OTCMKTS: VLKAY) will report its first-quarter results and conduct a conference call with analysts on April 26 . Notably stronger sales volume of higher margin vehicles in the first-quarter are expected to result in increased revenue. However, the company expects to have a moderate 2018 with revenue expected to grow by 5% year-on-year (y-o-y) and operating margin to range between 6.5–7.5%, close to its 2017 figure. Volkswagen posted strong sales volume in its first-quarter. Sales volume increased by 7.4% y-o-y, with double-digit growth experienced in China and Russia. Per the company’s 2018 outlook, Volkswagen expects a stronger demand to persist from Asia’s emerging economies as seen from the company’s first-quarter sales volume. The below graph has been created using our interactive platform . From a brand perspective, the company experienced the strongest volume sales in Skoda, Seat, and  MAN. These brands experienced a double-digit growth rate in Q1, significantly contributing to the total sales volume. Volkswagen is particularly optimistic about its trucks and bus brand, MAN, which came into existence 3 years ago. The company expects stable growth from this variant across markets based on the current market factors. The company is currently looking for new financing opportunities for its future investments in this segment for it to expand even further. The Chinese joint ventures (accounting for the majority of Volkswagen’s equity investments) also experienced record sales volume of 1.01 million vehicles in the first-quarter, reflecting a growth of 13.4% y-o-y . A large part of this growth is attributable to the increase in SUV sales in China which is expected to grow even further with 4 new SUV models expected to be available from the second half of 2018. However, the company is expected to face some cost headwinds in 2018 with rising material prices partly as a consequence of the latest development in the steel market. Additionally, the company expects its R&D expenditure to remain high in 2018 with the company’s increased focus on investment in e-mobility and new technologies.   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.
    UPS Logo
    What To Expect From UPS' Q1 Earnings
  • By , 4/25/18
  • tags: UPS
  • UPS  (NYSE:UPS) is all set to report earnings for Q1 this Thursday. In the previous quarter, the company managed to beat both the earnings and revenue expectations, comfortably. However, earnings were offset by increased costs in the quarter on heavy system bottlenecks and delayed deliveries. Given the heavy surge in package volume, UPS has also decided to spend heavily in the immediate future to upgrade its delivery network. Therefore, we expect the company’s bottom line to be hurt similarly in Q1. That said, in terms of revenues, we expect the heavy influx of e-commerce shipments to greatly benefit the packaging giant. Probably the most worrying news to investors would be the heavy costs the company expects to incur. Over the last few quarters, high package delivery costs have taken quite a toll on UPS’s bottom line, and we expect this momentum to carry into Q1 as well. Further, with the massive surge in package volumes, UPS has decided to up its investment in its delivery network. Additionally, the company is also working hard to expand its presence globally. While this move will benefit the shipping mammoth in the long run, in the short run, we expect these additional costs to drag on earnings. On the positive end, e-commerce has grown at a significant rate in the recent past. According to the National Retail Federation, e-commerce shipments grew by around 8-12% last year, which is more than double the overall increase for all of retail. This, as expected, translated to notably higher shipments through the holiday season. In this respect, we expect revenues across most divisions, notably the U.S. Domestic Package unit to continue gaining from this trend. Analysts estimate sales at the division to come in around $10.117 billion, notably higher than $9.535 billion in Q1 2017. Further, the company’s international package division is expected to benefit from a high growth in export volumes across the globe. According to analysts, we can expect the division to post revenues to the tune of about $3.339 billion, in comparison to $3.058 billion in the same period a year ago.
    LEA Logo
    What To Expect From Lear Corporation’s Q1 2018 Results
  • By , 4/25/18
  • tags: LEA HOG DDAIF
  • Lear Corporation (NYSE: LEA) will release i ts Q1 results and conduct a conference call with analysts on April 26 . We expect the company to continue and display strong results as it continues to benefit from a change in consumer preference in the U.S. for crossovers and SUVs and additionally from a global market shift towards electrification and connectivity. Revenue is expected to display a significant year-on-year (Y-o-Y) growth rate of 9% as per consensus mean estimates at $5.45 billion . Average consensus adj-EPS is expected to be $4.91, ~15% higher than the same period last year, benefiting from higher revenue and the company’s superior cost structure. Higher Revenue Growth To Be Derived From Both Seating Segment & E-system Segment The changing industry trends have led to a huge future opportunity for Lear Corporation. The transition to crossovers and SUVs, which will lead to a higher content per vehicle, and presents a significant growth opportunity for the company’s seating business. Bigger cars such as SUVs and crossovers command premium content per vehicle (premium/ additional seating and more advanced electric content) leading to higher revenues for Lear. Content per SUV is estimated at $1,000 as against the $700 average content per vehicle. This trend is likely to positively impact Lear Corporation’s revenues. Similarly, a global push towards electrification will continue to remain beneficial for the company over the long-term. Lear Corporation has recently announced the acquisition EXO Technologies, a developer of differentiated GPS technology. This acquisition is likely to strengthen the company’s E-Systems segment even further. Margins May Remain Low With Increasing Focus On China Lear has a leading cost structure in comparison to its peers, however, costs are expected to remain on a higher range in 2018 as the company continues to expand its reach and invest in China. Additionally, greater R&D expenses to support the company’s alternative energy vehicle and connectivity initiatives are also expected to add to additional costs. However, these additional investment expenses are not expected to have a significant impact on the company’s margins. Overall the company is expected to display a strong performance throughout the year. The details of our analysis have been outlined in our interactive dashboard . You can make changes to our key assumptions in our interactive platform to arrive at your own fair price estimate for the company.   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.
    COP Logo
    What To Expect From ConocoPhillips' Q1 2018 Results
  • By , 4/25/18
  • tags: COP APC EOG CHK
  • ConocoPhillips (NYSE: COP) will release its first quarter results and conduct a conference call with analysts on April 26 . The company is expected to post a strong financial result backed by a recovery in commodity prices. Further, the company’s sustained reduction in debt would provide additional support to its bottom line. Consensus market estimates have a mean adj-EPS estimate of $0.67 and revenue estimate of $8.88 billion, reflecting ~50% sequential EPS growth and ~2% sequential revenue growth. Continued Strength In Oil Prices To Boost Revenue & Increase Cash Flows Oil prices have continued to display strength since the beginning of year owing to several macroeconomic factors. The WTI crude oil prices averaged at $64.62 per barrel for the March ’18 quarter compared to $55.26 per barrel for the December ’17 quarter, representing ~17% sequential growth. Apart from the extension of the Organization of Petroleum Exporting Countries’ (OPEC) production cuts in the fourth quarter of 2017, oil prices have received additional support from the weakness in the U.S. dollar, geopolitical tensions in the Middle East, and the recent U.S. sanctions against Russia. Higher oil prices would continue to support the company’s top line and add to a significant portion of the company’s cash flows. Increased Cash Flows & Stronger Balance Sheet To Result In Higher Shareholder Return ConocoPhillips has strategically been reducing its debt to be better equipped to face an environment of fluctuating commodity prices. The company in 2017 reduced its debt by almost 30% to less than $20 billion and aims to achieve a debt level of $15 billion by 2019 . This reduced debt will consequently result in significant interest expense savings and thus boost the company’s bottom line in the upcoming quarters. Additionally, lower interest expense would result in higher cash availability for the company. Thus, a higher availability of cash flows as a resultant impact of higher commodity prices and lower interest expenses and with no plans of superseding the company’s current CapEx plan, ConocoPhillips is expected to deliver strong shareholder returns in the form of buybacks and dividends throughout 2018. The company expects its full-year 2018 production (excluding Libya) to average between 1,195 to 1,235 MBOED, translating into a growth of 5% on a year-on-year basis.  The first quarter production is estimated to be around 1,180-1,220 MBOED. Thus, with notably higher production volume and higher commodity prices and a strong balance sheet, ConocoPhillips is expected to have a strong year ahead and we look forward to the company’s performance in the upcoming quarters. Our key expectations from the company’s 2018 results are highlighted in our interactive dashboard, you can make changes to our assumptions to arrive at your own fair price estimate for the company.     What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Research Like our charts? Explore  example interactive dashboards  and create your own.
    KO Logo
    Core Brands And Healthy Portfolio Drive Growth For Coca-Cola
  • By , 4/25/18
  • tags: KO PEP DPS
  • The Coca-Cola Company  (NYSE:KO) had a solid start to 2018, posting results that beat consensus estimates on both revenues and earnings. As has been the case in recent quarters, the refranchising efforts were a 26% headwind to the revenues, which declined by 16%. On the other hand, organic revenue growth was 5%, driven more by volume growth than price growth, reversing the trend seen recently. Comparable operating margin (non-GAAP) expanded 600 basis points, driven by divestitures of lower-margin bottling businesses and the company’s ongoing productivity efforts, helping the EPS to grow to 47 cents, from 43 cents in the corresponding quarter of last year. In a welcome change for the company, its Diet Coke brand returned to volume growth in North America. Moreover, the foundation of the company remains strong, reflected in Trademark Coca-Cola posting a healthy 4% volume growth globally, fueled by 3% growth in brand Coca-Cola and double-digit growth in Coca-Cola Zero Sugar. We have a  $49 price estimate for Coca-Cola, which is higher than the current market price. The charts have been made using our new, interactive platform. The various driver assumptions can be modified by clicking here, to gauge their impact on the earnings and price per share metric. Key Factors That Will Impact Results Going Forward  1.  Success of Coca-Cola Zero Sugar : Coca-Cola Zero Sugar has been launched in 20 markets, with a reformulated product, evolved marketing, and new packaging. The brand witnessed positive results, reflected in the double-digit volume and revenue growth. This brand along with others, such as its water portfolio, ready-to-drink-tea and coffee, etc. are expected to help Coca-Cola deliver 4% organic revenue growth in FY 2018. 2. Diet Coke Revamp : The success of Coca-Cola Zero Sugar prompted the company to reformulate a number of other brands, as it clambers to keep up to pace with changing consumer preferences. One such brand has been Diet Coke, which had been plagued with declining volumes recently. To arrest this decline, Coca-Cola decided to revamp Diet Coke . While the original Diet Coke remains, four new flavors of it – Ginger Lime, Feisty Cherry, Zesty Blood Orange, and Twisted Mango – have been introduced, keeping the millennial generation in mind. The positive customer response has been reflected in the return to volume growth in North America, for the first time since 2010. 3. Potential of Global Ready-To-Drink Tea : The global ready-to-drink tea category represents $60 billion in retail value and is forecast to continue its solid growth as consumers look for more natural beverage choices that can deliver functional benefits. KO’s tea portfolio has grown steadily over the past few years, driven by Fuze Tea, Ayataka, and Gold Peak. As of the end of FY 2017, Fuze Tea had been launched in almost 50 countries. In the first quarter, the brand was launched across Europe (37 countries), which should ensure steady growth for the brand in the coming quarters. 4. Topo Chico U.S. Rights Acquisition : Last October, KO acquired the U.S. rights to Topo Chico, a premium sparkling mineral water brand. By the end of the first quarter, the first full quarter of ownership, KO increased distribution coverage within the convenience retail channel by 25%. Consequently, the brand grew its U.S. retail value over 30% during the quarter and gained value share in the fast-growing sparkling water category. 5. U.K. Sugar Tax : The sugar tax came into effect on April 6 in the U.K., and hence, the impact of this change will be seen only in the forthcoming quarters. The tax is levied on drinks having more than 5g of sugar per 100ml, while a higher levy is imposed on drinks with 8g per 100ml or more. Keeping this in mind, the company has reformulated a number of drinks to reduce the sugar content. KO has also put an increased focus on brands such as Coca-Cola Zero Sugar and the newly revamped Diet Coke, ensuring that two-thirds of the total portfolio will not necessitate a need for the payment of the sugar tax. The company has also put a greater emphasis on smaller packaging. See our complete analysis for The Coca-Cola Company   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.
    DNKN Logo
    Store Growth To Drive Dunkin' Brands' Growth In The First Quarter
  • By , 4/25/18
  • tags: DNKN QSR MCD SBUX CMG
  • Dunkin’ Brands  (NASDAQ:DNKN) is set to announce its first quarter earnings on April 26, wherein a substantial rise in revenue and earnings is expected. This growth is set to be driven by the ambitious store count growth the company has set for itself – the company aims to add 1,000 new restaurants by 2020. During the fourth quarter of the previous financial year, the company marked its 46th consecutive quarter of positive comparable sales for the business. However, the comps rate was less than 1%, roughly the same rate the company managed for the full year. This implied that the company grew at a slower rate than its main competitors – Starbucks and McDonald’s. We have a $62 price estimate for Dunkin’ Brands, which is slightly higher than the current market price. The charts have been made using our new, interactive platform. You can click here to modify different drivers, and see their impact on the EPS and price estimate for the company. Key Trends That Will Impact The Results 1. Positive Industry Environment:   The overall restaurant industry environment has been positive for the quarter ended March 2018 . While comparable traffic declined, comparable sales have been positive on the back of higher average checks. In March, same-store sales growth was 0.8 percent, the second-best month for restaurant industry sales growth over the last two years. While fine dining and upscale casual restaurants have consistently shown sales growth, casual dining and fast casual struggled heavily in 2017. This trend seems to be reversing, as this segment has shown signs of recovery this year, recording positive sales in the first quarter of 2018. This should benefit Dunkin’ Brands. 2. Menu Innovation : This includes the introduction of new beverages and new sandwiches, a focus on seasonal donut offerings around the year based on key holidays, removal of artificial dyes, and value offerings. Promotions such as sandwiches for $2 are likely to be introduced throughout the year – which should give the company a competitive edge over other players such as McDonald’s which are offering similar value deals. This can drive ticket-size for the company increasing the average revenue per outlet. 3. Convenience To Customers: Dunkin’ Brands is looking to increase the conveniences it offers to its guests with several initiatives such as a focus on its loyalty program, testing a digital catering platform, and tying up with third-party delivery options with a goal of creating a strong delivery and catering platform by the end of next year. The company is also working on building a dedicated mobile order drive-thru lane to ensure speed of service to its digital customers. 4. Expanding Its Footprint: Dunkin’ Brands is looking to expand the footprint of Dunkin’ Donuts U.S. at a 3% annual rate, adding around 1,000 new restaurants by 2020. It is also looking to convert its existing restaurants into NextGen stores to offer better customer service. New restaurants add to revenue growth, and should positively impact the company’s valuation. See Our Complete Analysis For Dunkin’ Brands   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.
    How Has L'Oreal Performed In Q1 2018?
  • By , 4/25/18
  • tags: LRLCY REV
  • In continuation with its strong performance over the prior few years, L’Oreal  (OTCMKTS: LRLCY),  the world’s biggest cosmetics company, continued its momentum in Q1 2018 with 6.8% rise in sales to 6.78 Billion euros. The company’s earnings were primarily driven by strong performance in L’Oreal Luxe segments, the active cosmetic division, and emerging new markets, particularly Asia-Pacific which grew +14.9%. All the top brands of the Luxe segment posted more than 10% growth and the Active Cosmetics Division posted double digit growth driven by the success of its La Roche-Posay and SkinCeuticals brands, the new impetus of Vichy, and the dynamism of CeraVe. The Consumer Products Division saw an outstanding performances in China.  In the New Markets, especially the Asia Pacific Zone, China’s consumers’ aspirations for iconic brands remained strong. With the acquisition of the Canadian company ModiFace the company’s digital acceleration has moved up a gear, which provided the most innovative technologies to enhance services and the beauty experience for all the brands. E-commerce sales have increased by 33.8% and continue to rise rapidly, and now account for 8.8% of the total sales. Driven by this strong annual performance, we expect L’Oreal to post double digit growth in its full fiscal 2018 sales. Please refer to our dashboard analysis on L’Oreal. Highlights from Q1 are as below: – L’Oréal ‘Luxe’ and ‘Active Cosmetics’ Division continue to boost top line – Global growth of the prestige beauty segment is outpacing growth in the mass beauty segment. L’Oreal’s premium brands, as expected, earned the company higher profit margins. L’Oreal’s Luxe Segment delivered a strong 14% growth in Q1, driven by makeup and facial skincare sales in the Asia-Pacific region especially China and Hong Kong, and by Travel Retail. L’Oréal Luxe has made a solid start to the year in Western Europe, particularly in Spain. The division is continuing to perform well in e-commerce. L’Oreal’s Active Cosmetics segment achieved 10.2% sales growth with La Roche-Posay (launching Hyalu B5), Vichy, CeraVe, and Skinceuticals as the best selling brands. L’Oreal is one of the leading names in the active cosmetics market. In an effort to further grow this segment, L’Oreal’s newly acquired skincare brands, CeraVe, AcneFree, and Ambi have been performing well, too. L’Oreal’s has the leading market position in Asia and North America, the fastest growing geographies for active cosmetics. Accelerated growth in new markets of Asia and western Europe leads Sales Increase   –  Sales from emerging markets which include Asia-Pacific, Latin America, Eastern Europe, Africa and the Middle-East have been on a growing trend, constituting nearly 40% of the company’s total sales. Growth from Asia-Pacific topped with 21.1% y-o-y growth in the Q1. In comparison, sales grew in single-digits from other geographies with a whopping 18.3% from Africa/Middle-East. Within Asia-Pacific, China has been a key driver with Chinese travelers being one of the highest spenders both in the domestic and international markets, making this market one of the focus areas for the company to boost its travel retail sales. Outlook for full fiscal 2018 The company forecasts a confident outlook for the remaining fiscal 2018 with sales to continue to rise reflecting continuing momentum from Q1. We believe that L’Oreal has the key advantages in terms of innovation, brand power, digital prowess, and the quality of its teams all over the world to continue to drive growth and hold on to its leading position in the Beauty market. . What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
    BMY Logo
    Bristol-Myers Squibb Q1 Preview: Expect Opdivo & Eliquis To Drive Growth
  • By , 4/25/18
  • tags: BMY
  • Bristol-Myers Squibb  (NYSE:BMY) is scheduled to announce its Q1 earnings on April 26. We expect the company to post steady growth led by its oncology and cardiovascular drugs, primarily from Opdivio and Eliquis. These two drugs combined accounted for more than 45% of the company’s overall revenues in 2017, and we expect the contribution to increase in the coming years. We continue to expect that Oncology drug sales will remain a key growth driver for BMY in the near term, primarily led by label expansion of Opdivo and Yervoy. We have created an interactive dashboard on BMY’s expected performance in 2018. You can adjust the revenue and margin drivers to see the impact on the company’s performance. Oncology Remains The Key Growth Driver For BMY The Oncology segment accounts for 65% of the company’s overall value, according to our estimates. This can be attributed to the success of Opdivo, which will likely further increase its market share with label expansion and different combinations being tested under phase 3 trials. In fact, the company’s recent multi-billion dollar collaborative agreement with Nektar Therapeutics will allow it to maintain its leadership role in the immuno-oncology market (read More – The Importance Of The Nektar Therapeutics Deal For Bristol-Myers Squibb ). According to our estimates, Oncology is the company’s only segment with solid revenue growth visibility in the coming years, while we forecast most of the other segments to see revenue declines, as patents for many drugs within the other segments have expired or are going to expire in the near term. Other than Oncology, the company’s Cardiovascular segment is expected to perform well in the near term. The growth will primarily be led by higher demand given the drug’s increased acceptance and market share gains. It should be noted that Eliquis sales jumped 46% to $4.9 billion in 2017, and we estimate single digit growth to $5.2 billion in 2018. Meanwhile, Virology drugs will likely decline in 2018, as some of the company’s key drugs have lost patent exclusivity. Immunology drugs are also expected to decline given that a key drug – Orencia – lost its exclusivity in the EU in 2017, and its exclusivity in the U.S. will expire this year. Further, m ature drugs are on a decline as they face competition from other drugs and biosimilars, and we expect the downtrend to continue in 2018 and beyond. Overall, we believe the company’s Q1 growth will be led by Opdivo and Eliquis. We expect the company to post EPS of $3.20 in 2018. We use a price to earnings multiple of 19 for the company’s 2018 earnings, which is slightly lower than most of the estimates for the sector, reflecting the risk of biosimilars to BMY’s drugs, to arrive at  our price estimate of $60  for Bristol-Myers Squibb. This implies a premium of over 15% to the current market price. Our price estimate of $60  for Bristol Myers Squibb implies a discount of over 10% to the market. 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
    UNP Logo
    Union Pacific Earnings Preview: Expect Industrial Products To Drive Q1 Growth
  • By , 4/25/18
  • tags: UNP
  • Union Pacific Corporation (NYSE: UNP) is set to report its Q1 2018 earnings on April 26, and we expect the company to post steady growth, primarily led by industrial products freight, which saw an uptick of 28% (y-o-y) in the previous quarter. We also expect the company’s other segments, such as Chemicals, and Intermodal to see moderate revenue growth, as the company benefits from the capacity constraints in the trucking industry. However, coal freight may drift lower, amid stable natural gas prices, and a decline in the U.S. coal production. We have created an  interactive dashboard  on Union Pacific’s expected performance in 2018. You can adjust the revenue and margin drivers to see the impact on the company’s performance. Expect Industrial Freight Segment To Drive Growth Led By Higher Oil Prices We expect UNP’s Industrial Freight revenues to grow 5% to $4.28 billion in 2018. We expect this growth to be driven by a recovery in the commodities market, which will result in more shipments for railroad companies. For instance, the U.S. oil production is expected to be 10.7 million b/d in 2018, the highest annual average U.S. crude oil production level ever. So far, WTI crude has rallied to $69, and there is no sign of weakening demand. This will likely boost drilling activity and increase the demand for crude oil related shipments as well. Beyond crude, steel shipments are expected to increase, as many players in the U.S. are adding capacity. The steel demand in North America is expected to grow by 3%, as compared to 1.8% expected growth globally. Favorable demand-supply dynamics with respect to these commodities will boost segment revenue growth. Accordingly, we forecast a low single digit growth, both on volume and pricing for UNP’s Industrial Freight segment. Looking at the company’s other segments, including Chemicals, and Agriculture, among others, we expect low single digit growth both in volume and pricing. Volume will likely be driven by a positive impact of capacity constraints in the trucking industry, given the full implementation of the ELD mandate. In addition, increasing consumer demand will also aid the volume growth, while the pricing growth will be led by increased fuel surcharge, which is linked to prices of WTI or U.S. On Highway Diesel. With oil prices expected to trend higher in 2018, higher fuel surcharge revenues will aid the company’s overall revenues. However, coal freight may drift lower due to lower export volume, and natural gas prices. The coal export volume is expected to decline by 17% in 2018. In addition, stable natural has prices will have an impact on overall volume growth. Overall, we expect the company to post earnings of $7.83 in 2018. We forecast a price to earnings multiple of 17.5 by the end of 2018, which is slightly lower than most of the estimates for the sector, to arrive at our price estimate of $138 for Union Pacific Corporation, which is more or less in line with 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.
    MMM Logo
    Guidance Revision Leads To Drop In 3M's Stock Price
  • By , 4/25/18
  • tags: MMM JCI
  • 3M (NYSE: MMM) reported its first quarter results on April 24, and while it was able to meet consensus expectations on revenue and narrowly missed on EPS, its stock price fell as the company reduced the high end of its guidance range. The organic sales growth is now expected to be between 3% and 4%, from 3% and 5% earlier, resulting in a change in the adjusted earnings guidance to $10.20 to $10.55 per share versus a prior expectation of $10.20 to $10.70 per share. Higher than expected costs and a soft automotive market are the main contributing factors to the weaker outlook. On the other hand, 3M is still reporting growth across all of its business segments, and a healthy 23% operating margin. We have created an interactive dashboard based on our expectations for 3M’s performance in 2018, and have arrived at a price estimate of $267 for the company, which is higher than the current market price. Recent market volatility and a weaker outlook have been the main factors driving the stock down, as the core fundamentals remain strong. You can click here to modify the different assumptions, and arrive at your own price estimate for the company. Increasing Raw Material Prices Dampen 3M’s Growth Outlook 3M noted that selling prices were up 70 basis points in the quarter, and was positive for all the geographies, a good sign for the coming quarters. However, while pricing growth is expected to remain strong throughout the year, and should more than offset raw material inflation, the latter is coming in higher than expected. This is mainly a result of crude derivatives and increased transportation and logistics expenses. At the beginning of the year, 3M anticipated commodity prices to be between a $0.05 benefit to a $0.05 headwind. The expectation now is for it to be between a $0.05 to $0.10 headwind . This contributed to 3M reducing the upper end of its guidance. Growth In China To Drive 3M In The Future During the quarter, 3M posted 7% growth in developing markets, including 11% organic growth in China/Hong Kong. A number of trends in the region should ensure continued strong growth for the company in the years to come. Safety and Security:  3M aims to provide safer work environments for Chinese workers, and in this regard, its portfolio of hearing protection, fall protection, and SCBA (Self-Contained Breathing Apparatus) through its new acquisition of Scott Safety, can be considered to be the next horizon of safety awareness for China. In 2014, China overtook the U.S. as the largest safety and security market in the world, and the growth has not slowed down yet. The demand for this segment is expected to improve with the growth of the infrastructure spending in the region. China alone is expected to need $28 trillion in infrastructure investment by 2040, which is more than half of Asia’s total needs, and 30% of global needs. Automotive : The automotive industry has witnessed modest growth globally, with the growth in China production outpacing the overall growth, albeit at a lower rate than in prior years. According to the China Association of Automobile Manufacturers, in 2017, the production and sales of automobiles were 29,015,000 and 28,879,000 units respectively, up 3.2% and 3% year on year, respectively. In the future, a growing and richer middle class, and the potential of Tier 2 and Tier 3 cities, can be expected to drive growth. 3M manufactures over 400 products pertaining to this segment, such as auto body fillers, adhesives, cleaners, waxes, polishes, which can be expected to grow as the industry continues its strong march. Healthcare:  Developing countries bear the brunt of food-borne diseases, with high levels of hazards reported in the food available there. A number of studies have shown a higher prevalence of such diseases in developing economies, as compared to high-income countries. 3M is a leader in developing innovative solutions to help the food and beverage industry to optimize the quality of their products. The company manufactures food and beverage testing products to ensure the achievement of the highest food safety and quality standards. It also develops environmental monitoring programs to identify and eliminate sources of potential contamination. Given the possibility of a trade war with China, one factor that may work in 3M’s favor is that the company has focused on local manufacturing, in the sense that it manufactures within China for its Chinese customers. Click Here To See Our Complete Analysis Of 3M 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.
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    Roche Holdings Q1 Preview: Rituxan Will Likely Continue To Decline While Tecentriq & Ocrevus May Lead Growth
  • By , 4/25/18
  • tags: RHHBY
  • Roche Holdings  (NASDAQ:RHHBY) is scheduled to announce its Q1 earnings on April 26. We don’t expect any significant growth in the company’s top line, as its key drug Rituxan may continue to face headwinds in Europe. The drug witnessed double digit declines in the previous two quarters, amid patent expiry in the EU, and increased competition from biosimilars. Rituxan is an important drug for Roche, with sales over $5.7 billion in 2017, and it is nearing patent expiry in the U.S. as well. Other key drugs – Avastin and Herceptin – which generated $13.5 billion in sales in 2017, are also nearing patent expiry in the U.S. This will have a significant impact the company’s Oncology segment in the coming years, in our view. We’ll also be looking for commentary on the hemophilia drug which was granted breakthrough therapy designation by the FDA earlier this month. We have created an  interactive dashboard  on Roche’s expected performance in 2018. You can adjust the revenue and margin drivers to see the impact on the company’s performance. Our price estimate of $36  for Roche implies a premium of over 25% to the market. Expect Tecentriq And Ocrevus To See Solid Growth We expect Roche’s Pharmaceuticals revenue to grow in low single digits in 2018, as it faces biosimilar competition for Rituxan in Europe. However, we expect Tecentriq and Ocrevus to do well in the near term. Both drugs have seen solid growth of late, and we expect this to continue in 2018. We expect Tecentriq sales to double to roughly $1 billion, while Ocrevus and Madopar sales could grow in double digits to north of $2 billion in 2018. Among other drugs, we estimate Perjeta to continue to do well and expect sales of over $2.5 billion in 2018. Apart from Oncology and Neuroscience, Roche’s other Pharmaceuticals segments will likely continue to face decline in the coming years, due to patent loss and expected competition from biosimilars and generics. Diagnostics Will Likely See A Modest Growth Led By Emerging Markets Looking at the company’s In-Vitro Diagnostics business, we expect growth to be in low single digit to a little under $13 billion in 2018. We expect the growth to be driven by emerging markets, including Latin America, Middle East and Asia Pacific. Emerging markets have been experiencing rapid economic growth, and Roche is increasingly focusing on these markets. In addition, Roche has increased its focus on diagnostics R&D, which should help in building its pipeline and launching new products in these markets. It should be noted that Roche has a formidable presence in in vitro diagnostics. Some of its best sellers are immune assays, blood glucose monitoring system, advanced tissue staining and tests for HIV and Hepatitis B & C. Having said that, we believe the growth will only be modest in the coming years, primarily due to stiff competition from the likes of Johnson & Johnson, and other players. 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
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    Shell Q1 Preview: Expect Solid Q1 Led By Higher Price Realization For Upstream Business
  • By , 4/25/18
  • tags: RDSA XOM CVX
  • Royal Dutch Shell  (NYSE:RDSA) is set to report its Q1 2018 earnings on April 26, and we expect the company to post solid numbers, primarily driven by improved price realization for its upstream operations and higher margins for its refined and chemicals products. Further, the company’s efforts to reduce its operating costs and capital spending are likely to boost its bottom-line for the year.  2017 was a good year for oil companies, as growth in WTI crude prices aided their margins, and Royal Dutch Shell in particular benefited from its massive divestments. Similarly, in 2018, the average WTI crude oil price is expected to be $56, representing a 10% jump from the 2017 average. It should be noted that the current price is much higher than the expected average by EIA. This should bode well for the company’s upstream operations in 2018, and the company’s $5 billion annual divestment target will further aid its overall performance. We have created an  interactive dashboard  on Royal Dutch Shell’s expected performance for 2018. You can adjust the revenue and margin drivers to see the impact on the company’s performance. Expect Upstream Business To Drive Growth In 2018   We estimate Royal Dutch Shell’s Upstream revenues to grow roughly 11% in 2018. While we don’t expect much change in the production, the average crude oil and NGL sale price is estimated to see a 3% jump to $51. Our forecast is based on the fact that OPEC and its allies have committed to production cuts, which is likely to keep oil prices higher, as compared to the prior year. In addition, a number of geopolitical concerns are weighing on the oil prices. Venezuela is sliding into default, and the economy may contract by 15% this year. Earlier this month, the U.S., France, and the U.K. launched a missile attack on Syria’s alleged chemical weapons sites in response to allegations of the Syrian government using chemical weapons. All these factors have led to a surge in oil prices, which currently trade at $69 (WTI). Having said that, there is a risk of OPEC changing its course, given a surge in oil exports from the U.S. to Asia, which could lead to an increase in the oil production.  Within the Upstream segment, we expect the Natural Gas business to see low single digit revenue growth, primarily led by higher price realization. It should be noted that Royal Dutch Shell’s Natural Gas price realization has declined from the peak of $6.85 in 2008 to $3.16 in 2016. However, it increased to $3.83 in 2017, due to higher demand. The overall gas demand in 2017 was high, which led to lower average inventory levels, thereby pushing the prices higher. Looking forward, natural gas prices are expected to remain steady in 2018. The benchmark Henry Hub natural gas spot price is expected to average around $2.99/MMBtu in 2018, according to the U.S. Energy Information Administration, which is similar to the 2017 average. Overall, we expect the company to post earnings of $4.73 in 2018. We forecast a TTM price to earnings multiple of 14 by the end of 2018, which is slightly lower than most of the estimates for the sector, to arrive at  our price estimate of $68  for Royal Dutch Shell. This implies a discount of around 4% to the current market price.
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    What To Expect From General Motors' Q1 Earnings
  • By , 4/25/18
  • tags: GM F TSLA
  • General Motors (NYSE: GM) will release its first-quarter 2018 results and conduct a conference call with analysts on 26th April 2018 . Average consensus market estimates expect the company to report a revenue of   $34.6 billion and adj-EPS of $1.28, representing an 8% and 22% decline quarter-on-quarter (q-o-q), respectively. Lower expected revenue is reflective of lower sequential sales volume reported by the company due to the continued headwinds faced by the company in the U.S. automobile market. General Motors has reported stronger quarter sales volume in the U.S. in Q1 in comparison to the same period last year. However, sales volume has been lower sequentially, which would reflect as a lower sequential revenue number for the company in its upcoming results. The company’s year-to-date (YTD) U.S. total sales volume increased by ~4% year-on-year (y- o-y ), with a material volume increase experienced in March. The company benefited from a stronger U.S. economy, with consumers taking benefit of lower borrowing rates ahead of anticipated interest rate hikes through the rest of the year. Additionally, the company’s sales volume benefited from a better product mix offering, with an increased effort made by the company to cater to the changing U.S. consumer demand for SUVs and crossovers. Increase in sales of more profitable SUVs and trucks is also expected to result in higher average price realization for its U.S. automobile sales volume. General Motors in its latest sales report notified investors that it would no longer be reporting monthly sales figures, in an effort to reduce short-term volatility in the reported numbers. This reporting transition is expected to lead to greater uncertainty with respect to quarterly figures among investors and make other automobile competitors (reporting monthly data) more appealing to the market. We wait to see if other automobile giants also follow suit reflecting General Motors’ reasoning. We have outlined our expectation for the company’s 2018 results using our interactive dashboard . You can make changes to our assumptions to arrive at your own fair price estimate forecast for the company.   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.
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    What To Expect From Newmont Mining's Q1 2018 Results
  • By , 4/25/18
  • tags: NEM ABX WPM
  • Newmont Mining (NYSE: NEM) will report its first-quarter results on 26 April and conduct a conference call with analysts the same day . Consensus estimates have an average adj- EPS estimate of $0.33 and average revenue estimate of $1.86 billion, reflecting 32% and 12% year-on-year (y-o-y) growth. The company is expected to benefit from higher gold prices, while gold production volume is expected to decline. The company has guided towards an annual production volume of  5.15 million ounces of gold (assuming mid-point) which is roughly 3% lower than the company’s actual output in 2017. Furthermore, production volume is expected to be stronger in the second half of the year as the first half is expected to be negatively impacted by scheduled mine sequencing and plant maintenance shutdowns. However, prevalent strong gold prices are expected to provide support to the company’s top line. Gold has been gaining strength due to the ongoing trade tension between the U.S. and China and the geopolitical tensions in the Middle East. Gold is considered as a safe-haven asset for investment and generally gains strength with increasing global uncertainty. A weaker dollar has further provided some buying opportunity for the yellow metal and aided its price. Newmont expects its costs to be slightly higher in 2018, reflecting higher stripping at Carlin, Boddington, Ahafo, and Twin Creeks . However, the company’s bottom line is expected to benefit from lower interest expenses due to lower debt level and additionally from lower taxes from its North American operations as a consequent impact of the latest tax reform initiation by Pres. Trump. Thus, EPS is expected to be stronger in the current year. We have created an interactive dashboard which outlines our key expectations for the company’s results for the current year. In case you have a different outlook, you can make changes to our key assumptions to arrive at your own fair price estimate for the company     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
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    What To Expect From U.S. Steel’s Q1 Earnings
  • By , 4/25/18
  • tags: X MT
  • U.S. Steel (NYSE:X) will report its first-quarter 2018 results on April 26 and conduct a conference call with analysts the following day. Consensus market estimates expect the company to report a mean revenue of $3.15 billion and mean adj-EPS of $0.29. The company is expected to display strong performance with notably higher year-on-year (y-o-y) revenue and earnings. The company is likely to benefit from higher steel prices due to the recent market developments which would consequently boost revenue. Additionally, the company’s tubular segment is expected to report considerable outperformance due to a favorable market environment. The imposition of punitive tariffs by Pres. Trump during the first quarter of 2018 has given a steady boost to steel prices which are expected to translate into higher revenue for steel producers in the U.S. U.S. Steel will especially be in a winning position in this situation as the company derives close to 70% of its total revenue from its U.S. Flat-rolled division. However, the company’s ongoing asset revitalization program has been dampening its steel output since 2017 and is expected to continue to disrupt operations throughout 2018. On the other hand, however, with improving market conditions, the company has recently announced the restart of a blast furnace and steelmaking facility at Granite City Works which is expected to add 100,000 tons of shipment per month. The likely increase is expected mostly over the second half of the year. Thus, even with the existence of such favorable market conditions, the company will most likely not be able to take complete advantage of higher steel prices. Additionally, we expect higher oil prices to boost the shipments of the company’s tubular steel division, which produces steels used in oil and gas drilling activities. As confirmed by a Longbow analyst, both U.S. domestic mill shipments and market prices are trending above expectations, which should provide a great boost to the company’s Tubular segment. U.S. Steel’s Tubular segment has been experiencing a recovery in its revenue since 2017, post the implementation of production cuts by Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC allies. Our key expectations for the company’s 2018 results are outlined in our interactive dashboard . These figures represent our pre-earnings expectations and figures will be modified based on the actual results. You can make changes to our assumptions and arrive at your own fair price estimate for the company.   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.
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    How Will Hartford Financial Perform In Its First Quarter?
  • By , 4/25/18
  • tags: HIG
  • Hartford Financial (NYSE: HIG) is scheduled to announce first-quarter earnings on April 26, after the market closes. We expect Hartford to report another robust quarter driven by solid performance from the Commercial Lines and Personal Lines businesses. Additionally, the acquisition of Aetna’s group life and disability business will likely boost the Group Benefits business. Below we take a look at some of the key trends that we will be watching when the company reports earnings. You can also use our  interactive dashboard  to see our expectations for the quarter, and see how changes in our forecasts can impact the company’s earnings and valuation. Growth In Property & Casualty Segment Will Likely Continue The company’s P&C business delivered stable results in 2017, despite the higher catastrophe losses. P&C Commercial Lines benefited from higher renewal written pricing, which provided a boost to the premiums generated per policy. In this sub-segment, we expect the top line to be driven by growth in the Small Commercial, Middle Market, and Specialty Commercial business. The company has also made progress on the technology front by expanding the functionalities of the ICON quoting platform. Also, underwriting improvements and optimal pricing strategies will likely drive growth in the Personal Lines sub-segment. Moreover, HIG has access to Aetna’s customer base to cross-sell its P&C products. However, worker’s compensation business will likely witness some pressure, due to weakness in pricing. Acquisition Of Aetna’s Group Life And Disability Business To Boost Group Benefits In 2017, Hartford executed two important deals that could shape the future of the company. It got rid of Talcott, a declining business, and acquired Aetna’s group life and disability business. The Aetna acquisition has made Hartford one of the biggest players in the Life and Disability business and has deepened Hartford’s penetration in mid-size and large companies. With complete integration, we expect the company to realize the full potential of the deal in 2018, which will drive growth in earned premiums. Furthermore, Aetna’s expertise in the business should help the renewal retention rate. 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.
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    What To Expect From Verisign's Q1 Earnings
  • By , 4/25/18
  • tags: VRSN
  • Verisign  (NASDAQ:VRSN) had a decent performance in 2017, with revenue of nearly $1.2 billion, an increase of nearly 2% year-on-year, primarily due to an increase in revenues from the operation of the registries for the .com and .net TLDs. This was driven by a 3% increase in the domain name base for .com, as well as an increase in .net domain name registration fees. We expect the company to report another strong set of quarterly results on April 26. We have also created an  interactive dashboard where you can change the company’s expected revenue, margins, and other key drivers to gauge how they would impact expected earnings for the year. In 2017, domain name registrations for .com and .net together grew 3% year over year to around 146.4 million. VeriSign processed 36.6 million new domain name registrations for .com and .net, driven by the internet adoption rate, economic activity globally, e-commerce activity, and registrar go-to-market strategies. The company holds a prime position in the highly regulated .com and .net domain industry. We expect the renewal of the .com contract and price hikes for .com and .net domain names to continue to boost the top line going forward. Additionally, VeriSign has the potential to greatly benefit from the significant growth opportunities in the Distributed Denial of Service (DDoS) security market.
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    How Will MGM Resorts Perform In Q1?
  • By , 4/25/18
  • tags: MGM WYNN LVS
  • MGM Resorts (NASDAQ: MGM) is expected to publish its Q1 2018 results on April 26, reporting on what is likely to be another mixed quarter for the company. Over Q4 2017, the company’s Las Vegas revenues grew by about 5% year-over-year, and the company expects to see some pressure in this region in Q1, largely due to a tough comparison. However,  strong showings  for CES and the Super Bowl should boost domestic revenue. In addition, the Chinese New Year should further increase its Macau business. Further, higher labor costs, expenses related to technological initiatives, and the transformation of the Monte Carlo casino should likely impact company’s margins and earnings in the first quarter. Below, we take a look at what to expect when the company reports earnings. We have a $40 price estimate for MGM Resorts, which is higher than the current market price. The charts have been made using our new, interactive platform. You can  click here  to modify the different driver assumptions, and gauge their impact on the earnings and price per share metrics. For 2018, MGM remains optimistic about the demand both in the domestic and Macau market. MGM looks to further strengthen its position in the domestic market with two new launches – MGM Springfield in the third quarter and Park MGM and NoMad by the end of the year. We expect the domestic market to remain the driving force led by the  improved outlook of the U.S. economy, recovery in the Vegas market – owing to recent tax cuts and higher customer spending –  and its expansion into Massachusetts . In addition, we also expect a strong growth opportunity for MGM in Macau, driven by the tailwinds in the Macau casino market. MGM’s CEO is optimistic about the  legalization of sports gambling  as well, and we expect this to boost its domestic operations. 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
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    Will China Again Drive Growth For Starbucks In The Second Quarter?
  • By , 4/25/18
  • tags: SBUX QSR DNKN MCD CMG
  • Starbucks (NASDAQ: SBUX) is scheduled to report its second quarter (three months ended March 2018) earnings on April 26, wherein a rise in both revenues and earnings is anticipated. While the revenue growth is expected to be boosted as a result of the company’s impressive performance in China, as well as the addition of new restaurants, these factors, together with a lowering of the corporate tax rate, should also result in a rise in the earnings. In the previous quarter, the company fell short of consensus revenue expectations, reporting a 6% year on year growth in revenues, against the expected 8%. Comparable sales growth remained at 2% (in line with the numbers in 2017) despite strong comparable sales of 6% reported in China. The low comps in the Americas were blamed on disappointing holiday sales  (holiday merchandise and limited time offers) and negative mall store comps. However, the company stated that it has a clear understanding of this issue and is working on several initiatives to drive sales including food and beverage innovation. Consequently, the company’s performance in this segment will be one to keep a close watch on. We have a $65 price estimate for Starbucks, which is 12% higher than the current market price. The charts have been made using our new, interactive platform. You can click here to modify different drivers, and see their impact on the EPS and price estimate for Starbucks. Key Factors That Will Impact The Results 1. Positive Industry Environment:   The overall restaurant industry environment has been positive for the quarter ended March 2018 . While comparable traffic declined, comparable sales have been positive on the back of higher average checks. In March, same-store sales growth was 0.8 percent, the second-best month for restaurant industry sales growth over the last two years. While fine dining and upscale casual restaurants have consistently shown sales growth, casual dining and fast casual struggled heavily in 2017. This trend seems to be reversing, as this segment has shown signs of recovery this year, recording positive sales in the first quarter of 2018. This should benefit Starbucks. 2. Growth in China: China was again the fastest growing market for the company in the first quarter, with 6% comps growth and 30% revenue growth. It continues to remain a long term growth driver for the company, as its GDP, projected to exceed $15 trillion by 2021 from $11 trillion in 2014, is expected to fuel a massive increase in its middle class. Shanghai was chosen as the location for the first international Roastery, and this decision has paid off as it has driven significant customer engagement and revenue. Starbucks’ partnership with Alipay and WeChat in China and its recent East China acquisition are likely to aid the company in taking advantage of the growing middle class in the country – which is its major customer base. The East China business will be reflected in Starbucks’ financials from Q2 2018. The company expects this transaction to be neutral or slightly accretive in 2018 and expects to see a more positive impact of this transaction in 2019. 3. Innovation in Food and Beverage: Mercato fresh food menu was launched in Seattle and Chicago last year, and continues to perform well. Keeping this in mind, the company is planning to deploy Mercato in at least six new markets in fiscal 2018. Starbucks also has a tremendous opportunity to leverage its core beverage platforms, particularly in ice coffee, tea, cold brew, and draft beverages. In response to strong customer demand, the company is accelerating the rollout of Nitro Cold Brew from 1,300 stores currently to 2,300 stores in the U.S. by the end of the year. Starbucks has noted approximately 1 point of additional comp growth in stores offering Nitro Cold Brew during 2017. 4. Change in Tax Rate: The changes in the U.S. tax laws are likely to impact Starbucks positively. The company expects the effective tax rate to be 7 points below its earlier guidance, at 26% for 2018, leading to a slightly higher EPS. 5. Margin Contraction: Given the poor performance in the first quarter, Starbucks is removing over 200 SKUs from its U.S. retail stores, representing over 30% of total lobbied items. While this simplification effort increases the focus of the company and reduces operational complexity in its stores, it will pressure the margins given the high write-offs associated with these products. Moreover, the consolidation of the East China business is expected to have a negative impact on the operating margins. Another factor that will pressure the margins is the digital investments the company is undertaking in the Americas. Given these factors, the coffee giant projects a moderate operating margin decrease for the year. See Our Complete Analysis For Starbucks   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
    Will The Weakness In The North American Beverages Segment Continue For PepsiCo In The First Quarter?
  • By , 4/25/18
  • tags: PEP KO DPS
  • PepsiCo (NYSE:PEP) is set to report its first quarter earnings on April 26, wherein revenues are expected to increase to $12.36 billion, while the earnings are estimated to decline by 1 cent to 93 cents, as compared to the prior year quarter. While revenue growth is expected to be driven by the Frito-Lay segment in North America, and the international segments, weakness in North American Beverages (NAB) may pressure the margins. Furthermore, PEP expects to make a $1.4 billion discretionary pension contribution in the first quarter of 2018, which would also play a role in the decline in the earnings. We have a $125 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, to gauge their impact on the earnings and price per share metrics. Softness In The North American Beverage Market A neglect of the core brands had been highlighted to be the main factor driving the weakness in the North American Beverages segment. While the company has been undertaking a number of steps, such as increasing the advertising behind these brands, the impact will take a few quarters to be fully realized.  Hence, while the trends continued to remain poor in the segment in Q4 2017, the metrics should improve sequentially as FY 2018 rolls on. PepsiCo is also focusing on other avenues of growth, such as ready-to-drink teas and coffees, and bottled and sparkling water. In this regard, it is making an effort to return its tea brands (through a joint venture with Unilever) – Brisk, Lipton, and Pure Leaf – back to positive growth, by launching new flavors and re-advertising the core brands. PepsiCo has also partnered with Starbucks in the ready-to-drink coffee business, with their strong innovation pipeline ensuring growth in the years to come. With water being a big and fast growing segment, it is imperative for PepsiCo to have a foothold in all its forms, such as still, sparkling, flavored, etc. The company launched LIFEWTR, an electrolytic water, in FY 2017, and the brand is reported to be performing well. PepsiCo recently launched Bubly, a flavored sparkling water drink, and will be playing catch-up to established brands such as Perrier, San Pellegrino, and National Beverage’s LaCroix brand. The tremendous growth in the water segment is expected to continue in the future as well, as the soda sales contract, and consumers look towards sparkling water to satisfy their cravings for carbonation. Importance Of The Frito-Lay Segment In FY 2017, while Frito-Lay North America (FLNA) contributed to roughly a quarter of the company’s revenues, its share of the total operating profit was 42%, similar to its performance in 2016. According to our estimates, 38% of PepsiCo’s valuation comes from this division, which has posted an average annual revenue growth of 3% in the past three years, and an average 3-year operating profit improvement of 6%. PepsiCo’s dominance in this business is critical to its long-term growth, as a moderate increase in Frito-Lay’s revenue can compensate for a significant decline in the revenue of its beverage division. This is primarily because Frito-Lay’s EBITDA margins are almost double those of the North American Beverages division . We expect the strong growth rates of FLNA to continue in the future, boosted by the segment’s foray into healthy snacks. Moreover, the segment has ensured its brands are available across multiple price points. For example, at the bottom end of the segment, Frito-Lay has Cracker Jack as a brand offering high value for money. Similarly, Taqueros was made available in dollar stores and other retail outlets that typically attract value-seeking consumers. Meanwhile, at the other end of the spectrum, Frito-Lay made its premium products available in high-end stores (such as Citarella) and the deli sections of grocery chains in order to create the right perception of these products. 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.
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    How Did Wynn Resorts Perform In Q1?
  • By , 4/25/18
  • tags: WYNN LVS MGM
  • Wynn Resorts (NYSE:WYNN) posted mixed earnings this time around, beating on earnings, but missing revenue consensus estimates. Despite the miss, revenues in the quarter came in about 21% higher than the year ago period, while earnings jumped by close to 80%. The revenue gain of nearly 21% y-o-y was driven by strong performance across its Vegas and Macau resorts, primarily driven by Wynn Palace. However, the one time $463 million litigation charge resulted in a net loss (in GAAP terms) for the company. Strong growth in the Macau VIP market and its expansion into Boston should provide long-term growth opportunities. We are optimistic about these tailwinds, and this should help further propel the company’s stock. Below, we provide a brief overview of the company’s results and what lies ahead. The company’s stock is now trading at around $190, and we believe it is undervalued in comparison to our price estimate of $203. We have created an interactive dashboard elaborating on our valuation estimates. Please click on the link to adjust drivers and arrive at your own price estimate. Both the Macau resorts – Wynn Palace and Wynn Macau were the top performers in Q1’18, with revenue growing 45% and 11%, respectively, year-on-year, driven by strong performance in the VIP market and higher room occupancy. We expect Macau to be the driving force for Wynn in 2018, since the gaming revenues in the region grew consistently for the 20th straight month in March 2018. These tailwinds in the Macau casino market, coupled with its positioning in the VIP market, strategic alliance with Galaxy Entertainment Group, and improving Chinese economy should provide for another year of robust growth for Wynn. The exit of Steve Wynn should have a  limited impact on its Macau operations. Further, the addition of two new properties in Macau, and the expansion into Boston and Japan should provide long-term growth opportunities. 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.
    GOOG Logo
    Google Ads Continue To Drive Alphabet's Top Line Growth
  • By , 4/25/18
  • tags: GOOG BIDU AMZN MSFT AAPL FB ORCL BABA
  • Alphabet (NASDAQ:GOOG) announced its Q1 earnings on April 23, reporting a solid 26% increase in revenues to $31.1 billion. Much of the revenue growth came from Google’s core advertising segment, particularly on Google owned and operated properties such as Search, Gmail, Maps and YouTube. Google Properties revenues were up 26% to $22 billion, forming 70% of the company’s net revenues. In addition, Google Other Revenues, or revenues from selling hardware (Pixel), cloud offerings, and in-app purchases, was the fastest growing segment, with a 36% increase in revenues to $4.4 billion. Ad revenues from network partnerships were up 16% y-o-y to $4.6 billion for the quarter. However, cost of revenues and operating expenses were up significantly through the quarter, due to which operating income was up only 6% y-o-y to $7 billion. The impact of higher operating expense was offset by lower taxes and gain on equity securities led to a massive (~70-75%) increase in net income and EPS for the quarter. Based on the recent results and market trends, we have revised our forecasts for Alphabet for the full year. We expect Alphabet to maintain its revenue growth trajectory, and forecast the company’s margins to return to 2015 and 2016 levels after comparatively low margins through 2017. We have summarized our expectations for Alphabet’s 2018 results on our interactive dashboard  platform. You can change expected segment revenue and net margin figures for Alphabet to gauge how changes will impact its expected EPS for the year. Our forecast for the EPS for the full year is  about in line with consensus estimates . See Full Analysis For Alphabet 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
    MO Logo
    Change In Corporate Tax Rate To Positively Impact Altria's Q1 Earnings
  • By , 4/25/18
  • tags: MO PM
  • Altria (NYSE:MO) is set to post its first quarter earnings on April 26, wherein a growth in earnings on relatively flat revenues is expected. It is not an unknown fact that the smoking rate has been falling, with the U.S. witnessing one of the steepest declines in the world. In the face of this, a majority of the company’s revenue growth in the past has been a result of increasing the prices of tobacco products, as well as the growth of its smokeless and innovative products segments. These trends are expected to continue in the first quarter, helping in improving the margins as well. Altria is also expected to get a boost to its earnings as a result of the overhaul of the corporate tax code, which reduced the tax rate from 35% to 21%, effective January 1, 2018. We have a  $79 price estimate for Altria, which is higher than the current market price. The charts have been made using our new, interactive platform. You can click here to modify the assumptions and gauge the impact on the company’s valuation and price per share metrics. Bigger Focus On The Small Segments The smokeless segment delivered an impressive 11% operating companies income growth in 2017, despite a voluntary recall of some smokeless tobacco products. Copenhagen continued its growth and market share improvement. However, Altria’s other big smokeless brand – Skoal – witnessed a market share decline, as the company continued its focus on growing Copenhagen while honing its investments into Skoal to enhance profitability. Within e-vapor, Nu-Mark’s Markten brand continued its solid growth, with volumes increasing a mammoth 60%, driven by increased distribution, as well as industry growth. The brand ended the year with a national retail share of approximately 12.5% in the mainstream channel. Significant progress has been made on the commercialization plans for iQOS, including a consumer engagement program and the development of digital strategies. Given the decline in the cigarette smoking rate in the US, it is imperative Altria place a greater focus on its smokeless and innovative tobacco segments. While the smokeable tobacco segment continues to form a large chunk of the company’s revenues, there has been a greater need for diversification. And this is where iQOS can prove to be a game changer. Tax Rate To Positively Impact 2018 Earnings As per the new tax bill, the corporate tax rate will be lowered to 21% from 35%, while the overall tax structure is also expected to be simplified. This factor will have a massive impact on a company like Altria, as it operates entirely in the United States, and has been, till now, subject to the exorbitantly high corporate tax rates in the country. In this respect, the company’s 2018 EPS guidance calls for a 15% to 19% increase on the 2017 figure, implying earnings in the range of $3.90 to $4.03 per share, with the expected tax rate hovering between 23% and 24%. Altria will also benefit from a lower tax rate on taxes on AB InBev dividends it receives. The EPS will be negatively impacted by the strategic long-term investments Altria has been undertaking, such as innovative product development and launches including iQOS, regulatory science, retail fixtures, and future retail concepts. The company is aiming to reinvest one-third of the total tax reform benefit it is receiving into these initiatives. Resorting To Share Buybacks Another factor that can be expected to boost the earnings for the company is the significant buybacks the company has authorized. In 2017, Altria repurchased more than $2.9 billion worth of shares, leaving $18 million in the program as of December 31. The company subsequently completed the program in January 2018, and in February, the board authorized a new $1 billion share repurchase program which is expected to be completed by the end of 2018. See Our Complete Analysis For Altria   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.