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COMPANY OF THE DAY : AT&T

AT&T is scheduled to report earnings on Tuesday. Our earnings preview details what we will be watching.

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FORECAST OF THE DAY : NEWMONT MINING'S NORTH AMERICAN GOLD SHIPMENTS

Newmont has seen some volatility in its North American gold shipments of late, but we expect solid growth going forward due largely to its Nevada mines.

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Low Cigarette Volumes And A Strong Dollar Result In A Disappointing Quarter For Philip Morris
  • By , 4/21/17
  • tags: PM MO
  • Philip Morris International (NYSE:PM) declared its first quarter earnings on April 20, wherein it reported an EPS of $0.98, flat versus the same quarter a year ago, but which missed on the consensus estimate by 5 cents. Even the revenue of $6.06 billion, which was a fraction of a percentage point down from the corresponding prior year figure, missed the analysts’ expectations. However, once the foreign currency impact is discounted, the revenues were up by 1.7%. The total cigarette shipment volume was down by a massive 11.5%, with substantial drops seen across all of its major regions, which pulled down the growth of the company. The company has again guided its full year forecast upwards, driven by a favorable discrete tax item, to a range between $4.84 and $4.99. Optimism regarding the company’s reduced risk products (RRPs) had pushed the stock price of the company higher this year by over 25%; however, the disappointing earnings posted by PM sent the price down by almost 4%. See Our Complete Analysis For Philip Morris International Weak First Quarter Does Not Foreshadow A Weak Year While a weak first quarter had been anticipated by the company, the decline in cigarette and heated tobacco unit volumes was larger than expected. For the full year, the company expects the volume to fall by 3% to 4%. After a strong performance in the fourth quarter of FY 2016, the company had set the FY 2017 EPS guidance to be in the range of $4.70 to $4.85. The company had since then revised this guidance upwards to $4.80 to $4.95. This has been further raised on account of a favorable tax item, as stated earlier. The foreign currency translations are expected to now impact the earnings of Philip Morris by $0.08, as opposed to an estimation of $0.18 earlier. The assumptions behind these numbers remain intact, namely the currency-neutral net revenue growth of 6%. This is expected to be supported by favorable pricing, as well as increased heated tobacco unit and iQOS device sales. The company is also targeting achieving break-even for iQOS this year. The growth is expected to be skewed towards the second half of the year, reflecting the increased RRP capacity, and improving returns on its investment as the year wears on. A strong pricing variance in the first quarter helped to drive the currency-neutral growth of the company, a trend which is expected to continue through the year. The company announced or implemented price increases in a number of markets in the quarter, notably Algeria, Argentina, Australia, Brazil, Canada, Egypt, Germany, Indonesia, Poland, Mexico, Russia, Turkey, Ukraine, and the UK. iQOS Performance Continues To Be Impressive The product carried on with its strong sequential growth, reflected in the weekly offtake shares for Marlboro HeatSticks. The brand closed out the quarter with a weekly offtake share of 9.6% nationally, 11.6% in Tokyo, and 14.9% in Sendai. The strong performance in Sendai in particular demonstrates the growing potential of the heat-not-burn technology products in Japan. iQOS has now been launched in 24 markets globally, following the city launches in Colombia and Lithuania during the first quarter, and in Poland and Serbia earlier this month. By the end of the year, the company is targeting the product to be present in 30 to 35 markets globally, subject to capacity. More importantly, the company estimates that approximately 1.8 million adult consumers have already quit smoking cigarettes and switched to iQOS. The company started the year with 15 billion units of installed annual HeatSticks capacity, and expects over 32 billion units in total capacity to be available for commercialization this year. The company anticipates an installed annual capacity of approximately 50 billion units by year end. Philip Morris is also implementing its plans to reach an installed annual capacity of 100 billion units by the end of 2018, which would translate to 75 billion units in total capacity available for commercialization. In support of these decisions, the company recently announced its decision to convert its cigarette factory in Greece to a heated tobacco unit production facility. Consequently, the company is also increasing its planned capital expenditure in 2017 to $1.6 billion, up from the $1.5 billion estimated earlier. Have more questions on Philip Morris? See the links below: Strong Demand For Smokeless Tobacco In Japan iQOS- A Product Of Innovation Or Necessity For Philip Morris? iQOS’ Impressive Growth Story Continues In The Fourth Quarter For Philip Morris How Is Philip Morris Working Towards A Smoke-Free Future? Notes:
    CMG Logo
    Here’s What To Expect In Chipotle’s Q1 2017 Earnings
  • By , 4/21/17
  • tags: CMG DNKN MCD
  • Chipotle Mexican Grill  (NYSE: CMG) is set to report its Q1 2017 earnings on April 25 th 2017. After an extremely difficult 2016, the company is beginning to show signs of improvement as its efforts towards better food safety and promotions to attract customers have started showing results. In the last one month the company’s stock price registered a more than 15% increase and we believe this is in anticipation of better than expected results.  Below is a summary of consensus estimates for Chipotle for Q1 2017: Source: Yahoo Finance This is in line with our estimates of higher revenues and EPS as the company recovers from the E-coli scandal. These include the roll out of smarter pick up times technology to reduce wait times for customers. (Read Can Shorter Wait Times Benefit An Ailing Chipotle Mexican Grill? ). It appears that its continuous measures to regain customer confidence are paying off and the company regained its top spot as the best U.S. Mexican Chain, according to Market Force’s survey. (Read Are Chipotle’s Food Safety Efforts Finally Paying Off? ). However, the proposed tax on goods imported from Mexico and heavy spends on promotion and food safety can put pressure on Chipotle’s margins impacting its EPS negatively. The overall weakness in the restaurant industry continues and according to insights from Black Box intelligence,   which are based on weekly sales data from over 145 restaurant brands, the first quarter of 2017 has not been very encouraging for the restaurant industry. Comparable sales and traffic have declined year on year in both February and March, with January being the only exception, reporting flat comp growth year on year. Chipotle’s Q1 2017 results are likely to set the trend for this year and give a strong indication on whether the company is on a recovery path. Most analysts expect the company to report a significant increase in revenues and EPS and the market survey confirms that the company is on the verge of a turnaround. This quarter could mark the beginning of new positive innings for Chipotle. Below is a summary of Chipotle’s key operating metrics for the last four quarters:   For further details on the company  See Our Complete Analysis For Chipotle Mexican Grill   View Interactive Institutional Research (Powered by Trefis): Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
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    What To Watch For In McDonald’s Q1 2017 Earnings?
  • By , 4/21/17
  • tags: MCD CMG SBUX DNKN
  • In the last three months, McDonald’s  (NYSE:MCD) stock price has increased by more than 10% as the market sentiment turned positive towards the company. The burger giant is slated to declare its Q1 2017 earnings on April 25 th  and the consensus expectation is a decline in the top line compared to last year. However, the consensus EPS estimate is around 8% higher than the actual EPS of $1.23 reported by the company for Q1 2016. The EPS growth is expected due to the share repurchase program of the company. Source: Yahoo Finance The consensus estimate is in line with our revenue estimates and we expect this decline to continue for the next few years (until 2020). While McDonald’s is taking several steps to drive revenues especially moving towards healthier menu items, the overall weakness in the restaurant industry is likely to impact its revenue growth negatively. According to insights from Black Box intelligence, which are based on weekly sales data from over 145 restaurant brands, the first quarter of 2017 has not been very encouraging for the restaurant industry. Comparable sales and traffic have declined year on year in both February and March, with January being the only exception, reporting flat comp growth year on year. Weakest restaurant segments in Q1 2017 are family dining and fast casual and this industry trend is likely to impact McDonald’s revenue growth. McDonald’s is taking several steps to stay ahead of the competition and grow revenue in the crowded quick service restaurant space. Some of the key steps include: Rolling out its mobile-order and pay initiative in all 14,000 U.S. restaurants in the fourth quarter of this year. Introducing fresh patties in its quarter pounder burgers by the middle of 2018. (Read A Closer Look At McDonald’s Next Big Change ) Tracking customer data to provide more personalized service. (Read Here’s Why McDonald’s Is Looking To Track Customer Data ) However, the benefits of these initiatives should be visible starting the end of 2017 and more in the next few years. For Q1 2017 we do not expect the company to spring any surprises in terms of revenues and EPS. Below is a summary of McDonald’s key performance metrics for the past four quarters: For more details on the company refer to our complete analysis of McDonald’s. See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    UL Logo
    Emerging Markets Lead The Way For Unilever In Q1; Reviving Hope For The Food Business
  • By , 4/21/17
  • tags: UL PG CL KMB
  • Unilever (NYSE:UL) released its Q1’17 earnings on April 20 th, and went on to surprise the market with growth in both organic sales and net sales, which has been a rare event over the past 2 years. Organic sales (Underlying Sales Growth) grew by 2.9% led by higher pricing, especially in the refreshments business, which saw an underlying price growth (UPG) of 5%. This was again led by premium ice cream brands like Talenti, GROM, and Magnum. The company doesn’t give out its detailed financials on a quarterly basis, but it has guided for an 80 bps rise in its operating margin for the full year 2017, which is because it has started reaping the benefits from its ‘Connected 4 Growth’ initiative started last year, that includes simplification of supply chain, innovation, and cost saving initiatives such as zero-based budgeting. The food division, excluding the spreads business, finally showed the symptoms of growth which actually sent out a positive message for the investors worried about this struggling segment. Another positive being that geographically, the growth was led by emerging markets like Africa & Asia from where Unilever derives around 55% of its sales. See our complete analysis for Unilever here Food Division Will Get Leaner, And New Acquisitions Can Boost Its Growth! Including the spreads business, the food division showed a dismal performance with flat organic sales and negative volume growth. However, excluding spreads, the organic sales growth returned to a positive territory along with better volumes. Also, on the same day the company has announced that it will buy Sir Kensington’s for $140 million. Sir Kensington’s produces natural non-GMO and eggless mayonnaise, and this is a clear indication that the company is turning away from the artificially processed food products after it had a bitter experience with spreads and margarine. This provides a better growth opportunity, as well, because the natural food market is expected to grow a lot faster than the artificially packaged food market. Technavio estimates the healthy food market to grow at 6% CAGR till 2020. Apart from this, it is a positive sign that the company may look forward to re-invest the cash it will receive after the divestiture of the spreads business, to buy such high growth companies that can add to its valuation. Emerging Markets Are Likely To Lead The Way The improvement in macro conditions in emerging nations played a vital role in Unilever’s net sales growth. The improvement in the currency situation of countries like India and Brazil provided a 2.4% tailwind to Unilever’s net sales which rose by 6.1%. Going forward, Unilever projects that the economic slowdown in the developing countries might have bottomed out. This is another factor which can have a major impact on the future performance of the company as the revenues from emerging nations make up the majority of its top line. However, the performance in developed markets like North America and Europe continued to disappoint because of weak market conditions. Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research  
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    JetBlue Looking At A Weak Start To 2017
  • By , 4/21/17
  • tags: JBLU
  • JetBlue Corporation  (NYSE:JBLU) is all set to report earnings for the first quarter of FY 2017 on April 25. The company posted positive figures in the previous quarter, beating the consensus estimates for earnings and revenues comfortably. The company posted a positive earnings surprise of almost 2%, with revenues coming in around $1,641 million, up about 3% year-over-year. Revenues were driven primarily due to the airline’s strategy to restrict its capacity growth in order to bring back its unit revenue in the positive range. While revenues could continue to remain positive this quarter on the back of this strategy, earnings are expected to take a hit on rising costs. Analysts estimate earnings to come in around $0.25 per share, down about 12% year-over-year. Probable Highlights : As mentioned previously, the bottom line is expected to be hurt by rising expenses. The recently inked labor deals and maintenance costs are bound to drag on earnings this quarter. The company expects the consolidated operating cost per available seat mile, excluding fuel, to grow in the range of 3%-5%. However, for the full year, the airline plans to restrict the unit cost growth to 1%-3% in order to maintain its margins. JetBlue has forecast fuel consumption in the quarter to be around 194 million gallons. Additionally, fuel costs are estimated to rise by about 16 cents in the quarter, up from $1.56 per gallon recorded in the last quarter, as oil prices continue their accent to normalcy. This is bound to weigh on earnings further. Operating revenue is anticipated to decline by about 4.8%. The airline plans to spend $305-$365 million in the first quarter and $1.2-$1.4 billion in the fiscal year on re-fleeting and maintenance of its airplanes. The negatives aside, the company has highlighted plans on increasing its capacity by a large margin over the coming year. To accommodate for the consequent surge in demand, the low-cost carrier intends on expanding its premium service, Mint, significantly. In this respect, the company hopes to operate more than 70 Mint flights by December 31, 2017. This could definitely attract more passengers, and should help boost the top line as early as this quarter. Further, the company is more than committed to reducing its debt significantly over the year, giving much needed respite to investors. JetBlue expects to repay debt of approximately $50 million and $195 million in the March quarter and the full year 2017, respectively. This move is bound to raise optimism regarding the stock which has suffered since the last earnings call. View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research  
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    Key Takeaways From E-Trade's Earnings
  • By , 4/21/17
  • tags: ETFC SCHW AMTD
  • E*Trade Financial ‘s (NASDAQ:ETFC) stock price rose nearly 4% during after-hours trading after the brokerage announced its Q1 earnings. After an impressive 2016, the company continued to perform well with quarterly revenue of $553 million, implying growth of 17% over the same period last year. In line with our expectations, interest earning assets continued to be the primary growth driver, aided by the Fed’s two interest rate hikes in the last 4 months. Additionally, the price cut in equity trading commissions did not impact E-trade’s overall trading revenue as the announcement came into effect only after the first week of March, and any adverse impact was more than offset by the increase in trading volumes from the acquisition of OptionsHouse in September 2016. Operating expenses grew nearly 12% in comparison to the prior year, due to higher compensation and infrastructure spending to cater to the expanding customer base, and we expect them to remain around same level for the year. Despite that, the company’s pre-tax margin remained at 41%, same as Q1 2016 and 100 basis points above the previous quarter. However, the costs incurred due to the OptionsHouse acquisition and decline in trading commission will likely lead to a dip in operating margins through the year. Interest Earning Revenues Grew Due to Fed’s Actions Interest earning assets account for nearly 57% of E-Trade’s revenue. Additionally, the company has the highest yield on these assets (at 2.7%) among its peers, which has contributed to impressive growth in revenues. These assets saw nearly 19% growth along with a 10 bp increase in yield, resulting in over 11% growth in the segment’s revenues for the year. We expect another 10 basis points of improvement in the yield and similar growth in assets for the entire year, due to the likelihood of another hike. Trading Revenue Grew Despite Cut In Commissions   Transaction-based revenues account for 23% of E-Trade’s overall revenue. The quarter saw around 18% growth in trading commissions despite the company’s decision to slash its commissions from $9.99 to $6.95 per trade and $4.95 for frequent traders. Trading volumes grew by over 25%, primarily due to the acquisition of OptionsHouse. Moreover, the company’s decision to slash its commissions came at the end of February, thereby affecting only a third of the trading volume for the quarter. E-Trade expects a decline in its operating margin of up to 200 basis points for the full year due to the price cut, but expects the loss to be offset by the growth in interest earning revenues. See our complete analysis for Charles Schwab . View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
    V Logo
    Earnings Review: Visa Posts Another Strong Quarter
  • By , 4/21/17
  • tags: V MA DFS AXP
  • Visa (NYSE: V) reported earnings for the second quarter of fiscal year 2017 on Thursday, April 20. The U.S.-based payments company reported a 23.5% increase in revenue net of client incentives compared to the same quarter in fiscal year 2016. However, increased tax expenditure related largely to the settlement of special items related to the reorganization of Visa Europe meant that net income and earnings per share (EPS) declined by almost 75% year over year. Excluding the impact of these one-time special items, net income came in at $ 2.1 billion and EPS at $ 0.86, implying an increase of 27% year over year. Visa is in an extremely strong position operationally. It has huge scale: its credit and debit cards are accepted universally and on all types of payment devices; it has a large number of co-branding partners and its cards in circulation and volume of transactions processed far exceed that of any rival company. Moreover, the company consistently posts an operating margin that most public companies can only dream of. This kind of market position allows Visa a lot of leeway to give up short term profits for the consolidation of market position in the medium to long term. In the second quarter, Visa grew its revenue net incentives by 23.5%. The company managed to achieve these numbers by growing client incentives 30.7% and operating expenses 40% year over year. Most of the increase in operating expenses came from increased spending on marketing and promotions, and a large increase in general and administrative expenses. Going forward, Visa is focusing on the integration of Visa Europe into its overall business. Additionally, it is trying to expand its payment services to newer platforms. This means that it expects its revenue to grow between 16%-18% for the full year, with an operating margin in the mid-60s. In the second quarter, the company’s operating margin dropped from 67% in the previous year to around 62.7%, while its revenue grew by 23.5%. Lower revenue growth means that we expect the company to scale back on client incentives, while the higher operating margin guidance means that Visa is likely to spend less on marketing and promotions, as well as that the increase in general and administrative expenses was likely a one-time occurrence. Have more questions about Visa? See the links below: How Much Did Visa’s Revenue & Gross Profit Grow In The Last Five Years? How Much Can Visa’s Revenue Grow In The Next Five Years? What Is Visa’s Fundamental Value Based On Expected 2016 Results? How Has Visa’s Revenue Composition Changed In The Last Five Years? Notes: Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap | More Trefis Research
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    Lockheed Martin To Continue Its Positive Streak
  • By , 4/21/17
  • tags: LMT
  • Lockheed Martin  (NYSE: LMT) is all set to report earnings for the first quarter of FY 2017 on April 25. In the previous quarter, the company managed to beat both earnings and revenue estimates, by a significant margin. In fact, the company beat earnings estimates in all four quarters last year, posting an average earnings surprise of about 12%. The top line in Q4 increased by about 19% year-over-year, driven primarily by increased F-35 sales and the Sikorsky helicopters business. In general, management appears optimistic about FY 2017; confident that the momentum driving the top line will continue spurring on. 2017 net sales are expected to grow by about 4.6% to 7.1%, compared to its previous forecast of an increase of 7%. For the first quarter, analysts estimate earnings to come in at $2.73 a share, reflecting a ~6% jump year-over-year, with revenues coming in around $11.26 billion, up ~4% year-over-year. Probable Highlights : The F-35 program is expected to boost the top line yet again this quarter. Ever since President Trump’s Twitter rant attacking mounting costs at the program, the company has worked tirelessly to ensure a lower price tag per aircraft. Lockheed managed to reduce the cost of the fighter jet by a significant 6-8% since then. This led to the signing of a mammoth $8.5 billion contract from the Department of Defense (DoD) for the production of 90 F-35 fighters. Additionally, during the first quarter, the defense contractor also received a $1.1 billion contract from the U.S. Navy for providing recurring logistics support and sustainment services for their recently acquired F-35 Lightning II aircraft. Further, the company was also awarded a $750 million contract by the Defense Logistics Agency for providing flight line spare parts. Other important deals that could boost revenues in the first quarter include two modification contracts worth $416.9 million received by United Launch Services, LLC (ULS). In a previous announcement, Lockheed management had projected a 40% hike in its 2017 delivery numbers in comparison to the last year. If this forecast holds true, we could see the top line jump significantly over the year, beginning as early as this quarter. In terms of orders, the company had earlier announced that it anticipates additional GPS III satellite orders during the first half of the year. Additionally, it also hopes to finally conclude the Hellfire missile order that was put on hold last year. The earnings call could help provide some more information on these deals. The positive aside, we can see a dip in the top line at the Missile and Fire Control segment in the first quarter. This is primarily due to unfavorable timing of deliveries. That said, a surge in deliveries can be expected in the second quarter of 2017, bringing the segment back on track.     View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
    USB Logo
    U.S. Bancorp's Q1 Results Were Solid Despite Seasonal And Mortgage-Related Headwinds
  • By , 4/21/17
  • tags: USB BAC C JPM WFC
  • The first quarter of a year usually sees overall loan balances for the industry nudge lower as people use bonuses and tax refunds to reduce their loan burdens. And loan growth in Q1 2017 was also hurt in particular by the Fed’s decision to hike interest rates last December, and again in March. Taking this into account, along with the fact that the U.S. mortgage industry is still witnessing weak activity, U.S. Bancorp’s  (NYSE:USB) results for Q1 2017 look rather good. After all, the bank has focused its growth efforts largely on the mortgage and payment industries since the economic downturn, and despite the headwinds on both fronts, it managed to grow pre-tax income by 4% year-on-year. There were a few factors that worked in U.S. Bancorp’s favor, though. Firstly, the rate hikes have helped increase net interest margins across the industry, and elevated demand for wealth management services also boosted the bank’s wealth management fees. Another factor that contributed was the overall improvement in economic conditions in the U.S., which helped U.S. Bancorp maintain loan provisions at roughly the same level over the last five quarters.
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    Texas Instruments To Retain Its Growth Momentum In Q1'17: Earnings Preview
  • By , 4/21/17
  • tags: TXN
  • Leading analog semiconductor maker,  Texas Instruments  ( NYSE:TXN), will be reporting its Q1 2017 earnings on April 25th. The company closed 2016 on a strong note driven by strong demand in the automotive and industrial segments. Additionally, gross margin touched an all time high of 62.5% in Q4 2016 on the back of an increasing proportion of analog production on 300mm fabrication facilities. We expect the growth momentum to sustain in 2017, as well. TI could witness an increased demand for its products if the infrastructure spending in the U.S. were to increase under the Trump administration, which has been quite vocal about its seriousness to boost infrastructure spending. A fiscal stimulus by the government to boost infrastructure is likely to drive growth in the industrial, automotive, and telecommunications markets. This, in turn, should result in an increased capex in these sectors. Given that TI derives revenues from each of these segments, an uptick in infrastructure spending will be beneficial for the company. Additionally, the possibility of a further increase in margins cannot be ruled out, as TI shifts an increasing proportion of analog production to the 300mm production facilities. See our complete analysis for Texas Instruments Margins Could Improve Further TI’s effective manufacturing strategy has helped it increase its gross margin from 49.7% in 2012 to 61.6% in 2016. At 62.5%, the company’s gross margins were at its highest levels in Q4’16. TI can continue to benefit from an efficient manufacturing strategy for the next couple of years depending on the pace at which it shifts its production to 300mm analog capacity, as manufacturing analog ICs in 300mm fabs (i.e., fabrication facilities) is 40% cheaper for the company as compared to production on 200mm wafers. To increase its 300mm production, TI is likely to ramp up its production from its RFAB and DMOS6 facilities, which have 300mm production equipment and were largely under-utilized until 2016. Thus, there is still room for margins to increase in the next couple of years. See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
    NEM Logo
    Newmont Mining's Q1 2017 Earnings Preview: Higher Costs To Weigh On Profits
  • By , 4/21/17
  • tags: NEM ABX FCX SLW
  • Newmont Mining will release its Q1 2017 earnings result on April 24 and conduct a conference call with analysts the next day. While Newmont’s Q1 2017 earnings cannot be directly compared with the figure for Q1 2016 due to the divestment of the Batu Hijau mine late last year, we expect higher operating costs to negatively impact the company’s Q1 earnings. Operations at Newmont’s Tanami mine, located in Australia, were disrupted by heavy rainfall towards the end of 2016 and in the early part of 2017. In addition, operations at the Carlin mine were disrupted in November of last year, too, due to a failure at the Silverstar pit. Costs incurred in the resumption of normal operations at these mines (which are reflected in the all-in sustaining cost metric forecast for 2017) will negatively impact the company’s Q1 earnings. Newmont is likely to report higher realized prices for its gold mining operations in Q1 2017, as gold prices stood higher in the quarter as compared to the corresponding period of last year. Prices rose sharply in Q3 2016 as investors sought refuge in safe-haven assets such as gold in the wake of the unexpected outcome of the UK’s EU referendum. Though prices fell subsequently as the Federal Reserve raised interest rates in December 2016 and March 2017 amid improving U.S. economic conditions, they still averaged higher in Q1 2017 as compared to the corresponding period of last year. The following tables summarize our expectations from Newmont’s Q1 results. Have more questions about Newmont Mining? See the links below. Newmont Mining’s Q4 2016 Earnings Review: Higher Gold Prices And Shipments Drive Earnings Improvement Why Gold Jewelry Demand Will Recover This Year Notes: See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology  
    AA Logo
    Alcoa's Q1 2017 Earnings Preview: Higher Aluminum Prices And Cost Reduction Initiatives To Boost Results
  • By , 4/21/17
  • tags: AA RIO
  • Alcoa will release its Q1 2017 earnings result and conduct a conference call with analysts on April 24. Since Alcoa spun off its value-added businesses into a separate company towards the end of last year, we cannot compare the company’s Q1 2017 results with those in the corresponding period of last year. Nonetheless, we expect the company to deliver strong results driven by higher aluminum prices and the impact of lower cost operations. Aluminum prices have risen considerably over the past few months as a result of an improved demand outlook for the metal. Aluminum is a metal which is extensively used in industrial applications. A fiscal stimulus package instituted by the central government in China, the world’s largest consumer of aluminum, is expected to boost Chinese demand for the commodity. In addition, the U.S. government’s plans for a $1 trillion overhaul of domestic infrastructure has raised the demand outlook from the U.S. This has translated into an increase in aluminum prices over the past year, as illustrated by the chart shown below. Source: LME In addition to a favorable pricing environment, the closure of high cost smelting and refining capacity instituted by Alcoa management over the past few few years will boost the company’s Q1 results. The company managed to considerably lower production costs for both alumina and aluminum last year. The lowering of these costs should prop up the company’s earnings in Q1. The following tables summarize our expectations from Alcoa’s Q1 results. Have more questions about Alcoa? See the links below. Alcoa’s Q4 2016 Earnings Preview: Higher Aluminum Prices And Lower Cost Operations To Boost Results Alcoa’s Q4 2016 Earnings Review: Higher Commodity Prices And Productivity Improvement Initiatives Boost Results Notes: See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
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    Kimberly Clark Could See A Slight Improvement In Its Top Line: Q1'17 Earnings Preview
  • By , 4/21/17
  • tags: KMB PG UL CL
  • One of the giants in the Baby & Feminine Care market, Kimberly-Clark  (NYSE:KMB) will release its Q1’17 earnings on April 24 th . A Quick Recap Kimberly Clark has seen an extraordinary growth in its bottom line over the past few years, which continued in FY’16. Its non-GAAP EPS has risen from 4.80 in 2011 to 6.03 in 2016. This has primarily been led by its successful FORCE (focused on cost savings everywhere) initiative. In 2016, the company was able to save $450 million under this initiative, beating its guidance of $350-400 million. However, the company has struggled to maintain a similar growth in its top line, which is visible from nearly 4% compounded average decline in its net sales since 2014. The main reasons being tough competition from P&G in North America and local diaper brands in emerging countries, in addition to high currency headwinds. See our complete analysis for Kimberly-Clark here Q1’17 Results: Slight Sales Improvement Possible; Bottom Line to Remain Strong We don’t expect a huge surprise in Kimberly Clark’s top line growth as the competition is likely to stay, and the benefits from ongoing investment in product innovation will take time to reap. However, there can be some positive contribution depending upon the success of its new premium launches in the Huggies lineup, which were introduced in November. Also, the company is not expecting any offsets this year from lower sales of nonwovens to its former healthcare division, Halyard Heath. On the other hand, earnings might continue to show the strength backed up by ongoing cost cutting initiatives and some ease in price wars in China, though anticipated commodity cost inflation can offset these benefits to some extent. Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research    
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    Travelers' Q1 Income Falls On Higher Catastrophe Losses
  • By , 4/21/17
  • tags: TRV AIG HIG
  • The Travelers Companies  (NYSE:TRV), one of the largest property and casualty (P&C) insurers in the U.S., reported disappointing earnings for the first quarter, with operating income declining 12% year-over-year (y-o-y) and its combined ratio (the ratio of claims to premiums earned) increasing by 370 basis points to 96.0%. The decline in operating income was primarily due to higher catastrophe losses, partially offset by higher net investment income. Per the National Weather Service, there were more than 400 tornadoes in the first quarter in the U.S., more than four times the previous three year average. The company’s revenues grew 5% year-over-year (y-o-y) to about $6.5 billion in Q1 2017. In terms of bottom line, the company’s operating income per share declined by 7% to $2.18, missing analyst estimates of $2.35 per share for the quarter. See our full analysis of Travelers here Business And International Insurance The Business and International Insurance division reported revenues of $4.2 billion in the quarter, comparable to the year ago quarter and accounting for 61% of total revenues. This was driven by a 13% increase in net investment income. The division’s operating income declined 2% to $468 million after-tax, primarily driven by a decrease in net favorable prior year reserve development, partially offset by higher net investment income and modestly lower catastrophe losses, compared to a particularly high level of catastrophe losses in the prior year quarter. The segment reported a combined ratio of 96.30%, an increase of 150 basis points on a y-o-y basis. In the Bonds and Specialty Insurance business, operating income declined by 10% to $129 million (after-tax) due to lower net favorable prior year reserve development. This was reflected in the combined ratio for the segment as well, which worsened by 10 percentage points over the prior year quarter to 79.3%. Personal Insurance The company offers homeowner’s multiperil and personal automobile insurance products within the Personal Insurance division. The net premiums written jumped 12% y-o-y to about $2 billion driven by higher new business volume from the company’s Quantum Auto 2.0. Lower underlying underwriting gains and higher catastrophe losses helped worsen the division’s combined ratio by 6.2 percentage points y-o-y to 99.9% in Q1 2017. As a result, the division’s operating income declined 43% to $79 million in the first quarter. View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
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    CSX's Q1 2017 Earnings Review: Healthy Top Line Growth & Productivity Gains Boost Earnings
  • By , 4/21/17
  • tags: CSX UNP NSC
  • CSX released its first quarter earnings result on April 19 and conducted a conference call with analysts the next day. The company reported a considerable increase in its Q1 earnings driven by both top line growth and the impact of the company’s productivity improvement initiatives. Improving economic conditions translated into a broad-based recovery in the company’s shipment volumes, particularly metals and minerals shipments. Improving domestic steel production amid moderating competition from imports drove rail shipments of steel higher, with CSX’s Metals and Equipment sub-category registering a 13% year-over-year growth in shipments. In addition, improving construction activity drove Housing & Construction shipments 9% higher on a year-over-year basis in Q1 2017. Besides shipment growth, core pricing gains and higher fuel surcharge revenue contributed to the growth in CSX’s revenue. CSX realized $123 million worth of margin improvement in Q1 2017 through its productivity improvement initiatives, which facilitated higher asset utilization and the rationalization of labor costs. With the recent appointment of Hunter Harrison as the CEO of CSX, the company has set itself ambitious targets for productivity improvements going forward. CSX plans to implement the ‘Precision Scheduled Railroading’ model, which helped improve Canadian Pacific’s operating ratio from 81% in 2011 to 59% in 2016 under Mr. Harrison’s leadership. The Precision Scheduled Railroading model involves making freight deliveries to a strict schedule and stringent monitoring of adherence to the schedule. Building on the the success of CSX’s productivity improvement initiatives in Q1, the top management estimates that the company can achieve a mid-60s operating ratio for the full year 2017. Moreover, the operational changes instituted by the company could lower capital spending by around $100 million in 2017. Thus, beginning with 2017, CSX plans to aggressively pursue higher profitability under its new management. In order to incorporate the planned operational changes at CSX into our model for the company’s stock, we have suitably modified our margin and capital expenditure estimates. Our new margin forecast represents a 300 basis point increase over our previous estimate by the end of our forecast period, while our new capital expenditure forecast represents a 10% decline over our previous estimate (in absolute terms, not as a % of EBITDA) by the end of the forecast period. These changes to our forecast have translated into our new $47.98 price estimate for the company’s stock . Have more questions about CSX? See the links below. Why Has CSX’s Stock Price Risen Sharply Over The Past Week? What Does The Recent Top Management Shake-Up Mean For CSX? Notes: See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
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    Verizon's Lackluster Earnings May Strengthen The Case For A Big-Ticket Acquisition
  • By , 4/21/17
  • tags: VZ T TMUS S
  • Verizon (NYSE:VZ), the largest U.S. wireless carrier, published its Q1 2017 earnings on Thursday, missing market expectations on both earnings and revenues, as its revenue base continued to shrink (down 4.5% adjusted for acquisitions and divestitures) amid the loss of lucrative postpaid phone subscribers, weaker equipment revenues and flattish wireline sales. Below, we provide some of the key takeaways from the carriers earnings, and take a look at its options for driving growth. We have a  price estimate of $52 for Verizon’s stock, which is slightly ahead of the current market price. We will be updating our price estimate for the company shortly. See our complete analysis for   Verizon  |  AT&T | T-Mobile |  Sprint   Verizon’s Wireless Business Shrinks, Amid Competition And Promotions Verizon’s wireless operating revenue declined by 5.1% in the first quarter, driven primarily by postpaid subscriber losses, as well as declining equipment revenues amid significant promotional activity. The carrier lost a net of 307k retail postpaid connections during the quarter, including 289k phone losses, amid mounting competition from smaller rivals such as T-Mobile and a continued loss of legacy feature phone customers. However, Verizon’s introduction of unlimited data plans in mid-February helped it to stem the overall quarterly losses, as it added a net of 109k retail postpaid phone connections after the plans were launched. Verizon’s average revenue per postpaid account (ARPA) also declined by about 5% to $137,  amid continued migration of the subscriber base to un-subsidized pricing and reduced overage revenues, as customers moved to plans that featured safety mode and roll-over data over the last year. That said, things could improve over the second half of the year, as a large portion of the subscriber base has already migrated to these plans. Verizon’s retail postpaid churn stood at 1.15% for Q1’17, marking a year-over-year increase of 19 basis points, primarily due to increased churn in tablets. However, postpaid phone churn remained low, at under 0.90% for the eighth consecutive quarter, despite increased competition. Verizon’s wireline business saw revenues remain almost flat on a year-over-year basis, as the loss in fixed line voice customers was partially offset by growth in FiOS broadband services. Why Inorganic Growth May Be A Solution  With the U.S. wireless market saturating and competition from smaller carriers mounting, inorganic growth seems like an increasingly likely option for Verizon to drive growth. While key rival AT&T has been aggressively making big-ticket deals (it has agreed to buy Time Warner for about $85 billion, while buying DirecTV in 2015 for about $48 billion), Verizon has been more circumspect, sticking to smaller strategic bets in areas such as digital advertising. However, there is an increasing possibility that the carrier will do a deal in the cable or media arena for multiple reasons. Firstly, the regulatory environment appears to be more conducive to consolidation, with the new administration and the new Chairman of the FCC Ajit Pai believed to be more open to mega-mergers. Regulations surrounding net neutrality are also likely to be reduced, potentially giving carriers more leverage with strategies such as zero-rating to push their own content. Moreover, the gradual introduction of high-speed 5G networks over the next few years also makes a media-focused merger more valuable to carriers, as video is likely to be the primary application for 5G. Verizon’s CEO Lowell McAdam has  indicated that the company would be open to having merger discussions with conglomerates including Comcast, Disney or CBS.  For instance, Comcast’s extensive fiber assets could help Verizon handle the back haul required to service its high speed 5G cells, while its subsidiary NBC Universal would provide a lucrative media business. View Interactive Institutional Research (Powered by Trefis): Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
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    Morgan Stanley's Q1 Results Show That Its Long-Term Growth Plan Is Aligned With U.S. Economic Outlook
  • By , 4/21/17
  • tags: MS GS BAC C JPM
  • The first quarter of 2017 saw the Fed’s rate hike and a rally in equity markets give a boost to securities trading activity while also creating an environment conducive for wealth management operations – the ideal conditions for  Morgan Stanley  (NYSE:MS) to demonstrate the strength of its business model. And the banking giant did not disappoint, as it churned out what was arguably one of its strongest quarterly performances ever. While the bank reinforced its dominance in the global equity trading industry, with revenues in excess of $2 billion once again, the spotlight was on its debt trading desk which saw revenues nearly double year-on-year to $1.7 billion. It should be noted that since 2010, the single biggest change Morgan Stanley implemented was a reduction in its debt trading operations to roughly one-third of its pre-recession size. This is what makes the performance of Morgan Stanley’s debt trading desk exemplary: it made more money than rival Goldman (which generated $1.685 billion) despite having a much smaller base of FICC trading assets (about $115 billion for Morgan Stanley compared to over $180 billion for Goldman Sachs). At the same time, its wealth management division generated more than $4 billion in revenues for the first time ever, while achieving a pre-tax margin figure of 24%. This is largely due to the growing success of traditional loans-and-deposits services being offered through its wealth management division – something that significantly improves cross-selling capabilities and fee-earning potential. Taken together, the strong performance helped Morgan Stanley finally achieve its return on equity (ROE) target of 10% in Q1. This is also a notable achievement, given that Morgan Stanley has an extremely large equity base – something that makes it the best capitalized global banking giant with a common equity tier 1 (CET1) capital ratio of 16.6% (fully-phased in), but weighs heavily on its ROE figure. We maintain our  $45 price estimate for Morgan Stanley’s stock, which is about 5% ahead of the current market price.
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    Procedure Growth Likely To Remain Strong For Intuitive Surgical
  • By , 4/21/17
  • tags: ISRG ABT MDT
  • Intuitive Surgical’s (NYSE:ISRG) stock jumped nearly 6.5% following its Q1 2017 earnings announcement. So, was the investor enthusiasm justified? We think so, considering that the growth in the number of procedures performed using da Vinci surgical systems accelerated to 18% in the first quarter. This is critical because the growth in instruments and accessories revenue closely follows the growth in the number of procedures, and is a recurring source of revenue. According to our estimates, this revenue source accounts for nearly 50% of Intuitive Surgical’s value. We had stated in an earlier note that Q1 2017 results should be seen as an important catalyst which can set expectations for the rest of the year. Needless to say, the results catalyzed investor activity and Intuitive exceeded our growth expectations. This wasn’t an easy task, considering that Intuitive’s performance has been mixed in China and Brazil, which are key growth markets, and more instruments are being placed under operating leases. While we don’t expect such stellar growth in the remaining quarters of the year, we believe that Intuitive has offered an optimistic outlook for da Vinci’s adoption.
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    Barrick's Q1 2017 Earnings Preview: Higher Gold Prices And Lower Cost Operations To Translate Into Earnings Growth
  • By , 4/20/17
  • tags: ABX NEM FCX SLW
  • Barrick Gold will release its Q1 2017 earnings result on April 24 and conduct a conference call with analysts the next day. We expect the company to report an improvement in its earnings driven by higher gold prices and the impact of lower cost operations. Gold prices surged in Q3 2016 amid the uncertainty caused by the unexpected outcome of the UK’s EU referendum and an increase in the safe-haven investment demand for the yellow metal. While prices declined in anticipation of the Fed’s interest rate hikes in December of last year and March of this year, they still averaged higher in Q1 2017 as compared to the corresponding period of last year. Besides higher gold prices, Barrick Gold’s Q1 earnings are likely to benefit from a reduction in the company’s operating costs. A combination of operational improvements and the sale of high-cost non-core assets has led to a reduction in the costs of the company’s gold mining operations, as illustrated by the comparison between the company’s cash costs in Q1 2016 and the guidance for 2017. The following tables summarize our expectations from Barrick’s Q1 2017 results. Have more questions about Barrick Gold? See the links below. Why Did Barrick Sell Off A 25% Stake In The Cerro Casale Mining Project? Gold Prices To Average Lower This Year As Fed Maintains Interest Rate Hike Outlook Notes: See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology  
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    Harley-Davidson Reports De-Growth In Q1, As Was Anticipated
  • By , 4/20/17
  • tags: HOG HMC TM PII
  • Have more questions on Harley-Davidson? See the links below. Harley-Davidson Wraps Up A Slow 2016 With Weaker-Than-Expected Financials Reliance On The Slow Domestic Market Is Weighing Down Harley-Davidson’s Performance What Is Harley-Davidson’s Revenue And Gross Profit Breakdown? By What Percentage Have Harley-Davidson’s Revenues And Gross Profit Grown Over The Last Five Years? How Has Harley-Davidson’s Revenue And Gross Profit Composition Changed Over 2012-2016E? What Will Be The Impact On Harley-Davidson’s Valuation If Motorcycle Sales In The US Decline? What Will Be The Impact On Harley-Davidson’s Valuation If Motorcycle Sales In The US Accelerate? Notes: See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
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    What Can We Expect From Honeywell's Q1 Earnings?
  • By , 4/20/17
  • tags: HON
  • Honeywell International is all set to report earnings for the first quarter of FY 2017 on 21 April. The company performed quite solidly in the last quarter, only falling short in the final quarter on the back of weak performance at Aerospace. In the last quarter, organic growth at the conglomerate was down 1% year over year after the spin-off of Resins and Chemicals in Performance Materials and Technologies and the divestiture of the Aerospace government services business. However, the decline was partially offset by the acquisitions of Elster and Intelligrated. In general, sales over the second half of the year were lighter than expected. This forced Honeywell to lower its overall revenue outlook for 2017 by almost 1.5% at the midpoint of its guidance range. Despite this, for the full year, Honeywell expects its earnings to lie in the range of $6.85-$7.10 per share, significantly up in comparison to $6.46 in 2016. For the first quarter, earnings are projected to be in the range of $1.60-$1.64 per share. Probable Highlights : Earlier in the quarter, the company announced that it has been selected to provide a wide range of process technology for the Largest Petrochemicals Project in China. According to the deal, Honeywell UOP will offer a wide range of technologies to the project in the form of licensing, designing, key equipment, and state-of-the-art catalysts. Additionally, the Process Solutions segment will provide the process controls and automation systems. This deal is likely to have a significant impact on the company’s revenues as early as this quarter. Last month, Honeywell announced that its UOP’s Ecofining process technology will be utilized by the Diamond Green Diesel facility in Norco, LA. This implementation will enable the plant to increase its renewable diesel production capacity from 10,000 barrels per day to 18,000 barrels by the second quarter of 2018. We can expect to hear more on this deal on the call. The positives aside, Honeywell’s top line is going to be hurt by many macro conditions in the coming quarters. Due to its international presence, the company is often impacted adversely by unfavorable foreign currency movements. Any global slowdown, particularly after the whole Brexit fiasco, could hurt the business and hamper its long-term growth potential. Any conflicts or geopolitical disruptions could further affect its international operations in key markets. View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
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    Qualcomm Reports A Strong Q2'17: Is Confident About The Future Of Its Licensing Business
  • By , 4/20/17
  • tags: QCOM
  • Qualcomm (NYSE:QCOM) reported a strong Q2’17 on April 19th, with both non-GAAP revenue and EPS above analyst expectations. The company saw healthy year-on-year growth across all reported segments, driven by solid MSM chipset demand and strong growth in the automotive, networking, and IoT area. Despite the various licensee disputes, Qualcomm witnessed a strong quarter for its licensing business on account of the positive effect of licensing progress in China, strong 3G, 4G demand, and a focus on costs. The company estimates that reported 3G/4G device shipments were approximately 400 million units within ASP of approximately $207 at the midpoints. Global 3G/4G handset ASPs are tracking consistent with expectations of low single-digit percentage declines year-over-year, and Qualcomm continues to see healthy growth in global 3G/4G device shipments. Note – “The GAAP results for Q2’17 reflect a $974 million reduction of revenues associated with the BlackBerry arbitration award including estimated interest in attorney’s fees. This reduced fiscal second quarter GAAP EPS by approximately $0.48 per share.” Qualcomm claims that its semiconductor business continues to benefit from a strong product roadmap for mobile handsets, as the adoption of mobile technologies and mobile computing accelerates around the world, as well as new growing markets including automotive, networking, and IoT. The company is confident that its footprint in these new segments will strengthen with the NXP Semiconductors’ acquisition, which is expected to close this calendar year. While the strong Q2’17 performance and Q3’17 guidance is encouraging, the ongoing dispute with Apple and various other lawsuits is a cause of concern and could potentially impact the company’s performance in subsequent quarters. Qualcomm Is Confident Of Sustaining Its Licensing Model While there are serious doubts about the sustainability of Qualcomm’s licensing model, the company is confident of navigating these challenges in time and has taken several steps to address the Korea Fair Trade Commission (KFTC) and U.S. Fair Trade Commission (FTC) matters in Q2’17. Qualcomm also recently filed an answer and counterclaims in the Apple litigation. (For more info on the lawsuits – Read ) Specifically, regarding the dispute with Apple — Apple withheld payment, to the tune of $1 billion, to their contract manufacturers who, in turn, withheld payments to Qualcomm for royalties that were owed under the contract manufacturers agreements. Effectively, Qualcomm’s Q3’17 guidance assumes a range of possible payments from Apple, and from the Apple suppliers, but does not reflect a scenario that Apple suppliers pay nothing to Qualcomm for March end quarter sales. The disputed agreement with Apple ended in December 2016, so there is really no relevance or impact to what the contract manufacturers would owe the company for sales during the March quarter, according to Qualcomm. Overall, there are a lot of uncertainties around the licensing business, so we’ll have to wait and watch how it all plays out. See our complete analysis for Qualcomm View Interactive Institutional Research (Powered by Trefis): Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap More Trefis Research
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    Textron Q1 Earnings: Slow Quarter Indicative Of What's To Come In 2017
  • By , 4/20/17
  • tags: TXT
  • Textron  (NYSE:TXT) reported earnings for the first quarter of FY 2017 yesterday. As expected, the company missed on revenues, while just meeting the EPS expectations. As in the last few quarters, Aviation and Bell have weighed on the top line yet again. Additionally, the revenues at the Finance segment also dropped by 10% year-on-year. Revenue growth at Systems and Industrial have helped offset the headwinds at other segments, albeit marginally. Aviation revenues fell substantially by about 11% year-over-year to $970 million primarily due to lower military and commercial turboprop volumes. However, the top line decline was partially offset by higher pre-owned volumes. The company managed to deliver only 12 King Air turbos this quarter, in comparison to 26 in the same quarter a year ago. The deliveries of the turboprop were hurt as customers in certain international markets deferred their purchases on the back of economic uncertainty and the relative strength of the dollar. That said, deliveries of the Citation aircraft were up by 1, coming in at 35 aircraft. Management has reaffirmed the segment’s forecast revenue to remain relatively flat at $5 billion. This comes after Textron said that it would spend less on its aviation business in 2017 due to weak business jet demand, earlier in the year. Backlog at the division was at about $1 billion in the first quarter. Demand for corporate jets the world over have been depressed over the last few quarters as companies, oil tycoons, and billionaires cut costs in light of an uncertain global climate. Furthermore, the weak oil prices have hurt demand for commercial helicopters at Bell as well. That said, revenues in the segment were down almost 14% in the quarter mainly due to lower deliveries of the H-1 helicopters to the U.S. government. The company managed to deliver only 3 copters in comparison to the 10 copters it delivered in Q1 2016. However, management has cited “timing issues” as the major cause for the lapse in deliveries, expecting revenues to stabilize in the quarters to come. As expected, Systems and Industrial have performed well in the quarter. Revenues at Systems were up almost 28% year-over-year driven by higher volumes at Weapons and Sensors and Marine and Land Systems. Industrial saw revenues rise by about 4.2% to $992 million driven by higher volumes at Kautex and synergies from acquisitions. In general, 2017 is expected to be quite slow for the conglomerate that is vastly affected by the world economy and oil prices. Given that the global economic climate is unfavorable at the moment, we can continue to see the company suffer the implied consequences. The company reduced its full-year earnings to lie within the range of $2.40-$2.60 per share to accommodate for the costs associated with the latest Arctic Cat acquisition. Revenues are expected to remain relatively flat year-over-year. View Interactive Institutional Research (Powered by Trefis): Global Large Cap  |  U.S. Mid & Small Cap  |  European Large & Mid Cap More Trefis Research
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    Could Acquiring Bonobos Help Wal-Mart Face Growing Competition?
  • By , 4/20/17
  • tags: WMT TGT AMZN
  • Wal-Mart  (NYSE:WMT) is  reportedly planning to buy men’s clothing e-commerce company Bonobos for about $300 million. Although the exact details of the potential deal are not available, it is believed to be in advanced stages of talks. Bonobos is known for providing customers with the right fit, which usually leads to higher customer satisfaction. The company is reported to be profitable even with its free shipping and convenient returns policy, which would definitely be beneficial for Wal-Mart. Wal-Mart has been on an acquisition spree since it acquired Jet.com, which transformed the company’s online operations and brought in a new team of e-commerce executives. The company’s recent acquisitions include online furniture retailer Hayneedle (acquired before the Jet.com merger), women’s online retailer ModCloth, outdoor gear seller MooseJaw and online shoe site ShoeBuy. These acquisitions should provide Wal-Mart with a diverse product portfolio, along with increased digital marketing expertise, which could help the company face growing competition from internet retailers such as  Amazon (NASDAQ:AMZN). Wal-Mart’s Is Growing Its Online Space  Wal-Mart’s e-commerce business includes all web-initiated transactions including those through Walmart.com – such as ship-to-home, ship-to-store, pick up today, and online grocery – as well as transactions through Jet.com. E-commerce is also the backbone of the recent free two-day shipping with a $35 order available at the company’s website. Globally, on a constant currency basis, the company’s e-commerce sales and GMV increased 15.5% and 17.5%, respectively, in the fourth quarter of fiscal 2017 (ending January 2017). In fact, the company covers more than 35 million SKUs to date from a marketplace perspective. The most striking development of 2016 was Wal-Mart’s comeback in the e-commerce space. The company added millions of items to its marketplaces, which helped it resume its online growth in 2016. In addition, the company expanded the number of locations for shoppers to pick up online orders, making the process more convenient. Wal-Mart is expanding its online selection, mainly by inviting more retailers and consumer brands to sell on Walmart.com and its international e-commerce sites. In 2016, Wal-Mart’s e-commerce sales contributed 15% of its total retail sales. E-commerce has been on the rise in the last several years, thanks in large part to internet retailers (Amazon alone accounted for ~42% of the U.S. e-commerce sales in 2016). Accordingly, it is necessary for brick-and-mortal retailers to pick up their digital initiatives to grow further. This Bonobos acquisition, if it happens, is right in line with Wal-Mart’s strategy to expand its online business.  Please refer to  our complete analysis for Wal-Mart    See More at Trefis | View Interactive Institutional Research (Powered by Trefis) Get Trefis Technology
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    Earnings Review: American Express Yet To Recover From Loss Of Costco, JetBlue Partnerships
  • By , 4/20/17
  • tags: AXP V DFS MA
  • American Express (NYSE: AXP) reported  earnings for the first quarter of 2017 on Wednesday, April 19. The U.S.-based payments company reported net income of $1.24 billion, down 13% from the first quarter of the previous fiscal year.  Reported earnings per share (EPS) fell by 8%, but were  lower than the decline in net income as a result of share buybacks. As we had written previously about the company, its focus right now is in offsetting the impact of losing out on deals with long time co-branding partners Costco and JetBlue Airways, lowering operating costs, and offering services on its cards that can expand the number of places where they are accepted. Most of the changes in the company’s reported numbers in this quarter can be tied to one of these three initiatives. Firstly, the company saw its non-interest revenue – revenue generated from transaction fees, card fees, and fees charged for providing other services on its debit and credit cards – decline by 2%, and interest income (net of interest expenses) declined by 5%. Overall revenue declined by 2%. However, this includes revenue generated from Costco-related business. According to the company, excluding that part of the business, year-over-year revenue growth was 7%. This increase was largely a result of higher spending per customer and can be attributed to higher expenditure on member rewards. In the first quarter, spending on rewards for card members increased by 6% compared to last year. Secondly, the company saw its expenses increase by 1%. However, breaking down these expenses one sees that spending on marketing and promotions is down 4% and spending on employee benefits is down by 6%. As already mentioned, spending on reward points increased by 6%. Since the company wants to reduce its annual operating expenses by around $1 billion, it will be interesting to see where it manages to squeeze out these cost reductions, as it appears that cutting expenditures on reward points might result in a negative impact on the top line. Going forward, American Express needs to figure out a way to grow its U.S. consumer services base. Its non-interest revenue has come down from $ 2.03 billion in the first quarter of 2016 to $ 1.86 billion in 2017, and interest income has declined to $1.31 billion from $1.39 billion. This happened despite provision for loan losses growing from $290 million to $ 394 million and operating expenses remaining flat. Currently, it appears that American Express is mostly finding opportunities to grow its commercial and merchant services while it struggles to find a way to create ways of growing its revenue from consumer services. Since this has historically been one of the biggest revenue sources  for the company and was affected the most by the loss of the deals with Costco and Jet Blue airways, the company needs to find a way of growing these numbers again. Have more questions about American Express? See the links below: How Much Did American Express’ Revenue & Net Profit Grow In The Last Five Years? How Much Can American Express’ Revenue Grow In The Next Five Years? What Is American Express’ Fundamental Value Based On Expected 2016 Results? How Has American Express’ Revenue Composition Changed In The Last Five Years? Notes: Global Large Cap |  U.S. Mid & Small Cap |  European Large & Mid Cap | More Trefis Research