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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 : FIRST SOLAR

First Solar published its Q4 results on Thursday, reporting on a quarter that saw the continued ramp up of Series 6 module production.

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FORECAST OF THE DAY : BOEING'S SHARE OF COMMERCIAL AIRCRAFT DELIVERIES

Boeing's Share Of Commercial Aircraft Deliveries rebounded in 2018 after prior year declines. We expect it to increase further in 2019 and plateau thereafter.

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RECENT ACTIVITY ON TREFIS

CVS Logo
CVS Delivers A Beat In Its Q4 Earnings
  • By , 2/22/19
  • tags: CVS
  • CVS Health  (NYSE:CVS), the second largest drugstore chain in the U.S., has posted stronger than expected results in its fourth quarter 2018 .  The company posted a 12.5% increase in sales to $54.4 billion with adjusted earnings reported at $2.14 per share in Q4. This growth was primarily driven by higher prescription volumes within the retail pharmacy business.  The top line got a major boost by a strong Pharmacy Services segment, benefiting from the upside in the specialty services. CVS successfully completed their long awaited transformational merger of $70 Bn with Aetna, began effective implementation of their integration strategy, and took important steps toward building the integrated healthcare model that will bring substantial value to its stakeholders. Looking ahead, the company expects its GAAP diluted EPS from continuing operations to grow in the range of $4.88 to $5.08 for the full year 2019. CVS is focused on long-term growth initiatives and to invest in process improvements and technology enhancements that will position them well to expand their reach in providing access to high-quality and more affordable care. The recent Aetna transaction will also provide CVS the means to further lower health care costs for consumers and payers, in turn benefiting the company in the longer run. Please refer to our dashboard analysis on Takeaways From CVS’s Q4 2018 Earnings . In addition, here is more  Health Care data . Segment-Wise Performance –  Revenue for its Pharmacy Services segment grew by 2.2%  in Q4 driven by growth in pharmacy network and specialty claim volume as well as brand inflation, partially offset by continued price compression. This segment includes the pharmacy benefits manager business and specialty pharmacy services. In its Retail/LTC segment, revenues increased by 5.4% billion driven by an increase in same store prescription volume of 8.6%, on a 30-day equivalent basis, due to continued adoption of the Patient Care Programs, partnerships with PBM’s and health plans, and inclusion in a number of additional Medicare Part D networks this year, as well as brand inflation. Outlook for full fiscal 2019 We anticipate CVS to continue this healthy growth momentum in 2019 and beyond, with a rise in the top line continuing over time. 2019 is also expected to be a year of transition for CVS as they integrate with Aetna and focus on key pillars of their growth strategy.   What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    NEM Logo
    Newmont Mining’s 2018 Performance: Declining Volume Hits Revenue Growth While Bottom Line Grows Due To Lower Tax Outgo
  • By , 2/22/19
  • tags: NEM GOLD VALE FCX
  • Newmont Mining Corp . (NYSE: NEM), one of the largest gold companies in the world, announced its Q4 2018 results on February 21, 2019, followed by a conference call with analysts. The company beat market expectations by posting revenue of $2.05 billion in Q4 2018, 5.8% higher compared to $1.94 billion in Q4 2017, mainly driven by higher gold production in the fourth quarter of 2018. Adjusted earnings were $0.40 per share in Q4 2018 compared to $0.38 in the year-ago period. Higher earnings were mainly as a result of lower tax expense following the implementation of the TCJ Act. For the full year, though Newmont surpassed consensus expectations by posting revenue of $7.25 billion in 2018, it was 1.7% lower compared to $7.38 billion in 2017. Lower revenues were primarily driven by a decrease in gold shipments for the full year on the back of lower production at various sites and decline in copper prices due to US-China trade tensions, partially offset by a marginal increase in gold price. We have summarized the key takeaways from the announcement in our interactive dashboard – How Did Newmont Mining Fare In 2018 Amidst Lower Production And What Is The Outlook For 2019?  In addition, here is more  Materials data .   Key Factors Affecting Earnings Lower shipments: Gold shipments declined by 2.1% (y-o-y) to 5.52 million ounces in 2018 on the back of lower production at various sites. Gold production declined by 7% in North America due to lower-grade ore mined at CC&V, Long Canyon, and Twin Creeks, as well as lower leach tons placed at Carlin, Phoenix and CC&V, partially offset by higher-grade ore milled at Phoenix. Production decreased by 3.2% in Asia-Pacific due to lower-grade ore milled at Boddington and Kalgoorlie, partially offset by higher-grade ore milled and recovery at Tanami. The lower-grade ore milled at Kalgoorlie was a result of reduced ore tons mined from the pit due to a failure in the East wall of the pit, leading to the processing of lower-grade stockpiles. However, we expect gold shipments to increase by 1.5% to 5.6 million ounces in 2019. Higher volume would most likely be driven by a full year of higher-grade production from the recently completed Subika Underground project in Africa, and increased production from the Ahafo mill expansion project which is expected to complete in Q2 2019. Additionally, copper volume saw a marginal decrease from 111 million pounds in 2017 to 110 million pounds in 2018, primarily driven by lower grades at Phoenix and Boddington due to lower copper leach placement and lower mill grade and throughput. We expect copper shipments to increase to about 112 million pounds in 2019 as Phoenix reaches higher-grade copper ore from the Bonanza pit which is offset by lower production at Boddington. Price volatility: Gold prices have seen a lot of volatility in 2018. Price realized per ounce of gold sold increased marginally to $1,260 in 2018, compared to $1,254 in 2017. After being at elevated levels in the first half of the year, prices have declined since June 2018, mainly driven by rising interest rates in the US and a stronger dollar which made the greenback a more lucrative investment option. Price ranged from a high of over $1,350 per ounce to about $1,180 per ounce in the second half of the year. Thus, the upside in price realization was limited during the year. However, the global gold price has surged since January 2019 as central banks across the world have invested more in the yellow metal in the face of rising economic uncertainty. As of Feb 21, 2019, the gold price was just shy of its one-year high and we expect prices to remain robust through 2019. After a strong 2017, copper prices witnessed a declining trend in 2018 due to the threat of a US-China trade war. Realized price per pound of copper declined by 2.9% to $2.75 in 2018, from $2.84 in 2017. However, prices have risen since January 2019 on the back of easing trade tensions and rising sales of electric vehicles. We expect prices to remain elevated through 2019. Rising cost per unit: Costs of sales per gold ounce increased 2% in 2018 primarily due to lower volume sold, higher stockpile and leach pad inventory adjustments, and higher oil prices, partially offset by a lower co-product allocation of costs to gold. However, cost of sales per copper pound saw a significant rise of 15% in 2018 primarily due to a higher co-product allocation of costs to copper and lower production. Higher cost of sales in turn led to an increase of 2% in the AISC (all-in sustaining costs) per gold ounce and of 12% in AISC per copper pound. This affected the upside to margins. Profitability: After being in the red for the last couple of years, net income turned positive in 2018 as net income margin increased to 4.7% in 2018 from -1.5% in 2017, mainly driven by a significant drop in tax expense for the year, after the implementation of the Tax Cuts and Jobs Act. Even though cost of sales per unit increased during the year, on an absolute basis, costs applicable to sales remained fairly consistent in 2018 compared to 2017, as higher direct operating costs and higher stockpile and leach pad inventory adjustments were mostly offset by lower production at various sites. Higher margins led to a sharp rise in EPS to $0.64 in 2018 from -$0.21 in 2017.   Outlook Remains Bright We expect revenue to increase by 3.2% to $7.48 billion in 2019 from $7.25 billion in 2018, mainly driven by rising shipments and strengthening of global gold and copper prices. The company is expected to achieve cost efficiencies which would reflect in lower cost of sales attributable to gold for 2019 following higher production at Ahafo, lower mining costs at Yanacocha, and lower operational costs at Tanami with the completion of the Tanami Power Project. This would be partially offset by higher costs in the copper segment due to higher stripping expected at Boddington. Overall, cost-reduction efforts and lower tax expenses are likely to lead to an increase in net income margin and EPS in 2019. As per the recent announcement, Newmont Mining Corp has decided to acquire Goldcorp Inc. in a $10 billion deal that is likely to conclude in Q2 2019. The new company – Newmont Goldcorp – is expected to be the largest gold miner in the world. We believe that this acquisition, which is likely to provide Newmont with geographic diversification, larger scale, and operational efficiencies, would push the company’s margins higher. With its closest rival, Barrick Gold also concluding a major deal recently (Barrick Gold acquired Randgold Resources), the acquisition of Goldcorp will help Newmont compete effectively in the market and maintain its leadership position in the gold segment. Thus, rising volume and prices of gold and copper, coupled with synergies from the acquisition of Goldcorp, are expected to be the primary drivers of growth in Newmont’s profitability and its stock price going forward. We have a price estimate of $39 per share for Newmont Mining Corp, which is higher than its 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 All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    GOOG Logo
    How Much Revenue Can Google Fi Add To Alphabet’s Top Line?
  • By , 2/22/19
  • tags: GOOG BIDU AMZN FB AAPL BABA MSFT
  • Google Fi is a mobile virtual network operator (MVNO) service operated by Alphabet (NASDAQ:GOOG) that uses networks operated by T-Mobile, Sprint, and U.S. Cellular and over 2 million Wi-Fi hotspots. Google Fi will be switching between these networks to enable best connectivity services to its end users. While initially started on Nexus phones, Google Fi was extended to Android phones manufactured by popular OEMs and even to the iPhone . We estimate that Fi contributed around 0.3% in 2018 to the company’s top line. The pricing plan for the service is $20 per month for unlimited calling and text messages, with $10 per GB up to 6 GB. Post 6 GB of consumption, data usage is free for the month. However, speeds are slowed down for using in excess of 15 GB. Since Google does not provide details of the number of Fi subscribers, or even the number of hardware units sold, we use the following approach to estimate the contribution of Google Fi to Google: Estimating the active devices compatible with Fi (number of phones designed for Fi and compatible with Fi). As of Feb 2019, the following phones were designed for Fi and compatible with Fi. Designed for Fi: Pixel, LG G7, LG V35, Moto G6, One Moto X4, Nexus 5X, Nexus 6P and Nexus 6 Android: Google notes that all models running Android 7.0 with certain bands would be compatible with Fi. Per this definition, on the basis of the Android distribution report, at the end of Oct 26, 2018, ~50% of devices were compatible with Fi. Apple: Per  Google’s website, all phones running iOS 11.0 or higher would be compatible with Fi. According to industry reports, as of October 2018, 89% of iPhones were running version 11 or higher. Estimating active users: Not all downloaded Fi users would be using the app. We have seen the active usage to download ratio vary between 0% to 80-90% depending on the popularity and age of the app. Estimating average revenue per user (ARPU) : Per Fi’s pricing plan, the minimum monthly bill is likely to be $20 for a voice only user, and could go up to a maximum of $80 for heavy data usage. We estimate the average revenue per user roughly at the midpoint of that range, as most users are likely using data. Estimating total annual revenue from Google Fi : This is simply the number of active users per year multiplied by the ARPU. Estimating the contribution to total Google revenue : We estimate that 0.3% of Google’s revenue was attributable to Fi. Further, we expect this number to increase to 3.2% in 2020 as the company continues to roll out and improve its service. Our interactive dashboard on Google Fi’s Contribution to Google outlines our forecasts and estimates for the MVNO and the company. You can modify any of the key drivers to visualize the impact of changes on its revenue, and see all of our technology company data here . See More at Trefis | View Interactive Institutional Research (Powered by Trefis) All Trefis Data
    MDT Logo
    How Much Can Medtronic's Earnings Grow In Fiscal 2019?
  • By , 2/22/19
  • tags: MDT ABT ISRG
  • Medtronic  (NYSE:MDT) recently reported its Q3 fiscal 2019 results, which were above our estimates. The company saw steady growth in most of its business segments. However, Cardiac & Vascular Group, which includes rhythm management devices, and balloons, among other products, saw a modest decline, primarily due to a tough comparison with the prior year quarter. Looking forward, we expect the company to post low single-digit revenue growth, and a high single-digit earnings growth for full fiscal 2019.  The growth will largely be led by its drug eluting stents, and MiniMed systems. We have created an interactive dashboard ~  A Quick Snapshot of Medtronic’s Q3 Performance And Trefis Estimates For Fiscal 2019. You can adjust various drivers to see the impact on the company’s overall earnings. Below we discuss our forecast in detail. In addition, here is more  Health Care data . Expect Revenues To Grow In Low Single-Digits In Fiscal 2019 Medtronic’s Cardiac & Vascular Group includes cardiac rhythm management devices, such as pacemakers and implantable cardioverter defibrillators (ICDs) for the diagnosis, treatment, and management of heart rhythm disorders and heart failure. It also includes coronary balloons, drug-coated balloons, and thoracic stent graft systems, among others. The segment revenues saw a modest decline in the previous quarter, amid a tough comparison, given a large order in Q3 last year, and a discontinued product line. While this will impact the segment’s overall performance for the full fiscal, the company is seeing strong growth for its Evolut PRO Valve. This should aid the overall segment sales. We forecast a modest growth in revenues to $11.50 billion in fiscal 2019. Minimally Invasive Therapies Group, which includes devices and therapies for neurological problems, and imaging systems among other products, saw mid single-digit revenue growth in the previous quarter, led by strong demand for its advanced stapling products, endoscopic ultrasound products, and Bravo reflux testing systems. This trend should continue in the near term, and aid the overall segment revenue growth. The company plans to launch a robotic surgical system in fiscal 2020, which will likely aid the long-term segment revenue growth. However, currency headwinds can weigh on the segment revenues in the near term, and we forecast them to see a slight decline in the current fiscal. Note that the company could see a negative impact of $425 million to $475 million from currency headwinds on sales. Looking at the Restorative Therapies Group, the company saw double-digit growth in Brain and Pain therapies for the nine month period ending January 2019. The segment primarily includes devices and implants for conditions relating to the spine, musculoskeletal system, brain, and nerves. The growth in the recent quarters can be attributed to strong sales of its Intellis spinal cord stimulation platform, and StealthStation surgical navigation systems, among other products. Looking forward, the company should continue to benefit from the existing product line, as well as its newly launched Mazor X Stealth Edition robotics guidance platform. Medtronic’s Diabetes group has seen growth in high teens for the nine month period ending January, 2019, led by its MiniMed 670G system, which is the world’s first hybrid closed loop system that optimizes glycemic control for patients with type 1 diabetes. We expect the full fiscal growth to be in low teens, driven by expansion of 670G in international markets. Looking at the pipeline, the company will launch MiniMed 780G, which will also have bluetooth capability, in fiscal 2020. Overall, the company should see low single-digit revenue growth in fiscal 2019. The company has guided for slight improvement in its operating margins, which along with higher revenues, should result in adjusted earnings of $5.15 per share, reflecting a high single-digit growth over the prior fiscal. Our price estimate of $112 for Medtronic is based on a 22x price to earnings multiple. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    HSBC Logo
    How Did HSBC Fare In Fiscal 2018?
  • By , 2/22/19
  • tags: HSBC
  • HSBC (NYSE: HSBC) announced its Q4 and full year results recently. After delivering a strong performance in first three quarters of 2018, the bank’s revenue fell by approximately 8% in Q4 2018. The bank’s total revenue for the year increased by approximately 4.5%, driving its net profit to $12.6 billion, an increase of approximately 30% from 2017. Overall, HSBC had a successful fiscal 2018, with Asia again contributing a substantial portion of the profits, notably in Retail Banking, Wealth Management and Commercial Banking. Loans and advances to customers increased by approximately 2% in 2018, while the Asia loan portfolio grew at 5.5%, constituting 46% of the bank’s total loan portfolio. The loan growth has not come at the expense of higher loan losses, as loan provisions in 2018 were fairly stable. We currently have a price estimate of $50 per share for HSBC, which is ahead of the current market price. We have summarized the key takeaways in our interactive dashboard on  HSBC’s Q4 Earnings Overview, the key parts of which are captured in the charts below. You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Financial Services company data . Division Summary Net Interest Income constitutes approximately 55% of HSBC’s total revenue and grew 8.2% for 2018. Revenue from net insurance income, which had been negative in the previous three fiscal years, turned positive to reach $852 million in 2018. HSBC’s Asian division constitutes more than 50% of bank’s revenues. The fundamentals for growth in Asia remain strong, and we expect the Asian business to remain a significant part of the bank’s revenue and drive overall revenue growth in the future years. HSBC’s Investment Banking division recorded revenues of $10.6 billion in fiscal 2018, a decline of 2% from 2017. Investment banking revenues fell approximately 27% in Q4 2018 as economic uncertainty and reduced primary issuance led to subdued client activity and spread compression. HSBC reports the performance of its investment banking operations along with its treasury and securities services operations as a part of its Global Banking & Markets business division. This division reported an increase of 7% in revenues in 2018. Investment banking revenues and profit margins are expected to shrink in the first half of 2019, as the China-U.S. trade disputes and uncertainty surrounding Brexit will likely continue to negatively impact client activity. However, we expect these revenues to largely remain in the 15-20% range of total revenues going forward. HSBC’s total operating expenses remained stable in 2018, leading to an increase in operating income of approximately 16% from 2017. HSBC reported total operating income of $19.9 billion in 2018, led by the bank’s Asian segment, which contributed approximately 90% of total pre-tax income. However, HSBC’s adjusted “jaws ratio” for 2018, which measures adjusted income versus cost growth, came in at negative 1.2%. HSBC’s total asset base increased for the third consecutive year, reaching approximately $256 billion in 2018. Additionally, the bank’s loans and advances increased approximately 2% in 2018 driven by growth in loans and advances in its Asian division. HSBC has chosen to reduce its presence in North America and Europe over the years and shifted its focus more on its Asian operations. This strategy presents a sizable downside risk in the event of a full-blown trade war. A trade war could trigger losses on a chunk of its retail and commercial loan portfolio in China, while also weighing on overall revenue growth. Looking Forward HSBC plans to achieve positive adjusted jaws ratio in 2019, and remains focused on achieving a return on tangible equity of over 11% by 2020, while maintaining a stable dividend. However, escalating tariffs and other trade restrictions, and an economic slowdown in the Eurozone and mainland China are likely to have an adverse impact on the bank’s growth. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
    FSLR Logo
    Key Takeaways From First Solar's Q4 Results, 2019 Outlook
  • By , 2/22/19
  • tags: FSLR SPWR
  • First Solar  (NASDAQ:FSLR) published its Q4 2018 results on Thursday, reporting on a quarter that saw the company continue to ramp up production of its next-generation Series 6 modules. While the company’s revenues doubled year-over-year to $691 million, driven by the sale of two projects in Japan, they came in below market expectations, with earnings also falling short of consensus due to some production ramp-related costs. In this note, we provide some of the key takeaways from First Solar’s results and the outlook for the company over 2019. We have also created an interactive dashboard analysis on  What’s the outlook for First Solar in 2019?  You can modify the various drivers to arrive at your own forecasts for the company’s 2019 revenue and EPS. In addition, you can view all Trefis data for Energy companies here. First Solar’s Bookings Backlog Is Expanding First Solar’s shipments backlog (both systems and standalone modules) stood at to 12.1 gigawatts (GW) as of the earnings report. Overall, through 2018, the company noted that it had 5.6 GWdc worth of bookings, translating into a book-to-bill ratio of over 2. Systems projects continued to be a meaningful driver, as the company signed 1.3 gigawatt DC of new PPAs last year, driven partly by strong demand for utility-scale solar from commercial and industrial customers. While the U.S. remains the biggest market for First Solar, international bookings have also been picking up. For instance, bookings from Europe have been on the rise ( 700 MW through 2018 ), driven by demand from France and Spain, and also due to the E.U’s 2030  targets of deriving 32% of its energy from renewable sources. Updates On Series 6 Production First Solar has been scaling up production of its Series 6 panels, with daily production up by about 65%, compared to October 2018, with the company producing a total of 0.7 GW of modules between its three factories in Malaysia and Ohio and Vietnam. The new panels are important for the company, as they have a significantly higher-rated power capacity compared to legacy Series 4 panels, with manufacturing costs also estimated to be as much as 40% lower. First Solar has noted that run-rate production in these factories stood at about 2 GW at the end of 2018, and the figure is expected to scale up meaningfully over the next few quarters. In January, First Solar started Series 6 production from its second factory in Vietnam, and the company’s second Ohio factory also on track, helping Series 6 capacity to grow to about 5.6 GW by 2020. For 2019, First Solar’s production is expected to stand at between 5.2 GW and 5.5 GW, with 2 GW coming from the legacy Series 4 panels. 2019 Guidance Updates First Solar provided its updated guidance for 2019, reiterating revenue and EPS guidance of $3.25 billion to $3.45 billion, and $2.25 to $2.75, respectively. However, it noted that gross margins would stand at 19.5% to 20.5%, lower by about 0.5% from previous guidance, on account of an expected increase in ramp costs. For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
    BIDU Logo
    Baidu Q4: Sustained Momentum Across Business Lines
  • By , 2/22/19
  • tags: BIDU GOOG NFLX YELP AMZN BABA SINA
  • Baidu (NASDAQ:BIDU) reported its fourth quarter and full-year results on February 21. The company beat consensus revenue and EPS estimates. As indicated by an internal memo in January, Baidu crossed RMB 100 billion in revenue for 2018 with total revenue coming in RMB 102.7 billion ($14.9 billion, +28% y-o-y), with 856K active online marketing customers (+10% y-o-y). While other revenue grew 86% to $3 billion driven by iQIYI, content costs grew 75% to $3.42 billion, also driven by iQIYI. Our interactive dashboard on Baidu’s Price Estimate  outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation, and see all of our technology company data here . Key takeaways from the quarter are below: Search and Feed: Baidu App’s daily active users (DAUs) grew 24% year-on-year to 161 million (+24% y-o-y), Baijiahao – Baidu feed’s content network – grew to 1.9 million. Meanwhile, BaiduSmart Mini Program monthly active users (MAUs) grew to 147 million (+30% y-o-y), while Haokan (short video) and Quanmin (flash video) DAUs reached 19 million and 4 million, respectively. DuerOS: The installed base for DuerOS crossed 200 million (+45% q-o-q), while registering 1.6 billion voice queries. Apollo: The company’s self-driving project has been granted over 50 licenses for open road testing in some of China’s major cities. Apollo has also secured 135 OEMs as partners. Cloud and Others: On the eve of the Chinese New Year, Baidu’s cloud handled over 20 billion interactions with a peak of 10 million hits per second. The company continues to see widespread adoption of its AI tool kit and also has been expanding in local cities for newer initiatives of blockchain-based implementations. iQIYI: User base grew to 87.4 million (up 36.6 million) and also launched a hybrid OTT TV box with Sichuan Cable TV. Q1 Guidance: Management expects Q1 revenues to range between $3.42-3.60 billion (+12-18% y-o-y). Baidu’s results look fairly strong in light of the expected weakness due to the ongoing U.S.-China trade disputes. Further, we note that Baidu is maintaining its leadership position in search while also moving towards profitability in its digital content (capital intensive) business. Additionally, the developments at Apollo point toward sustained headway in commercializing the company’s self-driving technologies. Coupled with management’s vision on ramping up AI across the portfolio of Baidu’s offerings, this hints towards significant upside if these endeavors come to fruition. Do not agree with our forecast? Create your own price forecast for Baidu by changing the base inputs (blue dots) on our interactive dashboard .
    BA Logo
    How Will Boeing Gain Market Share?
  • By , 2/21/19
  • tags: BA LMT UTX
  • Boeing  (NYSE:BA) A number of changes are expected in 2019 that we believe will lead to Boeing gaining market share, which we believe will lead to improved earnings during the coming quarter. We analyze those factors in this article. Macro Analysis for Boeing, and its Shift Away from North America /Europe to Asia-Pacific:  Boeing will increasingly see a shift away from American, and European customers, to APAC customers, during the current year, and into the next decade. Furthermore, this trend will increasingly become a common theme for Boeing’s earnings going forward, with China making up the largest portion of airline sales. Therefore, with China showing signs of an economic slowdown, Boeing’s deliveries in the region may witness a slowdown in 2019, the extent to which this affects Boeing’s earnings depends largely on Chinese consumers and their travel trends. Europe has also showed early signs of a slowdown with Italy and Germany both showing early recessionary signals. But with the load factor being historically high we expect that Boeing, regardless of macro conditions, will continue to see a robust delivery schedule. We currently have a price estimate of $441 per share, which is 5%  higher than the market price. You can use our interactive dashboard  Can Boeing’s Growth Continue?    to modify key drivers and visualize the impact on Boeing’s price estimate.   In addition, here is more  Industrials data .   Key Competitor Analysis: Commercial Airliners : Airbus is the other big name in the commercial airline space, both Boeing and Airbus each own about 43% and 45% of the global commercial airline industry, respectively, by revenue, with the rest of the market share owned mainly by Bombardier and Irkut. While Airbus continues to outpace Boeing in terms of overall deliveries, Boeing’s latest wide-body aircraft, the 777, is doing much better than the Airbus A380, and with the introduction of Boeing’s 777x, we expect Boeing’s wide-body sales to perform better than those of Airbus, and this should translate into slightly increased market share in 2019. This is mainly owing to the Emirates, who will decide whether or not to switch to the new 777x model being offered by Boeing. Should this happen it would effectively end the the A380 program, and help push Boeing’s market share to 45%. Airbus has largely been reliant on its single-body aircraft the A320 NEO to retain market share, and has used it to shore up its sales. This compared to Boeing’s version of the single-body 737; which has seen less demand (Boeing delivered 52 737’s per month during 2018), mainly due to the A320 NEO being more fuel-efficient. We expect lower demand for the A320 NEO aircraft in 2019, and this could translate into Boeing coming up on top in terms of overall sales for the year. Russian airline maker Irkut’s new single-body commercial airline, which will enter production in 2019, is also widely anticipated to do well, but questions remains about its performance, it is yet to be seen how well the aircraft performs once it enters service. Meanwhile, China has come up with their own versions of the single-body aircraft, and it is expected to enter service in a couple of years. Defense: Boeing’s defense contracts are largely dependent on its FA-18 aircraft, this compared to the F-35 Lockheed aircraft which is its main competitor. While the F-35 is expected to become the backbone of the U.S military replacing the FA-18 eventually, we believe the FA-18 aircraft will continue to see demand through the next decade, helping Boeing’s defense revenues remain consistent. But risks do remain if the military decides the F-35, (which has been historically plagued by issues) is to permanently replace the FA-18. With Germany recently considering the FA-18 over the F-35, this should help the fighter jet’s case to remain in production. Boeing may see an increase in earnings over the next 4-5 years from the order should it go through. Boeing also continues to see strong demand for its helicopters with Russia’s Kamov and Mi-26 models mainly offering competition.  We expect Boeing’s helicopter sales to remain robust through the year, especially in international markets. We believe that with Airbus shutting down key commercial aircraft models, and Boeing gaining as a result, and that also combined with continued defense contracts, Boeing’s market share will improve during the year.     What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    VMW Logo
    What To Watch For In VMware’s Q4 Results
  • By , 2/21/19
  • tags: VMW MSFT CSCO HPE IBM SAP ORCL CRM
  • VMware (NYSE:VMW) is scheduled to report its fourth quarter and full year earnings on Thursday, February 28. In addition to management’s outlook on the traction from the VMware Cloud on Amazon, we will be looking for any updates on the company’s plans for achieving containers running atop virtual machines. We have revised our price estimate upward to $150 per share, which is around 10% lower than the current market price. Our interactive dashboard on VMware’s Price Estimate  outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation, and see all Trefis technology company data here . VMware’s investments in ramping up technological and sales capacity in anticipation of the growth in hybrid and multi-cloud environments have proven to be prescient. Not only has the market rewarded the company with a 60%-plus stock price increase over the past year, the likes of AWS (and more broadly Amazon) have made significant commitments: Amazon has committed to leverage VMware’s software stack to enter into the on-premise hardware business. The advent of IoT/edge computing, coupled with mobility and AI, are likely to contribute significantly to the need for multi-cloud deployments. We note that VMware is the technology integrator equivalent in the cloud world, with hybrid cloud driving demand for VMware’s integration solutions. The company’s management has also been correct about IT spending outpacing broader economic growth, and we will be listening for commentary around management’s revenue guidance for 2019, and whether it is revised upwards. Do not agree with our forecast? Create your own price forecast for VMware by changing the base inputs (blue dots) on our interactive dashboard .
    HD Logo
    Can Digital Sales Drive Growth For Home Depot In Q4?
  • By , 2/21/19
  • tags: HD LOW
  • Home Depot  (NYSE:HD) had a fairly strong first three quarters of 2018, as the home improvement retailer managed to grow its revenue by just over 6% in the first 9 months of the year. This performance was primarily attributable to strength in the housing market, better-than-anticipated growth in its digital segment, and a lower effective tax rate. We expect these trends to continue in the near term, though higher-than-expected transportation costs and a tougher comparable sales comparison should slightly dampen its Q4 results. Nevertheless, we expect the company to announce another solid quarter when it announces its Q4 results on February 26. Further, the company’s strategic investments to bolster its supply chain and tackle higher costs should begin to show results in the medium term. Below we take a closer look at what to expect in Q4. We have a $210 price estimate for Home Depot’s stock, which is slightly higher than the current market price. Our interactive dashboard on  what to expect from HD in Q4  details our expectations for the company’s earnings. You can modify the charts in the dashboard to gauge the impact that changes in key drivers for Home Depot would have on the company’s earnings and valuation, and see all of our Consumer Discretionary company data here . Factors That May Impact Performance 1. Housing Market:  Despite the news surrounding a weak housing market, Home Depot saw its revenues grow by just over 6% in the first nine months of 2018, largely due to homeowners preferring to remodel their homes rather than selling. Further, the company has often highlighted that the housing stock in the country is old and in need of restoration and remodeling, which should drive growth for Home Depot. Even though interest rate hikes make mortgages more expensive, on the whole it is indicative of a robust economy. Moreover, unemployment is at its lowest level since 2000, and wages are improving. As a result, solid economic conditions bode well for a company like Home Depot that is heavily reliant on broader economic conditions. 2. Pro Sales Outpacing DIY Sales:  HD’s Pro segment should be the key driver for its growth, largely due to Pro sales outpacing its DIY (Do It Yourself) segment. Further, its big-ticket transactions – those above $1000 – form nearly 20% of U.S. sales. Consequently, a sustained focus on this segment is imperative for ensuring future growth. Further, the Pro segment sales have consistently improved above the company average in the first nine months of 2018. In addition, the company has been enhancing its investments to deepen its relationship with such customers, including enhanced associate tools in the stores and expanded delivery options. 3. Interconnected Retail Strategy:  The company has made a concerted effort to create a truly integrated retail strategy, which seamlessly connects the online and offline channels, in an attempt to improve the shopping experience and store efficiency. Additionally, Home Depot’s digital segment saw solid growth in the first nine months of the year, largely driven by enhanced online traffic. Consequently, this has led to improved revenues and profitability. Moreover, in the digital space, the typical transaction ticket size is three times that in stores, and by focusing on this interconnected channel strategy, Home Depot has been able to boost revenues per square foot. This has ensured that its present store network is being efficiently used to drive revenues. 4. Higher Ticket Size:  Numerous factors have benefited, and should continue to benefit, the average ticket size. Besides the aforementioned factors such as greater Pro sales and growth in digital sales, the focus on appliances as well as innovation are other factors driving this increase. Better than expected investment in appliances has resulted in share gains, with appliances garnering a higher than average ticket size. 5. Higher Transportation Costs: The company faced transportation headwinds throughout the first nine months of 2018. The higher costs in the third quarter resulted in a 23 basis point contraction in gross margins. While Home Depot isn’t the only company facing higher transportation costs, the increasing shift toward the online space, as well as the addition of features such as same-day delivery, should continue to put pressure on gross margins through the fiscal year. Consequently, the company expects gross margin to improve 37 bps this year, down slightly from the previous guidance of 44 bps. 6. Reduced Tax Rate: Given the fact that Home Depot operates primarily in the U.S., its effective tax rate has been 35% or higher in the past few years. As a result of the decline in the corporate tax rate from 35% to 21%, effective January 2018, the company is expected to have an effective tax rate of 24%, which should be a key driver in the substantial improvement in its net margin this year. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    How Will The Model 3 Price Cuts Impact Tesla?
  • By , 2/21/19
  • tags: TSLA GM F
  • Tesla  (NASDAQ: TSLA) has cut the price of its Model 3 sedan twice this year. After slashing prices of all its vehicles by $2,000 following the reduction of the federal tax credit for its cars in January, the company dropped Model 3 prices by another $1,100 earlier this month after ending its customer referral program. In this note, we take a look at the potential impact of the price cuts on Tesla. We have created an interactive dashboard analysis that breaks down  our price estimate for Tesla, based on key drivers including Model 3, S, X average selling prices and deliveries. You can modify inputs for Tesla’s pricing, volumes, and margins to arrive at your own valuation for the company. In addition, you can view all Trefis Consumer Discretionary company data here. Why The Price Cuts Are Necessary  At the start of 2019, the federal tax credit for Tesla buyers fell to $3,750 from $7,500, as the company crossed the sales threshold of 200k cars set by the government. The total price cut of $3,100 over the past few weeks largely helps to offset this, and now the least expensive version of the Model 3 sells for $42,900 for a car offering mid-range battery capacity (264 miles) along with the premium interior package. However, it will become important for the company to move further down the price curve in early July, as the tax credit again drops by half, effectively making Teslas more expensive by $1,875. The credit will go away entirely in January 2020. With Tesla being the first automaker to lose access to the full credit, and competition in the broader EV market heating up, the company will have to launch the standard version of the Model 3 ($35,000) to mitigate the impact. However, it appears that Tesla will have some work to do on this front. Towards the end of last year, Tesla indicated that it would cost about $38,000 to make the standard range Model 3, implying that it would still need to make meaningful cost cuts to make the vehicle profitably. How Is Tesla Enabling These Price Cuts? Tesla has been taking multiple steps to cut costs. Firstly, the scale-up of Model 3 production could help the company improve economies of scale and reduce costs. Tesla is likely to be producing over 5,500 Model 3 vehicles per week currently according to the Bloomberg Model 3 tracker, up from less than 2,500 units a week in mid-2018, and the metric is expected to approach 10k vehicles by the end of this year. Moreover, the production process for the Model 3 uses a significant amount of automation, which helps it drive down costs. For example, in Q4 Tesla has said that the number of labor hours per Model 3 declined by roughly 20% compared to Q3 and by about 65% in the second half of 2018. The company also decided to cut 7% of its full-time workforce in January to save costs. Tesla also has an advantage in terms of battery costs, with the company aiming for battery cell costs of  less than $100/kWh last year, which is well below the broader industry. Separately, Tesla also ended its customer referral program – which offered new buyers six months of free supercharging, while offering existing owners other perks – and this could also help the company cut costs. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    Newmont Mining’s 2018 Results Likely To Be Marred By Lower Production And Declining Prices Of Gold And Copper; Outlook Remains Bright
  • By , 2/20/19
  • tags: NEM GOLD FCX VALE
  • Newmont Mining Corp. (NYSE: NEM), one of the largest gold companies in the world, is set to announce its fourth quarter results on February 21, 2019, followed by a conference call with analysts. The market expects the company to report revenue of $1.88 billion in Q4 2018, 3.1% lower than in Q4 2017. Adjusted earnings for the quarter are expected to be $0.24 per share compared to $0.40 per share in the year-ago period. The lower revenue and EPS is likely to be the result of a decrease in gold and copper production, coupled with a decline in the realized price of both the commodities, slightly offset by a decrease in cost of sales on the back of lower volume. Full year revenues are expected to decline by 6.8% to $6.85 billion in 2018 from $7.35 billion in 2017. We have summarized our key expectations from Newmont Mining’s earnings in our interactive dashboard – Production Cuts To Affect Newmont’s Financial Performance In 2018 . In addition, here is more Materials data .   Key Factors Affecting Earnings Lower volume: Gold production declined by 7% in the first 9 months of 2018 compared to the corresponding period of 2017. This was mainly driven by a 7% reduction in volume from Carlin (USA) due to lower mill throughput at Mill 6 from unscheduled downtime and ore chemistry, as well as lower leach tons placed and recovered; and 41% lower production at CC&V (USA) primarily due to lower ore grade mined, a build-up of concentrate inventory to be shipped and processed in Nevada, and lower leach tons placed at Valley Leach Fill 2. We believe that these production cuts will have an adverse effect on gold ounces sold, which is expected to be 6.8% lower at 5.2 million ounces in 2018, compared to 5.6 million ounces in 2017. Additionally, we expect copper volume sold to marginally decrease to 110 million pounds in 2018 from 111 million pounds in 2017, mainly driven by a decrease in copper production due to lower ore grade milled at Phoenix in North America. Declining prices: Gold prices have seen a decline since June-2018, mainly driven by rising interest rates in the US and a stronger dollar which made the greenback a more lucrative investment option compared to the yellow metal. Price ranged from a high of over $1,350 per ounce to about $1,180 per ounce in the second half of the year. Thus, for the full year, we expect the average realized gold price to be marginally lower at $1,252/oz in 2018 compared to $1,255/oz in 2017. Elevated copper price levels due to strong EV sales received a major jolt in the form of US-China trade tensions, which saw copper prices tumbling from over $3.15/pound to about $2.50/pound in the latter half of 2018. Though global copper prices saw some recovery in Q4, they remained much lower than the year’s high. Thus, for the full year, we expect realized copper price per pound to decline to $2.81 in 2018 from $2.84 in 2017. Profitability: After two years of remaining in the red, we expect net income margin to enter the positive territory in 2018, driven by lower cost of sales and a decrease in tax outgo. Due to lower production and volume sold during the year, we expect cost of sales to be slightly lower compared to the previous year. Additionally, the implementation of the Tax Cuts and Jobs Act, which has reduced the federal tax rate from 35% to 21%, is expected to boost Newmont’s profitability for the year. We expect net margins to increase to approximately 2% in 2018, compared to -1.3% in 2017. Future Looks Bright As per a recent announcement, Newmont Mining Corp has decided to acquire Goldcorp Inc. in a $10 billion deal that is likely to conclude in Q2 2019. The new company – Newmont Goldcorp – is expected to be the largest gold miner in the world. We believe that this acquisition, which is likely to provide Newmont with geographic diversification, larger scale, and operational efficiencies, would push the company’s margins higher. With its closest rival, Barrick Gold also concluding a major deal recently (Barrick Gold acquired Randgold Resources), the acquisition of Goldcorp will help Newmont compete effectively in the market and maintain its position as the market leader in the gold segment. After witnessing a declining trend over the last few months, gold prices have seen an upswing since January 2019, driven by an increasing amount of gold being bought by central banks world-over in the face of an uncertain economic climate. Additionally, the outlook on copper prices is also positive with rising demand and sales of electric vehicles. Thus, rising metal prices and synergies from the acquisition of Goldcorp are expected to be the primary drivers of growth in Newmont’s profitability and its stock price. We have a price estimate of $39 per share for Newmont Mining Corp.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    How Much Will Microsoft's Intelligent Cloud Revenues Grow In The Next 3 Years?
  • By , 2/20/19
  • tags: MSFT ADBE GOOG AMZN ORCL SAP ATVI CRM
  • Microsoft ‘s (NASDAQ:MSFT) Intelligent Cloud division houses the company’s public, private, and hybrid server products and cloud services; Azure is Microsoft’s rapidly growing cloud services offering. In order to promote growth in Azure, Microsoft has shed its traditionally acrimonious stance towards open source and has joined the Open Innovation Network, a group of companies offering products on a royalty-free basis. The company’s moves are aimed at making a greater number of services and applications available through Azure, thereby aiding wider adoption. We expect the Intelligent Cloud division to grow to $42 billion in revenue by fiscal 2022 end, a CAGR of 7% from fiscal 2018 revenue of $32 billion. We have a price estimate of $104 per share for Microsoft, which is around the current market price. Our interactive dashboard on Microsoft’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation, and see all of our Technology company data here . Microsoft has based its subscription offerings on the Azure cloud, giving the company unprecedented analytics capability. Not only does understanding relevant trends bode well for making incremental improvements to Microsoft’s applications, it also makes Azure a better platform overall, which in turn is likely to attract significant workloads. While AWS continues to lead the space, Amazon’s increasing business overlap with many of its customers has led some customers to evaluate other options, and Azure’s number two position gives Microsoft a slight edge over other competitors. Additionally, the increasing need for computing locally has been driving the adoption of edge computing. Furthermore, the need to marry legacy and distributed cloud environments has necessitated customers building out their cloud strategies with vendors who can support multiple business processes. Microsoft’s ecosystem of applications (including Office and Dynamics, among others) gives the company a competitive edge in such situations, helping growth . See More at Trefis | View Interactive Institutional Research (Powered by Trefis) All Trefis Data
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    What's The Upside To eBay’s Stock If It Reaches $10B In Transaction Revenues By 2020?
  • By , 2/20/19
  • tags: EBAY AMZN BABA GRPN YELP SINA FB
  • eBay  (NASDAQ:EBAY) has been struggling somewhat in the last couple of years on account of its inability to offer alternatives to PayPal and competition from the likes of Amazon. In addition to laying out plans for growth, eBay’s management notes that 2019 is likely to be a year of consolidation, which will drive growth in 2020. We expect a 10% upside to our price estimate in case eBay achieves $10 billion revenue in transaction revenues by 2020, which we explain further. Our interactive dashboard on eBay’s Price Estimate  outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation, and see all of our technology company data here . The entry of activist investor Elliott Management is also likely to result in incremental measures towards achieving profitability. The operating leverage in eBay’s marketplace business is likely to be one of the key starting points. We note that while this narrative is similar to other companies in which Elliot invests, the company’s alignment with Adyen as an alternative to PayPal is likely to be a key area of focus for the company to achieve a $10 billion sales number by 2020 . We estimate that an improvement in marketplace revenue would not only positively impact advertising revenue, but also profitability. In our base scenario, marketplace revenue for 2020 is $9.7 billion. We believe that if this revenue number moves up to $10 billion, it is also likely to boost the marketing and advertising revenue slightly, from $2.6 billion to $2.7 billion, due to higher demand. Additionally, the consequent benefits of operating leverage are likely to help the net margin increase marginally to 15%, versus our base case expectation of 14% for 2020. Accordingly, we expect a 10% upside to our $37 price estimate for eBay should the company’s transaction revenues touch $10 billion by 2020. See More at Trefis | View Interactive Institutional Research (Powered by Trefis) All Trefis Data
    RBS Logo
    Key Takeaways From RBS’s Q4 Results
  • By , 2/20/19
  • tags: RBS CS UBS
  • Royal Bank of Scotland Group Plc (NYSE: RBS) announced its fourth quarter and full-year 2018 resultsrecently. After returning to profitability in 2017, the bank reported an attributable profit of £1.6 billion, more than double that of fiscal 2017, and delivered its first Q4 profit in 8 years. The bank also declared dividend of 2 pence per share for the first time in 10 years. RBS’s net revenue increased by 2%, and total operating expenses declined by approximately 7% year over year, leading to an improvement in its net margin figure from 6% in 2017 to 12% 2018. We currently have a price estimate of $8 per share for RBS, which is ahead of the current market price. We have summarized the key takeaways in our interactive dashboard on  RBS’s Q4 Earnings Overview, the key parts of which are captured in the charts below. You can modify any of our key drivers to gauge the impact changes would have on its valuation, and see all Trefis Financial Services company data . Segment Performance Despite an uncertain economic outlook, RBS delivered a strong financial performance in 2018, improving over its 2017 numbers. Key takeaways of the bank’s 2018 performance are presented below: Net interest income and net fee & commission income – constituting 80% of the bank’s revenue – declined by approximately 3.7%, and revenue from other income increased by approximately 41% year over year, leading to an overall 2% increase in the bank’s total revenue. RBS’s investment banking division had a profitable 2018, as securities trading revenues increased by approximately 30% from 2017, contributing 9% of total revenues. This shows that RBS has been successful in achieving its objective of shrinking its investment banking operations, which were responsible for more than 60% of the bank’s revenues in 2007. We expect these revenues to largely remain in the 5-10% range of total revenues going forward, as growth is primarily driven by traditional loans-and-deposits activities. Operating expenses fell by approximately 7% in 2018 as the bank remained on course to achieve its cost to income ratio target of less than 50%. The bank has been able to reduce its costs by more than £4 billion in the previous 5 years. RBS’s total loan portfolio declined from approximately £327 billion in 2017 to £323 billion in 2018. However, the bank’s UK Personal & Banking business loan portfolio, constituting approximately 51% of its total loan portfolio, remained stable. The bank’s total asset base shrunk from £738 billion in 2017 to a low of £695 billion at the end of 2018 as a result of a decline in total loans, trading assets and derivative securities. That said, the bank is in a strong financial position, as evident from its Common Equity tier 1 ratio of 16.2%.   Outlook for 2019 RBS declared dividends for the first time in a decade, and is expected to maintain ordinary dividends of around 40% of attributable profit. The bank also plans to buy back its shares from the UK government by utilizing surplus capital, as the UK Government plans fully to exit its stake in RBS by 2024. RBS remains on course to achieve its 2020 Return on Tangible Equity target of more than 12%. However, the bank might not be able to achieve its 2020 cost to income ratio target of less than 50% due to ongoing economic and political uncertainty, and the additional ongoing costs associated with ring-fencing and Brexit. The bank had planned in advance for risks expected to arise as a result of uncertainties related to Brexit by charging an additional £100 million in impairment charges in Q3 2018, and as of now RBS seems to be largely prepared for Brexit (whatever it ends up looking like). What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    What's The Downside To Apple Stock If Its Chinese Sales Fall 50% This Year?
  • By , 2/20/19
  • tags: AAPL SSNLF
  • Apple’s  (NASDAQ:AAPL) stock has corrected by over 20% over the last four months after the company cut its guidance for the holiday quarter, driven largely by woes in the Chinese market where iPhone sales have come under pressure. While the cooling Chinese economy and the current trade tensions between China and the United States have impacted Apple’s business, we believe that much of the slowdown is attributable to the company’s strategy and product positioning. In this analysis, we spell out some of the factors impacting the company’s Chinese business and estimate the potential impact of weaker Chinese sales on the stock. View our interactive dashboard analysis on the key drivers of Apple’s valuation, with a geographic breakdown of its revenues. You can also see all of our  data for Information Technology Companies here . High Device Prices iPhone sales in China declined by about 20% year-on-year during Q4 2018, according to a report by IDC, with Apple’s market share in the country falling to 11.5% from 12.9% a year earlier. While smartphone shipments in China  have been on the decline, Apple has been more severely impacted on account of an increasing preference among Chinese customers for lower-priced, but well-specced handsets from the likes of Huawei and Oppo. Additionally, Chinese customers  spend much of their smartphone time  on apps such as WeChat and Baidu which are platform agnostic, making it difficult to justify the hefty premium for an iPhone when they can get a largely similar app experience on a cheaper device. For instance, the iPhone XS Max costs roughly $1,400, about twice as much as Huawei’s flagships. The mid-range iPhone XR, which Apple has been counting on to drive volumes, also appears to be faring poorly among image-conscious Chinese buyers. There Doesn’t Appear To Be An Easy Solution To Apple’s Chinese Woes Apple follows a fairly consistent strategy across all its geographic markets, selling highly desirable products at a premium price point while locking users into its device and software ecosystem. However, the platform lock-in is not strong in China, where Apple’s services are less popular (for instance iMessage and FaceTime take a backseat to WeChat) meaning that an iPhone user in China is more likely to switch to other platforms compared to users in other markets. There is also a sense that the enthusiasm and brand cachet surrounding Apple’s products could be waning in China, limiting the ability to bring on new users. Apple will need to rethink its strategy to better align with the Chinese market, but there doesn’t seem to be an easy solution at the moment. Pricing is likely to be the biggest issue. While some retailers have also resorted to cutting prices (the XR saw a price drop of a little over 10% last month), it’s unlikely that Apple will be able to become more price competitive in China without hurting its broader iPhone franchise overseas.  For instance, the company could launch a lower-priced China-focused device, but customers in Western markets where the iPhone continues to do well could demand the same. Impact Of Changes In Chinese Sales On Apple’s Stock Price  Our base case valuation of $178 per share for Apple stock assumes that the company’s revenue from Greater China will drop by about 30% this fiscal year (FY’19) to about $36 billion. However, things can change quickly in the Chinese market (Samsung’s market share fell from close to 20% about five years ago to under 1% currently) and it’s possible that Apple could see a swifter decline. For instance, if Apple’s revenues from Greater China decline by about 50% this year (scenario is shown in blue in our dashboard ), our price estimate could fall to about $170 per share, assuming all other drivers remain the same. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    After A Strong Performance In 2018, Outlook Turns Bleak For Coca-Cola In 2019
  • By , 2/19/19
  • tags: KO PEP
  • The Coca-Cola Company (NYSE: KO) released its Q4 2018 results on February 14, 2019, followed by a conference call with analysts. The company fell short of analysts’ expectations for revenue, primarily due to loss of revenue from the refranchising of company-owned bottling operations and the impact of currency. The company reported net revenue of $7.1 billion for the fourth quarter of 2018, which marks a decline of 6% on a year-on-year basis. However, the company met the consensus EPS estimates for the quarter with an adjusted earnings per share of $0.43 in Q4 2018, 10.3% higher than $0.39 in Q4 2017. Higher earnings were primarily driven by benefits from the ongoing productivity plan, refranchising of low-margin bottling business, and lower tax expense with the implementation of the TCJ Act. Full year revenue decreased by 10% to $31.9 billion. We have summarized the key takeaways from the announcement in our interactive dashboard – Coca-Cola Ends 2018 With Higher Profitability But A Discouraging Outlook . In addition, here is more Consumer Staples data .   Key Takeaways from the announcement Growth in sparkling products: As the young population is growing increasingly health conscious and moving away from soda consumption, Coca-Cola has attempted to innovate its iconic Diet Coke brand in North America to help consumers reduce added sugar, which translated into significant revenue growth in the North American segment. The company continued to strengthen its sparkling soft drink portfolio and build consumption rituals through world-class innovation, premiumization, and revenue growth initiatives. Though sparkling soft drinks declined 1% in Q4 2018 as solid volume growth across Central and Eastern Europe as well as India was offset by the impact of more challenging economic conditions in certain emerging markets, including Argentina and Central America, for the year 2018, sparkling soft drinks grew 2%, driven by strong growth in China and India as well as across Central and Eastern Europe. The continued success of Coca-Cola Zero Sugar, which witnessed double-digit growth during the year in addition to strong growth in the low and no-calorie offerings of Sprite and Fanta, led to an 8-percentage points acceleration in retail value growth for the no-calorie sparkling soft drinks portfolio for the year. Total portfolio growth: Water, enhanced water, and sports drinks category grew 1% in Q4, led by strong performance across emerging markets. However, the product category witnessed a 3% growth in 2018, primarily driven by strength in single-serve packaging in China and premium offerings in North America. Coca-Cola launched approximately 500 products across multiple markets through the lift, shift, and scale strategy while also accelerating the elimination of under-performing SKUs during the year. The company launched Georgia Craftsman in Japan and Authentic Tea House in China which helped the tea and coffee segment grow by 3% in Q4 and 1% for the full year. Ready-to-drink tea and coffee market size is expected to reach $116.13 billion by 2024 . Such immense growth potential would drive sales of Coca-Cola’s ready-to-drink tea over the next few years. Juice, dairy, and plant-based beverages were a drag on the company’s performance, with revenue for the category decreasing by 2% in Q4 and 1% for the year, largely driven by strategic decisions to deprioritize low-value juice brands in key African and Southeast Asian markets, as well as packaging downsizing actions in the juice portfolio within North America. Effects of Refranchising: Coca-Cola’s sales have seen a decline over the last couple of quarters due to structural changes undertaken by the company, as it 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. Any impact on the sales of the bottler is going to have a magnified impact on overall sales for Coca-Cola and much less effect on the company’s profits, as the bottling business contributes 4-5 times more revenue per drink. Thus, in spite of revenue growing across every other segment, total revenue for the company declined by 10% in 2018 as revenue from the bottling segment witnessed a significant decrease of over 60%. However, refranchising of the low-margin bottling operations and focusing on core operations drove net margins sharply higher to 20.2% in 2018, compared to 3.5% in 2017. The company has completed the refranchising of its bottling operations in China, Japan, Canada, and Latin America through 2017 and 2018. Outlook Turns Cautious Revenue is expected to increase by 4.6% (y-o-y) in 2019, driven by growth across all major segments, offset by a lower revenue from bottling business. However, with most of the refranchising already completed, the revenue loss is not expected to be as significant in 2018. Revenue growth would also be driven by inorganic growth strategies of Coca-Cola. The company announced several key acquisitions in 2018, including Costa Limited, which provides a platform to build a global coffee business, and a strategic partnership with BODYARMOR, one of the fastest-growing beverage trademarks in the United States. Additionally, it also announced the acquisition of full ownership in Chi Ltd, which is a fast-growing leader in expanding beverage categories, including juices, value-added dairy, and iced tea in Nigeria. With multiple reductions in the global economic growth outlook for 2018 and 2019, the management has turned prudent and tapered down its bottom-line guidance for 2019. We expect net income margin to rise only marginally to about 21% in 2019, from 20.2% in 2018. Margin growth would be driven by the ongoing refranchising of low-margin bottling operations and Coca-Cola’s new productivity plan which has been extended to 2019 to achieve incremental savings of about $800 million. However, rising transportation costs and currency swings are expected to be potential drags on the company’s margins, thus limiting the upside on earnings. Therefore, in spite of strong organic growth, rising costs and economic headwinds would likely affect Coca-Cola’s bottom line in 2019. Additionally, rising count of common shares due to employee stock options is also expected to dilute earnings per share growth in 2019, which the company expects would remain around the same level as in 2018. We have a price estimate of $50 per share for the company, which is higher than its current market price. The stock was punished by investors on the day of results, with the share price falling by close to 6.9%. Though our current estimate of $50 is slightly lower than our earlier expectations, we believe that the stock price would gradually rise from its current low levels to its fundamental value, driven by an expanding footprint in the emerging markets, new product offerings, and strong organic sales growth.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    What To Expect From CVS's Q4
  • By , 2/19/19
  • tags: CVS
  • CVS Health  (NYSE:CVS) is scheduled to release its fourth quarter results on February 20 . The company had posted a 2.4% increase in sales to $47.3 billion with adjusted earnings reported at $1.73 per share in the previous earnings for Q3. This growth was primarily driven by higher prescription volumes within the retail pharmacy business.  The top line got a major boost by a strong Pharmacy Services segment, benefiting from the upside in the specialty services. The company’s retail business also showed  improvement, with revenue from the front store, which includes products like makeup and vitamins, increasing 2% from last year while same-store sales were up 0.8 %.  The company also has closed the $69 billion purchase of health insurer Aetna in November 2018. Looking ahead, the company expects its GAAP diluted EPS from continuing operations to grow in the range of $1.40 to $1.50 for the full year 2018. CVS is focused on long-term growth initiatives and to invest in process improvements and technology enhancements that will position them well to expand their reach in providing access to high-quality and more affordable care. The company is also upbeat about sustaining a solid year-over-year revenue trend in Q4, thereby realizing gains from the Pharmacy Services segment. Please refer to our dashboard analysis Outlook For CVS’s  Q4 2018 results . In addition, here is more Trefis Consumer Discretionary data . The factors below will likely play a key role in CVS’s Q4 results. Retail/LTC segment –  In its Retail/LTC segment, revenues increased by 6.4% to $20.9 billion in Q3 driven by an increase in same store prescription volume of 8.7%, on a 30-day equivalent basis, due to continued adoption of the Patient Care Programs, partnerships with PBM’s and health plans, and inclusion in a number of additional Medicare Part D networks this year, as well as brand inflation.  In the upcoming Q4, growth for this segment will follow an upward trend driven by solid same store script growth as a result of partnerships established with PBMs and health plans. Increased participation as a pharmacy in Medicare Part D networks will also boost results. Pharmacy Services segment –  In its Pharmacy Services segment, CVS grew by 2.6% to approximately $33.8 billion in Q3 driven by growth in pharmacy network and specialty claim volume as well as brand inflation, partially offset by continued price compression. This segment includes the pharmacy benefits manager business and specialty pharmacy services. The company expects drug price inflation, product launches, and higher utilization to fuel growth and this segment is expected to be a stable growth platform. The CVS Management stated that CVS Health’s specialty business is its top priority to help it expand its customer base. The company is more than poised to capitalize on this opportunity on the back of wide and differentiated offerings including Specialty Connect. All in all, we anticipate CVS to continue its healthy growth momentum in the coming earnings and beyond, with a rise in the top line.   What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    DUK Logo
    In Spite Of Higher Revenue, Increased Storm Restoration Charges And Lower Tax Shield Affect Duke Energy’s Margins In 2018
  • By , 2/19/19
  • tags: DUK
  • Duke Energy Corp . (NYSE: DUK) released its Q4 2018 results on February 14, 2019, followed by a conference call with analysts. Though the company exceeded analysts’ expectations for revenue, it fell short of the consensus on earnings per share. Duke reported net operating revenue of $6.1 billion in Q4 2018, 5.4% higher than $5.8 billion in Q4 2017. Higher revenue was mainly driven by an increase in customer base on the back of a rise in housing starts and privately-owned housing completions. The company reported earnings of $0.84 per share in Q4 2018, 10.6% lower than $0.94 in the year-ago period. Lower earnings for the quarter were driven by increased depreciation and amortization expense on a growing asset base and higher storm-related costs, partially offset by higher rider revenues. We have summarized the key takeaways from the announcement in our interactive dashboard – High Restoration Costs and Depreciation Affect Duke’s Profitability In 2018 . In addition, here is more Utilities data . Key Factors Affecting Earnings Higher consumption: Revenue from Electric Utilities and Infrastructure segment increased by 4.2% in 2018, mainly driven by higher energy consumption per customer, which increased by 3.4% during the year. Rising economic growth and higher per capita income has led to a pick-up in construction activity and an increase in housing starts and privately-owned housing completions for most of 2018. This has led to a higher customer base for the company, which, in turn, helped Duke enhance its pricing power, reflected in a slight increase in revenue per megawatt hour (MWh). Additionally, rising sales of electric vehicles is also contributing to higher consumption and revenue. As the economy moves further toward digitization, with retail moving online, increased use of wireless internet, higher demand for electric vehicles which, in turn, adds electric charging stations, it would help in Duke maintaining its segment revenue growth going forward. Growth in renewables: Revenue from the renewables segment increased by 3.5% in 2018 as the share of renewable energy in the U.S. continues to rise. Official records show that 18% of all the electricity in the US was produced by renewable sources in 2017, up from 15% in 2016. Though official numbers for 2018 are yet to be announced, early estimates point out that growth is better than what was recorded in 2017. Duke Energy has over 1000 MW of wind and solar projects in late stages of development. As additional consumers switch to renewable energy and with continuous decline in the cost of solar and wind energy generation, the segment is expected to be the fastest growing operating segment of the company. Lower margins: Duke Energy saw its net income margin decline to 10.9% in 2018 from 13% in 2017, primarily driven by high storm restoration costs, higher depreciation expense, one-time severance pay, and a lower tax shield on holding company interest. In October 2018, Florida was hit by the most powerful storm – Hurricane Michael – in its recorded history, which led to over a million power outages in the Carolinas and 70,000 outages in Florida. This led to the company incurring huge storm restoration costs which adversely affected EPS to the tune of $0.07 in 2018. Additionally, depreciation expense increased by 15.5% during the year on the back of a growing asset base, eating into the company’s bottom line. Though the implementation of Tax Cuts and Jobs Act led to a lower tax outgo, this benefit of a lower tax rate was completely offset by a lower tax shield on holding company interest. This factor had an adverse effect of about $0.13 on the EPS for 2018. The bottom line was also hit by a one-time severance payment of $144 million made in Q4 2018 as a buyout package to employees to cut costs. Outlook Remains Stable Duke Energy’s stock has not seen much volatility over the last one year. We believe that the biggest support to the company’s stock comes from the company’s pricing power, which is derived from it being a regulated entity. Also, as the demand for renewable energy is growing at a fast pace, Duke Energy has realized this opportunity by expanding and diversifying in this segment with the acquisition of REC Solar and Phoenix Energy Technologies. Duke is hedging its bets with renewable energy as the world moves toward having a cleaner environment. The commercial renewables segment is expected to drive the company’s overall revenue growth in 2019 and beyond. Additionally, the grid modernization and improvement initiatives of the company are expected to lead to a strong revenue growth in the Gas Utilities segment as well. Though net income margin is expected to be more or less flat at the current level as the company is likely to incur additional maintenance and capital cost and take some time to cope with major natural disasters of 2018 along with higher depreciation as the asset base grows, higher revenues would most likely drive better earnings per share in 2019. Concentrating on enhancing shareholder returns, the company increased the dividend by 4.2% in 2018. We believe that overall growth across all its operating segments without losing focus on enhancing shareholder returns would provide support to Duke’s stock price. We have a price estimate of $88 for Duke Energy’s stock.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    PEP Logo
    In Spite Of Lower Operating Margins, PepsiCo’s Bottom Line In 2018 Was Boosted By Significant Tax Benefits; Strong Organic Growth Expected In 2019
  • By , 2/19/19
  • tags: PEP KO
  • PepsiCo, Inc . (NYSE: PEP) announced its Q4 2018 results on February 15, 2019, followed by a conference call with analysts. The company met analysts’ expectations for revenue as well as EPS. PepsiCo reported revenue of $19.52 billion in Q4 2018, marginally lower compared to $19.53 billion in Q4 2017. Though organic revenue grew by 4.6% (y-o-y) during the quarter, unfavorable foreign exchange movements and acquisitions and divestitures had an adverse impact on reported revenue. Adjusted earnings were $1.49 per share in Q4 2018, 13.7% higher compared to $1.31 in Q4 2017. Higher earnings were mainly driven by gains from the productivity plan, tax benefits, and refranchising of a portion of its beverage business in Thailand, partially offset by lower operating profit due to higher transportation and commodity prices. We have summarized the key takeaways from the announcement in our interactive dashboard – Refranchising And Productivity Gains Along With Tax Benefits Drive PepsiCo’s Bottom Line In 2018 . In addition, here is more Consumer Staples data . Key Factors Affecting Earnings Growth in Frito-Lay: Frito-Lay North America (FLNA), which contributes a little over a quarter of the company’s total revenue, saw its revenue grow by about 3.5% in 2018, driven by effective net pricing and volume growth in variety packs and its trademark Doritos, partially offset by lower volume of Santitas. FLNA’s EBITDA margins saw a slight decline in 2018 due to certain operating cost increases and the impact of a bonus extended to certain U.S. employees in connection with the TCJ Act, partially offset by net revenue growth and productivity savings. We believe that the foray into new products and healthy snacks would drive segment revenue growth in 2019 and beyond. However, growth in margins is expected to be slightly subdued on the back of higher transportation costs and higher commodity costs, primarily potatoes and motor fuel. Quaker Foods and North America Beverages proved to be a drag: Net revenue of Quaker Foods declined by 1.5% in 2018, reflecting lower volume and unfavorable net pricing and mix. The lower volume was driven by decline in trademark Gamesa and ready-to-eat cereals, partially offset by growth in oatmeal. EBITDA margin declined due to lower revenue and the impact of higher commodity costs. In the near future, we expect revenue to be around the current level, with a slight downward bias, due to declining volume. Margins are expected to slightly improve, driven by productivity savings and lower advertising and marketing expenses. Revenue in North America Beverages segment grew by 0.6% on the back of favorable pricing mix. However, volume decreased in 2018 due to a decline in CSD (carbonated soft drinks) volume and a decrease in juice and the juice drinks portfolio. On the other hand, the water and sports drinks portfolio received a boost due to an increase in non-carbonated beverage volume and an increase in Gatorade sports drinks. EBITDA margins saw a sharp decline, driven by higher transportation and commodity costs. We expect revenue to increase in the near term, driven by higher sales of non-carbonated beverages. Margin growth is likely to remain subdued due to increasing advertising and marketing expenditure. Refranchising: In Q2 2018, PepsiCo refranchised its beverage business in Thailand by selling a controlling interest in its Thailand bottling operations. This has led to about a 2.1% decline in revenue from Asia, Middle East and North African segment. As the revenue per unit is 3-4 times greater in the bottling business, it has a magnified effect on revenues rather than on margins. Refranchising of the low-margin bottling business along with productivity savings has led to an increase in the segment’s profitability. We expect revenues to remain flat going forward due to the loss of revenue from the bottling business being refranchised, offset by organic growth across other categories. Margins are expected to continue their  upward trend. Outlook Remains Strong We believe PepsiCo’s recent focus on healthy snacks – with it shifting its portfolio to a wider range termed as “Everyday Nutrition Products” – would help it cater to the health-conscious young generation. The recent announcement of the $3.2 billion acquisition of SodaStream – the number one sparkling water brand – would likely help the company grow as there is a shift in consumers’ preference away from carbonated drinks and diet sodas, thus precipitating growth of the sparkling water category. Thus, we expect revenue to grow by 3% to $66.6 billion in 2019, compared to $64.7 billion in 2018, driven by strong organic growth, rising sales of non-carbonated beverages, growth in healthy snacks and sports drinks, partially offset by foreign currency headwinds. PepsiCo announced a new productivity plan in February 2019, which will leverage new technology and business models to further simplify, harmonize, and automate processes; re-engineer the go-to-market and information systems, including deploying the right automation for each market; simplify the organization and optimize manufacturing and supply chain footprint. This new plan is an improvement over the existing plan and is expected to boost the company’s margins over the next five years due to intended cost savings and operational efficiencies. Net income margin increased significantly in 2018, mainly due to $3.4 billion of tax benefit during the year following the implementation of Tax Cuts and Jobs Act. As this was a one-time benefit, margins in 2019 are expected to be much more subdued, though higher than in 2017. We expect net income margin of 8.5% in 2019, led by productivity savings and refranchising initiatives, slightly offset by rising commodity and transportation costs. On February 15, 2019, PepsiCo announced a 3% increase in its annualized dividend to $3.82 per share from $3.71 per share, effective with the dividend expected to be paid in June 2019. The company expects to return a total of approximately $8 billion to shareholders in 2019 through share repurchases of approximately $3 billion and dividends of approximately $5 billion. We believe that these initiatives to enhance shareholder returns, coupled with increasing organic growth and rising margins, would provide a boost to PepsiCo’s stock price over the next one year. We have a price estimate of $119 per share for the company, which is higher than its 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 All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    NVDA Logo
    What Factors Will Impact Nvidia's Fiscal 2020 Earnings?
  • By , 2/19/19
  • tags: NVDA AMD INTC
  • Nvidia  (NASDAQ:NVDA) recently posted its Q4 fiscal 2019 results. While the company’s top line was a beat, its adjusted earnings were below our estimates. Revenues declined in the mid-twenties percent, with both GPU, as well as Tegra Processors segments seeing a sharp decline in sales. Earnings plunged over 50% to $0.80 per share on an adjusted basis, amid lower margins. Looking ahead, the company has guided for a weak Q1, as it continues to struggle over crypto-related inventory. We have created an interactive dashboard analysis ~  A Quick Snapshot of Nvidia’s Q4 Performance And Trefis Estimates For The Fiscal 2020 . You can adjust various drivers to see the impact on the company’s overall earnings, and price estimate. Below we discuss our forecasts. In addition, here is more  Information Technology data . Expect Revenues To Decline In High Single-Digits In FY 2020 We forecast the company’s total revenues to decline in high single-digits in fiscal 2020. The GPU business will likely see sales of a little under $9.30 billion, while Tegra Processors’ revenue could decline to $1.45 billion. This can primarily be attributed to a slowdown in the Chinese economy, which has impacted the consumer demand for GPUs, according to the company’s management. Note that China and Taiwan combined account for over 50% of the company’s total sales. In addition, the company’s Turing graphics card sales so far has been lower than expected, given the high pricing. Also, the crypto hangover is expected to impact the Q1 results as well. Crypto currencies have seen a massive decline in the recent past, and the demand for graphics cards has faded, which were earlier sought for crypto mining. While the company did launch its new Turing architecture in 2018, the pricing of these cards was very high, and so far it appears to have not seen any significant demand. However, with its launch of GTX1660Ti later in this month, the company could see some uptick in sales. GeForce GTX 1660 Ti will be Nvidia’s first Turing 12nm gaming graphics card without the real-time ray tracing capability. The new card is rumored to outperform several other cards, and it could help Nvidia revive its GPU sales. Looking at the Tegra Processors, the trend in revenues have been volatile in the recent past, led by its automotive business, as well as SOC (system on a chip) modules for gaming consoles, primarily Nintendo Switch. The company posted a 50% dip in Tegra Processors’ revenue in Q4 fiscal 2019, due to lower shipments of SOC modules. Nintendo also revised its target of selling 20 million consoles to now 17 million consoles in the current fiscal, given the weak sales in the first half of the year. This trend will likely continue in the near term as well. Given these trends, especially in GPUs, the company could see further pressure on its operating margins. We forecast the company’s adjusted earnings to decline in low double-digits to $5.90 per share in fiscal 2020. Our price estimate of $176 for Nvidia is based on a 30x forward price to earnings multiple. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    AVP Logo
    Key Takeaways from Avon's Q4 Earnings
  • By , 2/19/19
  • tags: AVP
  • Avon  (NYSE: AVP) reported dismal Q4 2018 earnings, where its total reportable Segment Revenue in reported currency decreased 10% and like-for-like total Segment Revenue decreased 1% in constant dollars. This was due to the impact of adopting the new revenue recognition standard required by generally accepted accounting principles in  the United States  (“GAAP”). Avon also had experienced a decline in Active Representatives and Ending Representatives. Each declined 6% and 8%, respectively, excluding the Brazil truckers’ strike. Avon’s bottom line remained dampened as it experienced continued variability with challenges in key markets, particularly Brazil, where it was facing bad debt, challenges with representative retention, as well as stiff competition from other players. On the brighter side, the company remains on track and completed the restructuring actions associated with the cost savings program initiated in 2016, exiting 2018 with run rate savings in excess of the targeted $350 million. Avon also realized approximately $40 million of savings against the Open Up Avon cost savings initiative outlined at Investor Day. The company is positive that injecting new talent and capabilities into the business will now steer Avon toward the path of growth. The company is focused to generate efficiencies, and will strive to improve in the remaining year by strategically redirecting investments to support underlying growth initiatives. Please refer to our dashboard analysis on Avon’s Q4 Earnings .  In addition, here is more Trefis Consumer Discretionary data . Segment-wise performance in Q4 –  Avon’s performance across different regions was low in the Q4. Avon’s  Europe, Middle East & Africa  segment generated revenues of $581.8 million, which fell 9% year over year. Results included an 8% decline in Active Representatives and a 9% fall in units sold. Also, Ending Representatives fell 10%.  South Latin America ’s revenues fell 15% to $488.3 million, while the same rose 6% on a constant-dollar basis. In the reported quarter, Active and Ending Representatives declined a respective 7% and 9%, while units sold fell 10%.  North Latin America ’ s revenues dipped 3% year over year at $199.4 million but improved 3% in constant dollars. While Active Representatives remained flat year over year, Ending Representatives declined 7%. Asia Pacific ’s revenues remained flat at $125.8 million, while it improved 4% in constant dollars, mainly owing to a 6% increase in average orders and a 4% rise in units sold. This was partly negated by a 2% fall in Active Representatives and a 3% decline in Ending Representatives. Avon’s focus areas: The factors below have been working in favor of Avon in Q4 and are likely to benefit the company’s performance in 2019 and beyond: Digital Initiatives – The company is aggressively focusing on digital and e-commerce initiatives. Avon’s social media presence has increased with it having the third largest fan following among beauty brands. Along with increasing investments on advertisement, the company is shifting many of its campaigns to the digital platform. In our view, this will positively impact its performance as an increasing number of customers are buying beauty products online. Rigorous performance management –  Following the stepping down of its CEO in early 2018, Avon hired a new CEO and executive members to steer the company toward the path of better future growth. Relentless focus on execution capabilities  –  Avon is channelizing its investments toward upgradation of its systems that will help the representatives in their roles of selling its products. Brazil witnessed an upgraded system and similar projects are being run in other countries including China, Russia, and Poland. Competitive representative experience – Avon is focusing on improving the end-to-end of its business model starting from forecasting customer demand, planning of operations, distributions, and shipment to representatives. The company is also gathering analytical data on each representative’s business in order to understand their functioning at a more detailed level. Further, Avon’s grouping of its representatives as top sellers, sellers, and new Representatives, will likely motivate better performance as representatives aim to gain the title of top sellers. Outlook for fiscal 2019 –  Avon is expecting that it would be able to grow its top line in 2019 by executing significant operational improvements, despite continued competitive pressures. Avon has been taking strategic measures to create a simpler and more agile company. The company also plans on continuing to realize cost savings to improve financial resilience and to be able to invest in its growth. Its long term financial goal remains mid-single-digit constant dollar revenue growth and low double-digit adjusted operating margin.
    WMT Logo
    Higher Comparable Sales and E-Commerce Growth To Drive Walmart's Fiscal 2020
  • By , 2/19/19
  • tags: WMT TGT AMZN
  • Walmart  (NYSE: WMT) reported its fourth quarter and full-year fiscal 2019 results on Tuesday, February 19. The company’s revenues were in line with expectations, while its adjusted EPS beat market expectations. On a reported basis, the company’s revenue increased 2% year over year (y-o-y) to $139 billion, driven by growth in the domestic market due to its marketplace offerings. Walmart’s adjusted EPS grew by 6% y-o-y to $1.41. Walmart U.S. delivered a strong top-line performance, with comparable sales of 4.2%, which topped the consensus estimate of 3.3%. This growth was driven by a 0.9% increase in customer traffic and a 3.3% growth in ticket size in Q4. Overall, e-commerce contributed approximately 180 basis points to the segment’s comparable sales growth in the fourth quarter. On a constant currency basis, the company’s U.S. e-commerce sales increased 43% in the quarter. In the company’s other segments, Walmart’s international sales declined 2% y-o-y to $32 billion, driven by the sale of a majority stake in Walmart Brazil and negative currency impacts. On the other hand, Sam’s Club revenues declined 4% y-o-y, negatively impacted by tobacco. However, Sam’s Club comparable sales grew 3.3% y-o-y (ex. fuel) in the quarter, led by a solid jump in traffic. Our $103 price estimate for Walmart’s stock is about in line with the current market price. We have created an interactive dashboard on  What To Expect From Walmart’s Fiscal 2020 Earnings, which outlines our forecasts for the company. You can modify our forecasts to see the impact any changes would have on the company’s earnings. In addition, you can see all of our Trefis Retail company data h ere . Going forward, we expect Walmart’s earnings to decline in Q1, due to investments in technology and a rise in employee wages. In addition, we expect online grocery to drive some growth for the company, though the accompanying expenses could result in margin pressure. Further, we also expect the company to continue to post an increase in its revenue growth rate, driven by growth across operating segments. Fiscal 2020 Outlook Walmart expects its consolidated net sales to grow at least 3% in constant currency in fiscal 2020, driven by the acquisition of Flipkart. It also expects a decline in EPS in low single-digits compared to fiscal 2019. In addition, the company expects comparable sales to range between 2.5% and 3.0%. The retailer’s management is aggressively rolling out grocery pickup and delivery in the U.S. and expanding omnichannel initiatives in Mexico and China. We expect Walmart to generate around $532 billion in revenues in fiscal 2020, and earnings of almost $14 billion. Of the total expected revenues in fiscal 2020, we estimate $343 billion in the Walmart U.S. business, almost $127 billion for the Walmart International business, and nearly $58 billion for the Sam’s Club business. For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    How Much Of Facebook's Value Is Driven By Instagram?
  • By , 2/19/19
  • tags: FB TWTR SNAP GOOG AAPL MSFT AMZN SINA
  • Despite the spate of privacy issues around Facebook ‘s (NASDAQ:FB) core business, the company has been able to grow its revenue at a fairly rapid clip. Although Facebook expects its growth and margins to moderate in response to the company’s investments in the health of the platform, Instagram continues to be a strong asset in the company’s portfolio. We estimate that Instagram generated as much as $5.5 billion in revenue – or 10% of Facebook’s total revenue – for 2018. Our interactive dashboard on Instagram’s Contribution To Facebook outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes, and see all of our Technology company data here . While Facebook does not break out Instagram’s revenues, we estimate that Instagram’s user base of over a 1 billion delivered an average revenue per user of around $5. In addition to having overtaken Snapchat as the world’s most popular photo sharing app, Instagram is increasingly becoming a go-to destination for marketers wanting to differentiate themselves beyond the traditional social media offerings. Coupled with Instagram’s (and Facebook’s) commerce ambitions, we believe that Instagram may reach as many as 1.6 billion users by 2020, which would lead to it accounting for an even larger portion of Facebook’s revenue. Notes: See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology