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COMPANY OF THE DAY : HPE

HP Enterprise reported an earnings beat for fiscal Q2 despite the negative impact of the company exiting certain Tier-1 customer segments on revenues.

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FORECAST OF THE DAY : NETAPP'S PRODUCT REVENUES

NetApp reported weaker-than-expected results for its fiscal Q4 yesterday. With the company also projecting a decline in revenues and profits for the current fiscal, its shares tanked 8%.

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RECENT ACTIVITY ON TREFIS

NTAP Logo
How Did NetApp Fare In Q4, And What Can We Expect From Fiscal 2020?
  • By , 5/24/19
  • tags: NTAP WDC
  • NetApp (NASDAQ: NTAP) recently reported its Q4 fiscal 2019 results, which were slightly below our estimates. This note details the company’s Q4 performance, and Trefis’ forecasts for the full fiscal 2020. You can view our interactive dashboard analysis ~ How Did NetApp Fare In Q4, And What Can We Expect From Fiscal 2020? In addition, you can see more of our data for Information Technology companies here . How did NetApp’s top line fare in Q4? NetApp’s total revenues declined 3% to $1.59 billion in Q4 fiscal 2019. This can partly be attributed to currency headwinds, and lower maintenance renewals. The company’s revenue has largely trended higher in the recent quarters from $1.47 billion in Q1 fiscal 2019 to $1.59 billion in Q4 fiscal 2019. What impacted the Q4 earnings? Adjusted earnings per share grew 9% from $1.12 in Q4 fiscal 2018 to $1.22 in Q4 fiscal 2019. The growth in earnings can be attributed to a slight improvement in margins, and lower share count, partly offset by lower revenues. How does the revenue growth in the recent quarters compare to its peers? NetApp’s revenues have declined at an average rate of 0.4% over the last four quarters. This has been better performance when compared to its peers. Seagate’s revenue declined at an average rate of 4.3% over the last four quarters. Western Digital’s revenue declined at an average of 7.4% over the last four quarters. The decline in Western Digital has been higher given its exposure to flash-based products, which has seen massive price declines over the past few quarters, while NetApp has benefited from the transition to flash-based storage. What are NetApp’s key sources of revenue? NetApp generates its revenues from storage solutions and related products and services. The company reports its revenue under three segments ~ Product, Software Maintenance, and Services. Product segment includes revenues generated from NetApp’s storage-based hardware and related software sales. The segment accounted for a little under 60% of the company’s total revenues in fiscal 2018. Software Maintenance refers to product upgrades, enhancements, and technical support for customers. The segment contributed 16% to the company’s top line in the previous fiscal. NetApp’s services revenue refers to revenues earned from maintenance of hardware sold. It also includes revenues from professional services, and training. This is a recurring revenue stream, and it can be linked to the company’s installed base. How much can NetApp’s top line grow in fiscal 2020? NetApp’s total revenues will likely grow 5.4% to $6.48 billion in fiscal 2020. This growth should primarily be led by the Products segment, which should benefit from the transition to all-flash arrays. The segment revenues could grow in high single-digits in 2020 to $4.0 billion. However, the global server market could see a slowdown in 2019, given the expected launch of new processors in the near term. This could impact the overall sales growth in the near term. Software maintenance could also see mid-single-digit growth, benefiting from overall growth in the company’s installed base. The company’s sale of add-on software and infrastructure solutions products could further aid the revenue growth. However, the sales growth could be impacted by slowdown in demand from China, and ongoing trade tensions between the U.S. and China. Services segment could see modest decline to $1.43 billion in fiscal 2020, due to lower maintenance renewals. Services revenues can be linked to the company’s installed base, which could be impacted by the overall demand outlook in the near term, primarily on the enterprise side. How much can NetApp’s full fiscal earnings grow? NetApp’s full fiscal 2020 earnings will likely be $5.05 per share on an adjusted basis, reflecting 12% growth over the prior fiscal. Earnings growth can be attributed to higher revenues and lower share count. The company has guided for a slight growth in margins. Average consensus earnings for fiscal 2020 ~ $5.01. What is the price estimate of NetApp based on the above? Our price estimate of $81 for NetApp is based on a 16x price to earnings multiple, and earnings of $5.05 per share in fiscal 2020. The multiple for NetApp’s valuation is higher than that of Western Digital and Seagate, given the impact of NAND pricing has been favorable for NetApp.     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.
    INTC Logo
    What Is Intel's Fair Price Estimate Based On Expected 2019 Earnings?
  • By , 5/24/19
  • tags: INTC AMD NVDA
  • Intel’s  (NASDAQ:INTC) stock price has seen close to A 25% decline over the last month or so. This can be attributed to revised lower guidance for the full year post Q1 results, and the company’s exit from 5G smartphone modems. However, the stock price seems to have some room for further growth, in our view. This note details Trefis’ forecasts for Intel for the fiscal 2019. You can view our interactive dashboard analysis on ~ What’s Driving Our $51 Price Estimate For Intel? ~ for more details on the expected performance of the company. In addition, you can see more of our data for information technology companies here . What Are The Key Sources of Intel’s Revenue, And How Have They Trended In The Recent Quarters? Intel generates its revenues primarily from four segments: Client Computing, Data Center, Internet of Things, and All Others. Client Computing Group includes revenue from processors and platform products designed for use in notebooks, desktops, tablets, phones, and other mobile communication products. The segment revenues of $37 billion in 2018 accounted for 52% of the company’s total sales. Data Center Group includes sales of processors and chipsets designed for the enterprise, cloud, communications infrastructure, and technical computing segments. The segment generated $23 billion in sales in 2018, accounting for 33% of the company’s total revenues. Internet of Things includes revenue that Intel earns from the sale of platforms designed for embedded applications for medical, automotive, industrial, retail, and other market segments; as well as software-optimized products for the embedded and mobile market segments. It also includes small low-power chips that are used in wearable devices and a range of consumer and industrial products. The segment revenues of $3.4 billion contributed 5% to the company’s top line. All Other Revenue includes revenue from software products for endpoint security, network and content security, risk and compliance, and software products and services that promote Intel architecture as the platform of choice for software development. The division also includes results of operations from Intel’s reported segments including Non-Volatile Memory Solutions Group, Programmable Solutions, and All Others. The segment revenues of $7.4 billion in 2018 accounted for 10% of the company’s total revenues. Total Revenues for Intel have largely trended higher over recent quarters. Revenues grew from $17.1 billion in Q4 2017 to $18.7 billion in Q4 2018. However, they declined to $16.1 billion in Q1 2019, due to lower enterprise sales. How Does The Revenue Growth of Intel Compare To Its Peers? Intel’s revenues have declined at an average of 0.8% from $17.05 billion in Q4 2017 to $16.06 billion in Q1 2019. Intel’s decline rate was lower than that of Nvidia, but slightly more than that for AMD. AMD’s revenues have declined at an average of 0.2% from $1.34 billion in Q4 2017 to $1.27 billion in Q1 2019. Nvidia’s revenue declined at an average of 4.1% from $2.91 billion in Q4 fiscal 2018 to $2.22 billion in Q1 fiscal 2020. How Much Can Intel’s Top Line Grow In 2019? Intel’s revenues will likely decline 2.1% to $69.4 billion in 2019. Client Computing Group could see modest decline in sales due to a shortage of chips, as the company focuses on big core over small core chips. Even in Q1 the company saw high single-digit decline in volume for notebooks and desktops. However, that was offset by higher average selling prices. This trend could continue in the near term. Data Center Group could see mid-single-digit decline to $21.6 billion in 2019, as the overall server market could slow this year with expected launch of new processors in the near term. Note that the company is seeing continued growth in cloud business, which is being more than offset by weakness in enterprise sales. Internet of Things Group and All Others could see low single-digit growth, led by better pricing with favorable core mix. Weakness in demand from China and trade tensions between the U.S. and China could impact the overall sales growth for Intel. Note that China and Taiwan combined account for over 40% of the company’s total sales. How Much Can Intel’s Earnings Grow Based On The Expected Revenue Trends Above? Intel’s full year 2019 earnings will likely be $4.40 per share, reflecting a 4% decline over 2018. Consensus earnings estimate ~ 4.29 Earnings decline can be attributed to lower revenues, and expected decline in margins, due to a ramp up in 10-nm chips, partly offset by a lower share count. What Is Intel’s Share Price Estimate Based On the Above? Our price estimate of $51 for Intel is based on a 12x price to earnings multiple, and earnings of $4.40 per share in 2019. The multiple for Intel valuation is in line with the consensus for the overall sector. 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.
    URBN Logo
    Digital Channel Drives Urban Outfitters' Growth In Q1
  • By , 5/24/19
  • tags: URBN AEO TPR
  • Urban Outfitters (NASDAQ: URBN) recently released its Q1 earnings . The clothing and accessories retailer handily beat consensus earnings and revenues estimate. Net sales for the company grew by 1% (y-o-y) to $864 million – its highest-ever level for the first quarter of a year, largely driven by Retail segment comp growth of 1%, Wholesale segment growth of 2% and non-comp sales of $2 million. The company reported an increase in Retail segment comps for the seventh consecutive quarter thanks to double-digit growth in digital channel sales. However, adjusted earnings per share declined 20% y-o-y to $0.31 primarily due to higher markdowns and an increase in delivery and logistics expenses. Per Trefis estimates, Urban Outfitters’ shares have a fair value of $34  which is about 40% ahead of the current market price. We have summarized our key expectations from the earnings announcement in our interactive dashboard –  How Did Urban Outfitters’ Fare Fiscal In Q1 And What’s The Outlook For Full-Year?  In addition, here is more Trefis Textiles, Apparel and Luxury Good Industry Data . A Quick Look at Urban Outfitters’ Revenue Sources URBN reported $4 billion in Total Revenues in Fiscal 2018. This included 2 revenue streams: Retail Segment : $3.6 billion in FY 2018 (91% of Total Revenues). Retail segment contains the Anthropologie, BHLDN, Free People, Terrain and Urban Outfitters brands, as well as the company’s Food and Beverage division. Wholesale Segment : $357 million in FY 2018 (9% of Total Revenues). The wholesale segment sells Free People, Anthropologie and Urban Outfitters branded products through department and specialty stores worldwide. Strong Sales Trend Continues In Q1 URBN’s retail segment has been a consistent performer for the company and this trend continued in Q1 with Retail segment comps increasing by 1% driven by a double-digit increase in digital channel sales. This growth can also be attributed to strong comp sales growth for the Free People, Urban Outfitters, and Anthropologie brands. Moreover, the management stated that there is strong demand for their products and they intend to introduce new compelling products to boost demand. Going forward, we believe that a healthy economy, improved consumer confidence and low unemployment will continue to drive demand for the company’s products. Digital Sales Channel Continue To Drive Urban Outfitters’ Top Line The digital channel remains a key growth driver for Urban Outfitters – posting double-digit sales growth across brands in Q1. Notably, the digital channel was responsible for the increase in retail sales over Q1, as store comps were negative with each brand reporting a reduction in store traffic over the period. With overall consumer sentiment remaining favorable and wage rates increasing, we expect the company to make significant marketing investments to support digital channel sales growth going forward. This should help the digital channel drive strong revenue growth for Urban Outfitters in the future. Macro Headwinds Adversely Impact Performance In Europe Urban Outfitters’ Retail Segment comps were negative in Europe for the second consecutive quarter with revenues declining 5% y-o-y to $71 million. Lower-than-expected European sales were mainly due to a weak pound, political and economic uncertainty and weaker apparel assortments compared to the previous year. The company expects the demand in European countries to remain low until the political issues are resolved, especially until the uncertainty around Brexit is settled. However, over the next few years, the company plans to ramp up its European operations, which should provide stable long-term growth opportunities. Full-Year Outlook For fiscal 2019, we expect revenues to increase by about 2% to $4 billion while net income margin is expected to contract from 7.5% in FY2018 to about 6.7% in FY2019 due to higher markdown rates as well as an overall increase in delivery, logistics and store occupancy expenses from higher penetration of digital sales and negative store comps. Based on our forecast, Urban Outfitters’ adjusted EPS for fiscal 2019 is likely to be around $2.49. Using this figure with our estimated P/E ratio of 13.7x, this works out to a price estimate of $34 for Urban Outfitter’ shares, which is roughly 40% ahead of the current market price. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
    LOW Logo
    Lowe's Revenue Beats Consensus, Growth On Track For FY 2019?
  • By , 5/23/19
  • tags: LOW HD
  • Lowe’s (NYSE: LOW) announced its Q1 2019 (ended April 2019) results on May 22, 2019, followed by a conference call with analysts. The company beat consensus for revenue which was recorded at $17.7 billion, up by 2.2% y-o-y. The increase was driven largely by growth in comparable sales by 3.5% (4.2% in the US).  The earnings missed consensus and was recorded at $1.31, higher than the $1.19 per share in the same period of 2018.     Lowe’s reported $71.3 billion in Total Revenues in Fiscal year 2018.  The revenue comes from the sale of home improvement supplies like tools, construction products, and related services.   We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Lowe’s Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019?  In addition, here is more  Consumer Discretionary data .   Key Factors Affecting Earnings: Revenue to grow: The company has seen revenue fluctuating over the quarters. In-spite of the fluctuations the company has seen a revenue growth in all quarters of FY 2018 vis-à-vis the same quarters of FY 2017. In Q1 2019 (ended April 2019) revenue was recorded at $17.7 billion, up 2.2% y-o-y The company’s revenue growth is mainly contributed by the revenue per square foot metric. It has increased from $305 in 2016 to $340 in 2018. Trefis estimates the metric will reach $349 by 2019. The number of stores and square footage per store metrics have remained nearly flat for a few years now and are expected to continue in the same manner in 2019. Trend in Expenses: Cost of Sales has been steady at around 67% of Total Revenue over the quarters except Q4 2017 (ended January 2018) and Q4 2018 (ended January 2019) where it crossed 70%. In Q1 2019 (ended April 2019) the metric stood at 68.5%. Selling, General & Administrative expenses contributed more than 25% of Total Expenses in FY 2018 but came down to about 23.1% in Q1 2019 (ended April 2019). Lowe’s saw a fall in EBITDA margin as SG&A expenses increased by $3 billion in FY 2018. Further, Indirect expenses decreased in FY 2018 as income tax provisions came down by nearly $1 billion. In FY 2019 we expect EBITDA margin to recover and indirect expenses to remain flat. Full Year Outlook: For the full year, we expect gross revenue to increase by 2.1% to $72.8 billion in FY 2019. EBITDA margin is expected to increase to around 9.5%.   Trefis has a price estimate of $113 per share for Lowe’s stock. The value is based on the expectations of rise in comparable sales across its stores and improvement in EBITDA margin.     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.
    AMD Logo
    What Is AMD's Fair Price Estimate Based On Expected 2019 Earnings?
  • By , 5/23/19
  • tags: AMD INTC NVDA
  • AMD’s  (NYSE:AMD) stock has seen a stellar run with over a 45% surge in price year to date. While there are several factors that have led to such optimism in the company, the current price is higher than our estimate. AMD’s near term growth can largely be attributed to its Ryzen and EPYC products, which are gaining market share from Intel. This note details Trefis’ forecasts for AMD for 2019. You can view our interactive dashboard analysis on ~ What’s Driving Our $23 Price Estimate For AMD? ~ for more details on the expected performance of the company. In addition, you can see more of our data for information technology companies here . What Are The Key Sources of AMD’s Revenue, And How Have They Trended In The Recent Quarters? AMD manufactures and markets microprocessors used in servers, desktops, and notebooks. It reports its revenues under two segments ~ Computing & Graphics, and Enterprise, Embedded & Semi-Custom. Computing & Graphics includes revenue from sales of microprocessors and graphics processors for desktops and notebooks. The segment revenues of $4.13 billion in 2018 accounted for 64% of the company’s total revenues. Enterprise, Embedded & Semi-Custom includes revenue from the sale of embedded processors, semi-custom system-on-chip (SoC) products, development services and technology for game consoles, and server microprocessors. The segment revenues of $2.35 billion in 2018 contributed 36% to the company’s top line. Total Revenues for AMD have largely trended lower over recent quarters, declining from $1.65 billion in Q1 2018 to $1.27 billion in Q1 2019. This can primarily be attributed to a decline in blockchain related demand. How Does The Revenue Growth of AMD Compare To Its Peers? AMD’s revenues have declined at an average of 0.2% from $1.34 billion in Q4 2017 to $1.27 billion in Q1 2019. AMD’s decline rate was lower than that of Intel and Nvidia. Nvidia’s average revenue declined 4.1% from $2.91 billion in Q4 fiscal 2018 to $2.22 billion in Q1 fiscal 2020. Intel’s revenues have declined at an average of 0.8% from $17.05 billion in Q4 2017 to $16.06 billion in Q1 2019. How Much Can AMD’s Top Line Grow In 2019? AMD’s revenues will likely grow 6.6% to $6.90 billion in 2019. Computing & Graphics segment will likely see 8% growth to $4.45 billion in 2019, led by Ryzen products, which continue to see strong demand. Ryzen is the line for the company’s CPUs. AMD is gaining market share in desktops and notebooks, led by its Ryzen products. Higher demand for Ryzen has given the company room to increase its pricing, which is further aiding the margins as well. Enterprise, Embed & Custom segment could see 4% revenue growth to $2.44 billion in 2019, led by continued growth in EPYC shipments. EPYC refers to x86 microprocessors based on Zen microarchitecture targeted for server markets. The company’s datacenter processors’ market share could increase from 4% to 10% by next year. The overall X86 market is worth $18 billion, and a 10% share will translate into $1.8 billion in revenues (28% of the company’s total 2018 revenues). How Much Can AMD’s Earnings Grow Based On The Expected Revenue Trends Above? AMD’s full year 2019 earnings will likely be $0.65 per share, reflecting 48% growth over 2018. Consensus earnings estimate ~ 0.65 Earnings growth can be attributed to higher revenues, and expected improvement in margins, partly driven by higher pricing for Ryzen and EPYC products. What Is AMD’s Fair Value Share Price Estimate Based On the Above? Our price estimate of $23 for AMD is based on a 36x price to earnings multiple, and earnings of $0.65 per share in 2019. The multiple for AMD is higher than that of Intel and Nvidia, given it could garner strong growth in the medium term gaining share in the server as well as notebooks market.     What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams All Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
    AVP Logo
    A Closer Look At Avon's Global Operations, And What's In It For Natura
  • By , 5/23/19
  • tags: AVP LRLCY EL REV
  • Avon (NYSE: AVP) issued a press release yesterday announcing its intention to merge with the Brazilian corporation, Natura Cosmetics S.A. Natura has made an all-stock offer of 0.30 Natura Holding share ( Natura and Avon combined entity ) for each Avon common stock. Avon shares have rallied more than 25% since news of a potential merger leaked early Wednesday morning, while Natura has also seen a sizable increase in its share price. You can view our interactive dashboard on A Closer Look At Avon’s Global Operations, And What’s In It For Natura? to observe Avon’s revenue trends across geographies and see more of our Consumer Discretionary Sector data here. How has Avon fared in the last decade? Avon Products, Inc was founded by David H. McConnel in 1886 as a direct selling company specializing in personal beauty products. It is the second largest multi-level marketing company in the world (after Amway) with nearly 5 million sales representatives globally according to its most recent regulatory filings. In 2015, Avon sold its North American segment to affiliates of Cerberus Capital Management due to sustained losses from its U.S., Canada and Puerto Rico operations. Since then, the company has been operating in four regions globally: Europe, Middle East & Africa (EMEA); South Latin America; North Latin America; and Asia Pacific. Avon’s revenues have been declining continuously over the last decade, from $10 billion in 2008 to $5.5 billion in 2018. The revenue declines can be attributed to improved availability of affordable beauty products, the rise of e-commerce, and an outdated marketing model. How are Avon’s revenues distributed geographically? Latin America contributes over 50% of Avon’s total revenues and its share has remained considerably stable in the last four years. Revenues for the region declined by a sharp 11% to $1.9 billion in 2018 (excluding the favorable impact of Brazil’s IPI tax release). The contribution by the two sub-segments, South Latin America and North Latin America were 39% and 15% in 2018, respectively. The South Latin America sub-segment largely includes operations in Brazil and Argentina, which have been witnessing challenging macro-economic conditions and lower consumer demand. The North Latin America segment comprises of Avon’s Mexico operations, where revenues have declined due to quality issues in the Fashion & Home category as well as due to the impact of the Puebla earthquake. Overall the region has witnessed a mid single-digit reduction in active sales personnel over recent years, which has resulted in a similar revenue decline. Notably, the operating margin for this region has been the lowest at 8-10% since the North America segment was spun-off in 2015. Europe, Middle East & Africa is the second largest segment and contributes 38% of the total revenues. The segment’s revenues declined by a 2% to $2.09 billion in 2018, resulting from lower consumption in Russia, field issues in the U.K., and the economic downturn in South Africa. The active sales personnel declined a low-single-digit rate and resulted in a high-single-digit reduction of units sold over the last two years. The operating margin for the region has been in a 14-15% range since 2015 and is the highest amongst all geographies. Asia Pacific segment contributes the least to the top line – being responsible for less than 10% of total revenues. Notably, revenues for this division observed a sharp 20%-decline in 2016 as a result of a reduction in active sales representatives across the region. This resulted in Avon exiting Thailand in 2017, and New Zealand and Australia in 2018. The segment’s revenues came in at $470 million in 2018 with an operating margin of 9%. Profits have been falling for the region primarily due to supply chain-related costs and increased advertising expenses. Interestingly, comparing the performance of Avon’s geographical segments with industry leader L’Oreal, reveals a contradiction as L’Oreal’s Latin America segment observed a sharp decline of 8.6% in 2018 while the Asia Pacific region observed a strong growth of 20%. With Avon’s presence being focused in declining markets, and with its fortunes dwindling in high-growth markets, our first impression is that the acquisition will very likely be a burden on Natura’s balance sheet. Stay tuned for our detailed valuation dashboard of Avon and Natura as a combined entity in the coming days. 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
    TSLA Logo
    Explaining The Big Tesla Sell Off
  • By , 5/22/19
  • tags: TSLA GM F
  • Tesla  (NASDAQ: TSLA) stock has declined by close to 30% since early April, currently trading at levels of around $200 per share. While there are a lot of moving parts to the Tesla story at the moment, below we try to spell out some of the key reasons for the decline. View our interactive dashboard analysis on   Tesla’s Cash Flow, and Outlook for 2019 Cash Levels  You can modify our key forecasts and arrive at your own estimates for the company’s cash flows for the next two quarters. In addition, you can see more  Trefis Consumer Discretionary company data here. Demand Growth For Tesla Vehicles Appears To Be Cooling Off Over Q1, Tesla deliveries fell 30% QoQ to 63k units, with sales of the premium Model S & X falling 56% to ~12k units.  (related:  Why are Model X and S Deliveries Declining? ) Model 3 shipments also declined by about 20% QoQ. While Tesla attributed the decline to logistical issues relating to the scale-up of the Model 3 in the E.U. and China, it’s possible that U.S. demand growth is cooling as well, following the reduction of the Federal tax credit. Although the company indicated that it would deliver between 360k to 400k vehicles for the full year, this could be a long shot in our view. Tesla’s Tough Financial Position Tesla’s burned through over $900 million in cash (free cash flow) in Q1 2019. It also paid off a convertible note that was due, causing its cash and cash equivalents to drop to about $2.2 billion. This forced the company to raise about $2.7 billion by selling new stock and issuing debt earlier this month, contradicting its stance over 2018 that it didn’t need any further capital infusions. While we expect the cash burn rate to moderate going forward, driven by stronger shipments and a more aggressive cost-cutting program, it’s likely that cash flows will remain negative in the near-term. A Re-Escalation of the U.S.-China Trade War Raises Concerns The trade war between the U.S. and China has re-escalated, after the U.S. raised tariffs on Chinese goods, prompting China to retaliate, raising taxes on many American imports. While automobiles have been left out from the list of goods that China will impose its tariffs on, it’s unlikely that the respite will last long. This has potentially spooked investors as China is Tesla’s second largest market (close to 10% of 2018 sales). While Tesla is in the process of setting up a vehicle and battery factory in China, its demand in China could still potentially be hit by anti-American sentiment if the trade war continues.     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.  
    TTM Logo
    Revenue Falls As Tata Motors Ends FY 2019
  • By , 5/22/19
  • tags: TTM TM HOG F DDAIF GM LEA VWAGY HMC
  • Tata Motors (NYSE: TTM), the Indian Auto giant, announced its Q4 2019 (ended March 2019) and FY 2019 results on May 20, 2019, followed by a conference call with analysts. For the year, the company missed consensus for revenue and reported $43.7 billion, down by 1.3% y-o-y. The decrease was driven largely by a fall in sales volume of Jaguar Land Rover. The earnings missed consensus and were recorded at $-0.24, lower than the $1.50 per share in FY 2018.   Tata Motors reported $43.7 billion in Total Revenues in Fiscal year 2019. This included two revenue streams: Jaguar Land Rover (JLR): $33.6 billion in FY 2018 (77.1% of Total Revenues). This includes revenue from passenger vehicles sold and financial services revenue from the JLR division of the company. Tata Motors and other brands: $10 billion in FY 2018 (22.9% of Total Revenues). This includes revenue from passenger vehicles sold and financial services revenue from the domestic Tata and other brands of the company.   We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Tata Motors Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019?  In addition, here is more  Consumer Discretionary data .   Key Factors Affecting Earnings: Revenue expected in all segments: Tata Motors has seen revenue fluctuate over the past quarters due to the global slowdown in the Auto industry and Brexit. Q4 2019 (ended March 2019) revenue fell slightly y-o-y and was recorded at $12.6 billion. JLR revenue has been growing at a steady pace till now but is expected to be affected due to the uncertainty of Brexit. For FY 2020 (ended March 2019) we expect revenue to be around $34.3 billion. The brand Tata has done well in the past few years and the domestic market is expected to continue expansion. For FY 2020 (ended March 2019) we expect revenue to be around $12.8 billion. Trend in Expenses: Total Expenses have moved mostly in line with Revenue except in Q3 2019 (ended December 2018) where the company recorded an impairment loss of $4 billion in Jaguar. Cost of Sales has remained steady at around 63-65% of Total Revenue the last few quarters and was at 66.7% in Q4 2019 (ended March 2019). Full Year Outlook: For the full year, we expect gross revenue to increase by 8% to $47.1 billion in FY 2020. EBITDA margin is expected to fall to around 8.3%.   Trefis has a price estimate of $18 per share for Tata Motors’ stock. The value was determined after considering the uncertainty around Brexit and the expansion of its domestic brand in India and abroad.     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.
    HD Logo
    Home Depot Beats Consensus, Will Growth Continue For FY 2019?
  • By , 5/22/19
  • tags: HD LOW
  • Home Depot (NYSE: HD) announced its Q1 2019 (ended April 2019) results on May 21, 2019, followed by a conference call with analysts. The company just beat consensus for revenue which was recorded at $26.4 billion, up by 5.7% y-o-y. The increase was driven largely by growth in comparable sales by 2.5% (3% in the US).  The earnings also beat consensus and was recorded at $2.27, higher than the $2.08 per share in the same period of 2018.   Home Depot reported $108.2 billion in Total Revenues in Fiscal year 2018.  The revenue comes from the sale of home improvement supplies like tools, construction products, and related services.   We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Home Depot’s Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019? In addition, here is more  Consumer Discretionary data .   Key Factors Affecting Earnings: Revenue to grow: The company has seen revenue fluctuating over the quarters. In-spite of the fluctuations, the company has seen a revenue growth in all quarters of FY 2018 vis-à-vis the same quarters of FY 2017. In Q1 2019 (ended April 2019) revenue was recorded at $26.4 billion, up 5.7% y-o-y The company’s revenue growth is mainly contributed by the revenue per square foot metric. It has increased from $399 in 2016 to $456.60 in 2018. Trefis estimates the metric will reach $470.40 by 2019. The number of stores and square footage per store metrics have remained nearly flat for a few years now and are expected to continue in the same manner in 2019. Trend in Expenses: Total Expenses have moved in tandem with Total Revenue over the quarters. Cost of Sales has been steady at around 66% of Total Revenue over the quarters. In Q1 2019 (ended April 2019) the metric stood at 65.8% Indirect expenses decreased in FY 2018 and we expect the same to continue in FY 2019 as they are estimated at $8.7 billion. Full Year Outlook: For the full year, we expect gross revenue to increase by 3.2% to $111.6 billion in FY 2019. EBITDA margin is expected to increase slightly to around 18.7%.   Trefis has a price estimate of $207 per share for Home Depot’s stock. The value is based on the expectations of improvement in comparable sales and EBITDA margin.     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.  
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    What To Expect From Best Buy's Fiscal Q1?
  • By , 5/22/19
  • tags: BBY AMZN WMT
  • Best Buy (NYSE: BBY) is scheduled to announce its fiscal first quarter results on Thursday, May 23. In fiscal 2019, Best Buy’s comparable sales were up 4.8% and its online sales grew 10.5% on a comparable basis, primarily due to higher conversion and increased traffic. The company’s revenue grew 2% year-over-year (y-o-y) to around $42.9 billion, largely driven by the growth in domestic sales, partially offset by the loss of revenue from 257 Best Buy Mobile and 12 large format store closures in the past year. The company benefited from stronger consumer demand across the gaming and wearables categories, partially offset by lower than expected sales in mobile phones. Best Buy also reported non-GAAP EPS of $5.32 for the year, up 20% y-o-y, primarily driven by a lower effective tax rate and higher operating income. Our $75 price estimate for Best Buy’s stock is almost 10% ahead of the current market price. We have created an interactive dashboard on  How Is Best Buy Likely To Have Fared In Q1,   And What Can We Expect In Fiscal 2020? which outlines our forecasts for the company. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation and see more Trefis Consumer Discretionary company data here . Q1 Expectations Best Buy expects its top line to range between $9.05 billion and $9.15 billion in the fiscal first quarter. In addition, the retailer also expects non-GAAP EPS of $0.83 to $0.88. Further, Best Buy expects its enterprise comparable sales growth of flat to 1%. Best Buy is executing on its strategy to cut costs, optimize square footage, grow online sales, and stabilize its revenues. As a result, the company’s fourth quarter marked its fifth consecutive comps and EPS beat. We expect a similar beat on Q1 revenues as well. Fiscal 2020 Outlook For full-year fiscal 2020, Best Buy expects revenues of $42.9 billion to $43.9 billion. The retailer is also calling for same-store sales to climb as much as 0.5% to 2.5%. Best Buy’s gross profit margin is expected to remain flat relative to fiscal 2019, as continued investments in supply chain and higher transportation costs could be offset by the higher marginal rate of GreatCall. Further, the retailer’s SG&A expenses are expected to grow in low single-digits, driven by continued investments in technology and wages. The retailer’s investments in specialty labor, supply chain and increased depreciation related to strategic capital investments, as well as ongoing pressures in the business, will be partially offset by a combination of returns from new initiatives and ongoing cost reductions and efficiencies. 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.
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    How Is Medtronic Likely To Have Fared In Q4 Fiscal 2019?
  • By , 5/22/19
  • tags: MDT ABT ISRG
  • Medtronic  (NYSE:MDT) is expected to publish its Q4 fiscal 2019 results on May 23. This note details Trefis’ forecasts for Medtronic, as well as some of the key trends we will be watching when the company reports earnings. You can view our interactive dashboard analysis ~ How Is Medtronic Likely To Have Fared In Q4 Fiscal 2019? for more details on the key drivers of the company’s expected performance in Q4. In addition, you can see more of our data for Health Care companies. What are Medtronic’s key sources of revenue? Medtronic reports its revenues under four segments ~ Cardiac & Vascular Group, Minimally Invasive Therapies Group, Restorative Therapies Group, and Diabetes. Cardiac & Vascular Group includes cardiac rhythm management devices 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 of $11.53 billion in fiscal 2018 accounted for 38% of the company’s total revenues. Minimally Invasive Therapies Group includes devices and therapies for neurological problems and imaging systems among other products. The segment revenues of $8.54 billion in fiscal 2018 contributed 28% to the company’s top line. Restorative Therapies Group primarily includes devices and implants for conditions relating to the spine, musculoskeletal system, brain, and nerves. The segment generated revenues of $8.18 billion in fiscal 2018, accounting for 27% of the company’s total revenues. Diabetes includes sales of diabetes management products, which primarily consist of insulin pumps, and continuous glucose monitoring systems. The segment revenues of $2.42 billion in fiscal 2018 contributed 8% to the company’s total revenues. How have Medtronic’s revenues changed over recent quarters? Total Revenues for Medtronic have largely trended higher over the last few quarters. They grew from $7.37 billion in Q3 fiscal 2018 to $7.55 billion in Q3 fiscal 2019. The company saw higher demand for its Minimally Invasive, and Restorative Therapies Group products in the recent quarters. Looking forward, Medtronic’s revenues will likely be $8.25 billion in Q4 fiscal 2019, representing 1.3% growth over the prior year quarter, and 9.3% higher than what it reported in the previous quarter. This can be attributed to an expected steady growth in most of the company’s segments. How does Medtronic’s growth compare to its peers? Medtronic’s revenues have grown at an average of 0.8% from $7.36 billion in Q3 fiscal 2018 to $7.55 billion in Q3 fiscal 2019. This has been slower than the growth seen by its peers. Boston Scientific’s average revenue grew at 1.6% from $2.41 billion in the quarter ending December 2017 to $2.56 billion in the quarter ending Dec 2018. Intuitive Surgical’s revenues have grown at an average of 4.3% from $892 million in the quarter ending December  2017 to $1.05 billion in the quarter ending December 2018. Which are the key revenue drivers to watch out for in Medtronic’s Q4 results? Cardiac & Vascular Group revenues could decline in low single-digits to $3.07 billion. While the segment should see strong growth in its drug eluting stents, a discontinued product line will likely impact the reported sales. The company is seeing strong growth for its Evolut PRO Valve, which should aid the overall segment sales. Minimally Invasive Therapies Group could see revenues growth of 3.5% to $2.12 billion in Q4, likely led by continued demand for its patient monitoring products, along with sealing instruments, and advanced stapling products. The segment has seen strong demand for its advanced stapling products, endoscopic ultrasound products, and Bravo reflux testing systems in the recent quarters. This trend should continue in the near term, and aid the overall segment revenue growth. Restorative Therapies Group could see revenue growth of 4% to $2.21 billion in Q4, led by higher demand for its brain and pain therapies, which have seen double-digit growth for the nine month period ending January, 2019. 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. Diabetes could grow in low single-digits to $651 million in Q4 fiscal 2019, benefiting from the expansion of 670G, which is the world’s first hybrid closed loop system that optimizes glycemic control for patients with type 1 diabetes, in international markets. What will be the impact of the above on Medtronic’s EPS? Medtronic’s adjusted earnings per share will likely be $1.46 per share in Q4 fiscal 2019, reflecting 2.6% growth to the prior year quarter. Average consensus earnings estimate ~ $1.47 per share. This can largely be attributed to higher revenues, as well as slight improvement in margins.     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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    BofA Is Well Positioned To Report Top-Line Growth In 2019 Even If There Are No More Rate Hikes
  • By , 5/22/19
  • tags: BAC JPM C GS MS
  • Per Trefis estimates, Bank of America (NYSE: BAC) stock is worth $35, which is 20% higher than the current market price. Our price estimate is based on a P/E multiple of 11.8x and an EPS estimate of $2.97 for FY 2019. We have summarized our full-year expectations for Bank of America in our interactive dashboard How Did Bank of America Fare In Q1 2019, And What Can We Expect In 2019? You can modify any of our key drivers to gauge the impact of changes on its valuation. In addition, you will find more Trefis data for Financial Services companies here . A Quick Look At Bank of America’s Revenue Sources Bank of America reported $91.2 billion in Total Revenues in FY 2018. This included 5 revenue streams: Consumer Banking : $37.5 billion in FY 2018 (41% of Total Revenues) – It consists of Deposits and Consumer Lending sub-segments and offers credit, banking and investment products and services to consumers and small businesses. Wealth and Investment Management : $19.3 billion in FY 2018 (21% of Total Revenues) – It provides a variety of customized banking, investment and brokerage services to meet the needs of individuals and institutions. This consists of two primary businesses – Merrill Lynch Global Wealth Management (MLGWM) and Bank of America Private Bank. Advisory & Underwriting Services : $5.5 billion in FY 2018 (6% of Total Revenues) – It offers Financial Advisory and Debt & Equity Underwriting services. Corporate & Commercial Banking : $16.5 billion in FY 2018 (18% of Total Revenues) – It includes services like commercial loans, trade finance, asset based lending, and Capital Management & Treasury Solutions among others. Sales & Trading : $13.7 billion in FY 2018 (15% of Total Revenues) – It offers sales and trading services to institutional clients across fixed-income, credit, currency, commodity and equity businesses. All other : (-$1.3) billion in FY 2018 (-1% of Total Revenues) – This represents firm’s Global Principal Investments, Corporate Investments and Strategic Investments division. Key Revenue Drivers for Bank of America Business Loans Outstanding: It is the main driver of Corporate & Commercial Banking revenues. In Q1 2019, Corporate and Commercial Banking revenues grew by 3% y-o-y due to loan & deposit growth and higher interest rates, which is likely to continue in consequent quarters. Outstanding Business Loans have seen a steady increase over years (CAGR 2015-2018: 5%) and is expected to increase by 7% y-o-y in 2019. Net Interest Yield as % of Total Consumer Loans: Q1 2019 recorded an overall improvement in Net Interest Yield by 9 bps y-o-y. Although the Fed is expected to hold interest rates constant for the rest of the year, this key metric won’t see the strong growth it has witnessed over recent years. However, an improvement in high-yield loans (especially credit cards) should help the Consumer Banking division report a 6 bps improvement in this figure for the year compared to the level last year. Wealth Management Assets under Management (AuM): Bank of America’s Wealth Management AuM figure has seen steady growth over recent years (CAGR 2015-2018: 4%), and it is likely to follow similar growth in subsequent quarters. We expect it to grow by 18% y-o-y by the end of 2019, as the equity market slump hurt asset valuation at the end of 2018. Bank of America’s Outlook For Full-Year 2019 Bank of America is expected to report $94.6 billion in Total Revenues for 2019, which is 4% more than the figure for 2018. Consumer Banking revenues are expected to increase by 4% y-o-y followed by Corporate & Commercial Banking due to higher Net Interest Income. As we detailed above, the Net Interest Income will be driven by a strong growth in the bank’s loan base. This should more than make up for negligible gains to the Net Interest Margin figure as the Fed holds benchmark rates constant. Wealth Management is expected to grow by 3% y-o-y driven by an 18% increase in Assets under Management (AUM) and 10% increase in Brokerage Assets & Deposits. Gains to the top line will be partially offset by an expected 4% decline in Sales & Trading revenues. Total Expenses would fell to $56.4 billion due to efficiency savings. Similarly, Net Income will increase by 7% y-o-y driven by higher EBT, partially offset by a higher effective tax rate. Bank of America is expected to repurchases billions of dollars’ worth of shares over the year. This should help its EPS figure reach $2.97 for FY 2019. EPS of $2.97 coupled with our forward P/E multiple of 11.8x represents a price estimate of $35 – representing a potential upside of 20% for the bank’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 More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    How Has E*Trade Gained From TCA’s Advisor Management Services’ Business?
  • By , 5/22/19
  • tags: ETFC SCHW AMTD
  • Last April, E*Trade (NASDAQ: ETFC) completed the acquisition of the Trust Company of America – adding 200 registered investment advisors (RIAs) and $18.3 billion in assets under custody to its operations. With this move, E*Trade forayed into the advisor services market which has been led by Schwab (NYSE: SCHW), Fidelity, and TD Ameritrade (NASDAQ: AMTD) . To put things in perspective, total assets under custody for Schwab, Fidelity, and TD Ameritrade were $1.5 trillion, $800 billion, and $540 billion, respectively in 2017. Below we discuss the growing investment advisory market and the potential benefit E*Trade could achieve by achieving a sizeable share of this market. The Trefis price estimate for E-Trade stands at $50 per share, which is in-line with the market price. You can view our interactive dashboard on How Has E*Trade Fared In Recent Quarters And What’s The Outlook For The Full Year? to observe the quarterly revenue trends and modify our earnings expectations to gauge the impact on the stock price. Additionally, you can see more of our financial services company data here. Recent trends in the RIA market Per the Investment Advisor’s Act of 1940, a person or a firm that provides investment advice for a fee needs to be registered with the SEC and is known as a Registered Investment Advisor. The number of RIAs and RAUM (Registered Assets Under Management) have grown at a CAGR of 3% and 9% to 12,578 and $82.5 trillion, respectively, in the last six years. Per the report Evolution Revolution, the RAUM is equally distribution between individuals and institutions. Moreover, the custodian for nearly two-thirds of these assets are broker-dealers. E*Trade’s strong presence in the brokerage industry, hence, should make it easy for the company to ramp up its presence in the custody business. Growing managed products and custody assets E*Trade’s recent earnings have been driven by an increase in net interest income and services revenues, although a steady decline in trading fees has partially impacted the benefit of these gains on the top line. Fee and Service charges majorly comprise of order flow revenues, sweep deposits, advisor fees, and mutual fund service fees ( additional details about the revenue breakup can be viewed in our interactive dashboard ) and have been growing steadily in the last few years. Advisor management and custody revenues, which contribute 15% of the Fee and Service charges, came in at $18 million for the quarter ending March’19 and remained flat sequentially. However, the assets under custody grew by 2% to $19.2 billion over the quarter ending in December’18 the asset base spiking 10% sequentially. Although, E*Trade’s custody business is extremely small compared to Schwab’s or Fidelity’s, it also has the potential to boost other income streams such as order flow revenues and mutual funds. Additionally, a presence in the RIA market would reduce the company’s dependence on trading commissions that have been observing stiff competition by fintech startups and other brokerages. 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
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    Corning's Optical Communication Segment Should Continue To Drive Growth In 2019
  • By , 5/22/19
  • tags: GLW MMM JCI GE
  • Corning Incorporated (NYSE:GLW) reported strong Q1 results recently on the back of impressive growth for its Optical Communications business – which is its largest operating segment. The segment has benefited over recent quarters from improved demand for its Carrier and Enterprise Network products, and received a significant boost from the acquisition of 3M’s Communications Markets business. While the company’s other segments also witness steady growth in revenues, we believe that the Optical Communications segment will remain the primary profit driver over subsequent quarters. Per Trefis estimates, Corning’s shares have a fair value of $34, which is roughly 10% ahead of the current market price. We have summarized our full year expectations for Corning based on the company’s guidance and our own estimates, in our interactive dashboard –  How Did Corning Fare In Fiscal Q1 And What Is The Forecast Full-Year?  In addition, here is more Trefis Industrials Data . A Quick Look at Corning’s Revenue Sources Corning reported $11.3 billion in Total Revenues in Fiscal 2018. This included the following revenue streams: Optical Communications : $4.2 billion in FY2018 (37% of Total Revenues). This segment is classified into two main product groupings – carrier network and enterprise network. Display Technologies : $3.1 billion in FY2018 (29% of Total Revenues). This segment manufactures glass substrates for high performance displays, including organic light-emitting diode (OLEDs) and liquid crystal displays (LCDs). Specialty Materials : $1.5 billion in FY2018 (13% of Total Revenues). This segment manufactures products that provide more than 150 material formulations for glass, glass ceramics and fluoride crystals. Environmental Technologies: $1.3 billion in FY2018 (11% of Total Revenues). This segment manufactures ceramic substrates and filter products for emissions control in mobile applications around the world. Life Sciences: $946 million in FY2018 (8% of Total Revenues). Life Sciences segment works with researchers and drug manufacturers seeking to increase efficiencies, reduce costs and compress timelines. Other: $216 million in FY2018 (2% of Total Revenues). This segment is primarily comprised of the results of the pharmaceutical technologies business and new product lines and development projects, as well as certain corporate investments. Optical Communication Segment Continues To Excel Optical Communications segment delivered a robust performance in Q1, with revenues growing 20% YoY driven by data center and carrier business as well as sales from the recently acquired 3M Communication Markets. The acquisition of 3M’s Communication Markets Division will not only expand the company’s global reach and portfolio, but also provide significant long-term growth opportunities stemming from the expected deployment of 5G between mid-2019 and late 2020 Moreover, Corning’s management indicated that they remain on course to surpass $5 billion in 2020 sales for the segment as the company continues to grow faster than the overall market due to its unique co-innovation model. Overall demand for Corning’s fiber, cable and connectivity solutions remains strong and this should help to drive this segment’s growth in the foreseeable future. Environmental Technologies Segment Also Has Sizable Upside Potential Environmental Technologies segment posted another strong quarter, with net sales of the segment surging by 12% year-over-year to $362 million driven by accelerating adoption of gasoline particulate filters (GPFs) and growth in heavy-duty diesel. GPFs demand continue to remain strong in the European countries – owing to adoption of the European emission standards by auto manufacturers. Further, the early adoption by auto OEMs of the China VI standard bodes well for the company, and we expect this to further boost the segment’s revenue in the near future. For full-year 2019, Corning expects this segment’s sales to increase in the low double-digits range. Full-Year Outlook For fiscal 2019, we expect Corning’s revenues to increase by about 8% to $12.1 billion. While all segments should see decent growth, the ongoing technology and manufacturing investments will also aid the company’s top-line growth. Net income margin is expected to expand from 9.4% in FY2018 to about 11.5% in FY2019, largely due to strong revenue growth and ongoing innovations which should help to save costs. We forecast that Corning’s adjusted EPS for fiscal 2019 is likely to be around $2.02. Using this figure with our estimated P/E ratio of 17x, this works out to a price estimate of $34 for Corning’s shares, which is roughly 10% ahead of the current market price. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
    DE Logo
    Soft Agriculture Segment Showing Waters Down Deere’s Fiscal Q2 Results
  • By , 5/22/19
  • tags: DE GE CAT
  • Deere (NYSE:DE), the world’s largest agricultural-equipment maker delivered a mixed performance for its fiscal second quarter. The company reported adjusted earnings of $3.52 per share which missed the consensus estimate of $3.57 by a margin of 2%. Notably, though, the reported figure represents an improvement of 12% from the adjusted EPS figure of $3.14 for the prior-year period even as net sales from the company’s equipment operations rose 5% year-on-year to $10.3 billion. The revenue gains were primarily driven by higher shipment volumes and price realization, partially offset by the negative impact of currency translation. Per Trefis estimates, Deere’s shares have a fair value of $168  which is roughly 15% ahead of the company’s current share price. We have summarized our full-year expectations for Deere based on the company’s guidance and our own estimates in our interactive dashboard –  How Did Deere Fare In Fiscal Q2 And What’s The Outlook For Full-Year 2019?  In addition, here is more Trefis  Industrials data . A Quick Look at Deere’s Revenue Sources Deere reported $37.4 billion in Total Revenues in Fiscal 2018. This included 3 primary revenue streams: Agriculture and Turf Equipment : $23.2 billion in FY 2018 (62% of Total Revenues). This segment primarily manufactures and distributes a full line of agriculture and turf equipment and related service parts, including: large, medium, and utility tractors, along with a broad line of associated implements and other outdoor power products. Construction and Forestry Equipment : $10.2 billion in FY 2018 (27% of Total Revenues). This segment primarily manufactures and distributes a broad range of machines and service parts used in construction, earthmoving, road building, material handling and timber harvesting. Financial Services : $3.3 billion in FY 2018 (9% of Total Revenues). This segment primarily finances sales and leases by John Deere dealers of new and used agriculture and turf equipment as well as construction and forestry equipment. Besides these segments, a small proportion of Deere’s revenues (2% of Total) comes from various unconsolidated equipment affiliates. Key Takeaways From Deere’s Q2 Results  Construction Segment Continued Its Strong Showing Deere’s Construction and Forestry segment reported an 11% jump in sales y-o-y to $2.9 billion. The segment’s operating profit surged by 34% to $347 million, as increased price realization, shipment volumes and a lower impact of working purchase accounting more than made up for the negative impact of higher production costs and a less favorable product mix for the quarter. We expect this growth trajectory to continue in FY2019, with strengthening U.S. economic conditions driving growth in housing demand – in turn leading to robust construction spending. Further, the economic environment for construction, forestry and road building industries remains supportive and should continue to drive the demand for new and used equipment. Moreover, global transportation investment in 2019 is projected to increase at about 4%. This should further aid the segment’s top-line growth. Taking all this into account, we expect this segment to report strong growth in the near future, as summarized in the charts below. Outlook for Agriculture & Turf Segment Looks Bleak The Agriculture and Turf segment, which accounts for nearly two-thirds of Deere’s total revenues, grew by around 3% y-o-y in Q2 led by higher shipment volumes and price realization. However, operating profit for the segment contracted by 4% due to higher production costs, the unfavorable effects of foreign currency exchange and a step-up in research and development expenses. While unfavorable forex movements aren’t likely to be a cause for concern going forward, Deere lowered its margin forecast for the segment from 12% to 11% citing unfavorable movements in volume and mix, as well as the impact of the lower production schedules. In fact, a decline in demand for agricultural machines has forced the company to lower its production by roughly 20% at two of its large factories in North America. Further, the company also slashed its sales guidance for the segment from 4% to 2% over concerns about the impact of the escalating trade war between the United States and China on the exports of key commodities from the U.S. coupled with weakening agricultural market and delayed planting season in North America. Taking all this into consideration, we expect Deere’s agriculture and turf segment to grow in the low single-digits in the near term. Full-Year Outlook For fiscal 2019, the farm equipment giant slashed its total sales guidance from 7% to 5% citing trade uncertainty and unfavorable markets conditions. Moreover, Deere now expects net income for the fiscal 2019 to be around $3.3 billion compared with its earlier expectation of $3.6 billion. Based on our forecast, Deere’s EPS for full-year 2019 is likely to be around $10.45. Using this figure with our estimated forward P/E ratio of 16x, this works out to a price estimate of $168 for the company’s shares, which is about 15% ahead of the current market price. What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    How Did Nvidia Fare In Q1, And What Can We Expect From Fiscal 2020?
  • By , 5/21/19
  • tags: NVDA AMD INTC
  • Nvidia  (NASDAQ:NVDA) recently reported its Q1 fiscal 2020 results, which were in line with our estimates. This note details the company’s Q1 performance, and Trefis’ forecasts for the full fiscal 2020. You can view our interactive dashboard analysis ~ How Did Nvidia Fare In Q1, And What Can We Expect From Fiscal 2020? In addition, you can see more of our  data for Information Technology companies here.   How did Nvidia’s top line fare in Q1? Nvidia’s total revenues declined 31% to $2.22 billion in Q1 fiscal 2020. This can primarily be attributed to a sharp decline in gaming, as well as absence of revenues from crypto mining processors. The company’s revenue has largely declined in the recent quarters from $3.21 billion in Q1 fiscal 2019 to $2.22 billion in Q1 fiscal 2020. What impacted the Q1 earnings? Earnings Per Share declined 57% from $2.05 in Q1 fiscal 2019 to $0.88 per share in Q1 fiscal 2020. The plunge in adjusted earnings can be attributed to lower revenues and lower margins, which was down partly due to lower gaming margins. How does the revenue growth in the recent quarters compare to its peers? Nvidia’s average revenue decline of 4.1% from $2.91 billion in Q4 fiscal 2018 to $2.22 billion in Q1 fiscal 2020 has been higher than that of AMD and Intel. AMD’s revenues have declined at an average of 0.2% from $1.34 billion in Q4 2017 to $1.27 billion in Q1 2019. Intel’s revenues have declined at an average of 0.8% from $17.05 billion in Q4 2017 to $16.06 billion in Q1 2019. What are Nvidia’s key sources of revenue? Nvidia generates its revenues from graphic processing units (GPUs), and Tegra processors. GPUs refer to revenue from Nvidia’s graphic processing units used in PCs and data centers. Tegra processor segment includes products based on Tegra SOC (system-on-chip) and modem processor technologies, which includes Tegra for automotive computers, including infotainment and navigation systems; and gaming devices. What to expect from GPUs segment in fiscal 2020? Nvidia’s GPU revenues grew 25% to $10.18 billion in fiscal 2019. However, revenues will likely decline 5% to $9.64 billion in fiscal 2020, partly due to lower gaming PCs and notebook sales. Also, a decline in demand for GPUs used for crypto mining will impact the sales. 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. The slowdown in the Chinese economy is impacting the sales of its newly launched Turing products. Trade tensions between the U.S. and China could further add to the woes. Note that China accounted for roughly 25% of the company’s sales in the past quarter. What to expect from Tegra processors segment in fiscal 2020? Tegra processors revenue declined 2% to $1.54 billion in the last fiscal. However, the decline could be in low double-digits to $1.36 billion in fiscal 2020, due to lower shipments for gaming consoles. The decline in sales can largely be attributed to a lower shipments of SOC (system-on-chip) modules for gaming consoles. However, the company’s automotive business is doing well with 14% y-o-y revenue gains in the past quarter, led by increased adoption of the company’s next generation artificial intelligence cockpit solutions. These trends will likely continue in the near term. How much can Nvidia’s full fiscal earnings grow? Nvidia’s full fiscal 2020 earnings will likely be $5.67 per share on an adjusted basis, reflecting a 15% decline over the prior fiscal. The earnings decline can be attributed to lower revenues, and an expected decline in margins, due to lower gaming margins. Average consensus earnings for fiscal 2020 ~ $5.30.   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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    Sprint & T-Mobile: FCC Green Lights Merger, Will Justice Department Follow Suit?
  • By , 5/21/19
  • tags: S TMOBILE TMUS
  • The merger between T-Mobile  (NASDAQ:TMUS) and Sprint  (NYSE:S) has been given the green light by the Federal Communications Commission after the two companies agreed to some concessions . While this marks a significant step toward the combination of the third and fourth largest U.S. wireless carriers, the deal is still pending approval from the U.S. Department of Justice. Trefis has a $73 price estimate for T-Moble and a $5.70 price estimate for Sprint . See our interactive dashboard analysis on  How Has Sprint Fared In Recent Quarters And What To Expect In Q1 FY’19?  You can modify our key drivers to arrive at your own estimates for the company’s revenues and EPS. What Prompted The Decision & What Were The Concessions? The FCC said that the deal would line up with its top priorities of “closing the digital divide in rural America” and advancing the United States’ leadership in the 5G space. The two companies will build new 5G infrastructure using Sprint’s mid-band radio spectrum and have committed that the network would cover 97% of the U.S. population within three years of the deal closing. The network will also cover 85% of rural Americans in the same period. The companies have also committed to rolling out a new wireless home broadband service that will also serve rural areas, boosting competition in the home broadband market. Separately, the companies have also agreed to divest Boost Mobile, Sprint’s prepaid cellphone service that has roughly seven million customers. The FCC also cited T-Mobile and Sprint’s prior commitment to not raise prices for at least three years. (related:  Sprint T-Mobile Merger: Overview Of Some Of The Recent Developments ) Why Is The FCC’s Move Notable? The FCC’s move is significant, as it represents a departure from its stance under the Obama Administration when it moved to block deals citing the need to have at least four nationwide carriers in the U.S. For instance, in 2011, the FCC and the Justice Department moved to block AT&T’s bid for T-Mobile, noting that the merger would reduce competition and cause higher prices for customers. Now, with the FCC’s approval, the markets appear to believe that the Sprint – T-Mobile deal is more likely to go through. For instance, the stock price for Sprint – the carrier that has more to gain from the merger – rose by almost 20% to $7.30 per share on Monday. This is just 10% below the merger value of $8 per Sprint share, accounting for the 0.10256 swap ratio of T-Mobile shares and T-Mobile’s current stock price of about $78. Will The DOJ Approve Of The Deal? The Department of Justice is carrying out an independent review of the merger. The FCC and DOJ have different mandates under Federal law. While the FCC looks into whether a deal will serve the public interest (examining areas such as coverage, pricing etc.), the DOJ’s focus is primarily on the impact of the merger on competition. One major factor that the DOJ was reportedly concerned about was related to the strength of the combined company in the prepaid market, where they would hold a combined market  share of over 50% . However, it’s possible that the proposed divestment of the Boost prepaid business could help alleviate these concerns to a certain extent. While the DOJ has typically taken a similar view as the FCC with regards to deal approvals in the past, there’s still no guarantee that it will ratify this merger.     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.
    LOW Logo
    Will Lowe's Revenue Grow In Q1 2019?
  • By , 5/21/19
  • tags: LOW HD
  • Lowe’s (NYSE: LOW) is set to announce its Q1 2019 (ended April 2019) results on May 22, 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $17.7 billion for Q1 2019 (ended April 2019), which would be an increase of 2% on a y-o-y basis. The increase is mainly expected as the revenue per square foot metric will continue to rise. Market expectation is for the company to report earnings of $1.34 per share for Q1 2019 (ended April 2019), higher than $1.19 per share in the year-ago period.   Lowe’s reported $71.3 billion in Total Revenues in Fiscal year 2018.  The revenue comes from the sale of home improvement supplies like tools, construction products, and related services.   We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Lowe’s Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019?  In addition, here is more  Consumer Discretionary data .   Key Factors Affecting Earnings: Revenue to grow: The company has seen revenue fluctuating over the quarters. In-spite of the fluctuations the company has seen a revenue growth in all quarters of FY 2018 vis-à-vis the same quarters of FY 2017. In Q1 2019 we expect marginal growth over Q1 2018. The company’s revenue growth is mainly contributed by the revenue per square foot metric. It has increased from $305 in 2016 to $340 in 2018. Trefis estimates the metric will reach $349 by 2019. The number of stores and square footage per store metrics have remained nearly flat for a few years now and are expected to continue in the same manner in 2019. Trend in Expenses: Cost of Sales has been steady at around 67% of Total Revenue over the quarters except Q4 2017 and Q4 2018 where it crossed 70%. We expect for Q1 2019 it will be around 67%. Lowe’s saw a fall in EBITDA margin as SG&A expenses increased by $3 billion in FY 2018. Further, Indirect expenses decreased in FY 2018 as income tax provisions came down by nearly $1 billion. In FY 2019 we expect EBITDA margin to recover and indirect expenses to remain flat. Full Year Outlook: For the full year, we expect gross revenue to increase by 2.1% to $72.8 billion in FY 2019. EBITDA margin is expected to increase to around 9.5%.   Trefis has a price estimate of $113 per share for Lowe’s stock. The value is based on the expectations of revenue growth as the revenue per square foot metric continues its rise and an improvement in EBITDA margin.     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.
    LB Logo
    How Much Will Recent Divestitures And Changing Consumer Preferences Affect L Brands’ Q1 2019 Results?
  • By , 5/21/19
  • tags: L-BRANDS LB GPS NKE LULU
  • L Brands (NYSE: LB) is expected to announce its Q1 2019 financial results on May 22, 2019, followed by a conference call with analysts the next day. The company has been witnessing soft sales growth over the last couple of quarters due to stiff competition and consumers’ changing preferences. LB is expected to witness a revenue decline of 2%-3% in Q1 2019 compared to Q1 2018. Lower revenue is likely to be driven by decreasing sales from its PINK brand and loss of revenue from divestiture of La Senza and Henri Bendel. However, on a sequential basis, the revenue decline is expected to be significant, mainly due to seasonality factors as Q4 accounts for about one-third of the full year sales due to the holiday season. Additionally, the company is expected to report a sharp decline in earnings, driven by a reduction in merchandise margins, higher occupancy costs, higher wage rate, and inflation-related pressure. We have summarized the key expectations from the announcement in our interactive dashboard – How is L Brands expected to fare in Q1 2019 and what is the full year outlook?  In addition, here is more  Trefis Consumer Discretionary Services data. A Quick Look At L Brands’ Revenue Sources LB reported total revenue of $13.3 billion in FY 2018. The key revenue sources are: Victoria’s Secret North America: $7.4 billion revenue in FY 2018 (55% of total revenue). The segment sells women’s intimate and other apparel, personal care and beauty products under the Victoria’s Secret and PINK brand names, in US and Canada. Bath & Body Works North America: $4.7 billion revenue in FY 2018 (35% of total revenue). The segment sells body care, home fragrance products, soaps and sanitizers under the Bath & Body Works, White Barn, C.O. Bigelow, and other brand names. Victoria’s Secret and Bath & Body Works International: $0.6 billion revenue in FY 2018 (5% of total revenue). This segment includes company-owned and partner-operated stores located outside of the U.S. and Canada, as well as the online business in Greater China. Other Revenue: $0.6 billion revenue in FY 2018 (5% of total revenues). This includes sourcing and production functions, online and store apparel operated by partners, and other corporate functions. Two primary brands (La Senza and Henri Bendel) were divested in Q4 2018. A] Revenue Trends Victoria’s Secret North America Revenues were volatile throughout 2018 due to the seasonality factor and lower merchandise sales led by a decline in sales of the PINK brand. Though revenue was significantly high in Q4 2018, it remained almost flat on a y-o-y basis. We expect the segment sales to remain stable (y-o-y) in Q1 2019 due to inferior merchandise performance in loungewear, and declines in sport bras, due to category resets. Bath & Body Works North America This has been the most stable segment for the company, with growth in recent quarters being driven by growth in comparable store sales. We expect revenue to increase (y-o-y) in Q1 2019, driven by strong sales in most categories including home fragrance, body care and soaps and sanitizers, led by newness, innovation, and fashion. Victoria’s Secret and Bath & Body Works International Revenue growth over recent quarters was driven by opening of new company-owned Victoria’s Secret stores, direct channel growth in Greater China and additional stores opened by LB’s partners, partially offset by declines in the Victoria’s Secret Beauty and Accessories travel retail business. We expect Q1 2019 to see healthy revenue growth from the international segment due to higher sales from its partners and strong demand in China. Other Revenue Segment revenue has been increasing through 2018. However, we expect revenues to decline sharply in Q1 2019 compared to Q1 2018, driven by the adverse impact of divesting the La Senza and Henri Bendel brands, two large revenue contributors for the segment. B] Expense Trend Increase in total expenses was driven by higher cost of sales, lower merchandise margins, higher occupancy costs, and higher wages through 2018, along with losses from divestitures in Q4 2018. Cost of Goods Sold, Buying & Occupancy Costs: Cost largely increased over recent quarters, driven by decline in the merchandise margin rate due to increased promotional activity and the store asset impairment charges, along with higher occupancy charges due to investments in store real estate in Greater China. G&A, Store Operating Expenses: Expense has been steadily increasing through 2018 driven by higher wages, higher selling expenses related to higher sales volumes at Bath & Body Works, and new company-owned stores in Greater China, and severance and other costs related to the Henri Bendel closure. Loss On Divestiture: In Q4 2018, LB recognized a loss of $99 million on the sale of La Senza, primarily related to the recognition of $45 million of accumulated translation adjustments, as well as the loss related to the transfer of the net working capital and long-lived store assets to the buyer. In spite of higher expenses, margins improved in Q4 2018 due to significantly higher revenue benefiting from the seasonality factor. We expect net income margin to be lower on y-o-y basis in Q1 2019, driven by decrease in revenue, along with higher costs, and inflation-related pressures. Full Year Outlook For the full year, we expect revenue to decrease by 0.6% to $13.2 billion in FY 2019. The marginal decline in revenue is likely to be driven by loss of revenue from divested brands, ongoing pressure on loungewear merchandise, and changing consumer preferences. Net income margin is expected to decrease from 4.9% in 2018 to 3.6% in 2019, driven by rising cost, contraction in merchandise margins, higher investment in wages, and other cost pressures. Trefis has a price estimate of $34 per share for LB’s stock. In spite of short-term pressure on the company’s top line and profitability, we believe that the company’s renewed focus on its core brands and initiatives to enhance shareholder returns (the company recently declared its 178 th consecutive quarterly dividend to be paid in June 2019) will drive its stock price.   What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own.
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    What Has Driven Walmart's Recent Q1 Results
  • By , 5/21/19
  • tags: WMT TGT AMZN
  • In this article, we discuss the key takeaways from Walmart’s Q1 and its outlook in fiscal 2020. Our $105 price estimate for Walmart’s stock is slightly ahead of the current market price. We have created an interactive dashboard on  What Has Driven Walmart’s Recent Q1 Results, And What To Expect From Fiscal 2020?  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 more of our Trefis Retail company data h ere . Key Takeaways From Q1 On a reported basis, Walmart’s revenue increased 1% year over year (y-o-y) to $124 billion, driven by growth in the domestic market due to its marketplace offerings. Walmart’s GAAP EPS grew by more than 80% y-o-y to $1.35, Non-GAAP EPS declined 1% y-o-y to $1.13 Walmart U.S. delivered a strong top-line performance, with comparable sales of 3.4%. This growth was driven by a 1.1% increase in customer traffic and a 2.3% growth in ticket size in Q1. Overall, e-commerce contributed approximately 140 basis points to the segment’s comparable sales growth in the first quarter. Globally, on a constant currency basis, the company’s e-commerce sales increased 37% in the quarter (driven by growth in online grocery and the home/fashion categories). However, it was a deceleration from the +43% pace in Q4. How has Walmart’s Operating Profit and EPS changed in Q1, and what’s the forecast for Q2 2020? The company’s operating income declined 5% y-o-y in the first quarter, primarily due to investments in technology and a rise in employee wages. Walmart’s net income grew 83% y-o-y to $3.9 billion in the same period, translating into earnings of $1.35 per share. We expect the company to post $1.14 earnings per share in Q2 2020. 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 $529 billion in revenues in fiscal 2020, and earnings of almost $14 billion. Of the total expected revenues in fiscal 2020, we estimate $344 billion in the Walmart U.S. business, almost $121 billion for the Walmart International business, and nearly $59 billion for the Sam’s Club business. 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
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    What Factors Will Impact NetApp's Q4 Fiscal 2019 Earnings?
  • By , 5/21/19
  • tags: NTAP WDC
  • NetApp (NASDAQ: NTAP) is expected to publish its Q4 fiscal 2019 results on May 22. This note details Trefis’ forecasts for NetApp, as well as some of the key trends we will be watching when the company reports earnings. You can view our interactive dashboard analysis ~  How Is NetApp Likely To Have Fared In Q4 Fiscal 2019?  for more details on the key drivers of the company’s expected performance in Q4. In addition, you can see more of our  data for Information Technology companies here. How have NetApp’s revenues changed over recent quarters, and what’s the forecast for Q4 fiscal 2019? Total Revenues for NetApp have largely been rangebound, hovering around the $1.50 billion mark over the last few quarters. The revenues stood at $1.56 billion in Q3 fiscal 2019, as compared to $1.54 billion during the prior year quarter. The company has guided for revenues to be in the range of $1.59 to $1.69 billion in Q4 fiscal 2019. Our estimate of $1.64 billion, a figure 5% higher than what it reported in the previous quarter, is close to the mid-point of the company’s guidance and in line with the consensus estimate. What are NetApp’s key sources of revenue? NetApp generates its revenues from storage solutions and related products and services. The company reports its revenue under three segments ~ Product, Software Maintenance, and Services. Product segment includes revenues generated from NetApp’s storage based hardware and related software sales. The segment accounted for a little under 60% of the company’s total revenues in fiscal 2018. Software Maintenance refers to product upgrades, enhancements, and technical support for customers. The segment contributed 16% to the company’s top line in the previous fiscal. NetApp’s services revenue refers to revenues earned from maintenance of hardware sold. It also includes revenues from professional services, and training. This is a recurring revenue stream, and it can be linked to the company’s installed base. What to expect from Products segment in Q4? Products segment revenues have seen a modest increase from $952 million in Q3 fiscal 2018 to $967 million in Q3 fiscal 2019. This can largely be attributed to growth in all-flash arrays with favorable NAND pricing. The segment revenues could see low single-digit decline in Q1. Weaker demand from the enterprise customers weighed over the company’s sales growth in the previous quarter, and this trend will likely continue in Q4 as well. The global server market could see a slowdown in 2019, given the expected launch of new processors in the near term. This will likely impact storage companies, including NetApp. Asia Pacific accounts for 14% of the company’s total sales. There is a slowdown in Chinese economy, and ongoing trade tensions between the U.S. and China could further add to the woes. The segment revenues were impacted by currency headwinds in the previous quarter, and this could continue in Q4 as well. How much can Software Maintenance and Services segments grow in Q4? Software Maintenance revenues could grow to $290 million in Q4 fiscal 2019, as compared to $247 million in the prior year quarter, while Services revenue could see a slight decline to $367 million. The company’s sale of add-on software and infrastructure solutions products are aiding the revenue growth. Services revenues can be linked to the company’s installed base, which could be impacted by the overall demand outlook, primarily on the enterprise side. What will be the impact of the above on NetApp’s EPS? NetApp’s adjusted earnings per share will likely be $1.25 per share in Q4 fiscal 2019, reflecting 11% growth to the prior year quarter. Average consensus earnings estimate ~ $1.26 per share. This can largely be attributed to slight growth in margins, driven by lower share count and growth in all-flash arrays, which carry higher average selling prices (ASPs).   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.
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    Can Target Beat Estimates In Q1?
  • By , 5/21/19
  • tags: TGT WMT AMZN
  • SCHW Logo
    Will Schwab’s Asset Management Revenues Recover From Recent Declines?
  • By , 5/21/19
  • tags: SCHW ETFC AMTD
  • The last few quarters have been very good for Charles Schwab (NYSE:SCHW), with the company consistently beating street estimates thanks to the Fed’s rate hikes. However, the company’s Asset Management and Administration Fees have fallen steadily over this period due to a string of recent fee reductions – something we detail in our interactive dashboard titled  How Has Charles Schwab Client Asset Mix Trended?  Below, we take a closer look at the drivers of Schwab’s asset management revenues and the company’s strategic initiatives aimed at gaining a larger share of the rapidly growing ETF market. How has the U.S. ETF industry trended? After the financial crisis of 2008, exchange-traded funds became the retail investor’s primary investment vehicle as it provides an opportunity to diversify risk and invest in multiple asset classes. Since then, assets under management (AUM) in ETFs have jumped from $531 billion in 2008 to $1.4 trillion in 2013, and finally to over $3.8 trillion now. ETFs are increasingly gaining popularity thanks to low operating expense ratios (OER) as well as commission-free trading incentives provided by various issuers and brokers. Charles Schwab launched its ETF OneSource platform in 2013, enabling its clients to purchase 105 ETFs with no trading commissions. Since then, the platform has expanded its offerings to more than 500 ETFs, including those by other leading industry providers such as Invesco, JPMorgan and Oppenheimer Funds among others. The share of ETF net flows into the platform’s ETFs has increased staggeringly from 38% in 2015 to 49% in 2018. What has Schwab gained from ETF OneSource Platform? Per the below chart, Schwab’s equity & bond fund and ETF average fee has dropped by a sharp 43% in the last three years. However, the asset based has swelled by 130% over the same period. Though stiff competition has forced Schwab to slash fees, this had a positive impact on ETF assets. Notably, proprietary ETF assets swelled by 240% to $134 billion during the same period. Though, the platform includes offerings by 15 other issuers, Schwab’s proprietary ETFs have benefited the most – helping the company’s market share in the ETF industry increase from 0.7% at the time of the platform’s launch in 2013 to 3.6% in 2019. With the increasing popularity of ETFs among millennials, an overall shift is observed in Schwab’s client asset mix. The share of ETFs in client assets has increased from 10% in 2016 to 15% in 2019, resulting in an equal decline of mutual funds. With net interest revenues and trading commissions dependent on market forces such as repo rates and volatility, the asset management operations provide a stable cash flow for the company. Despite its sub-par performance in recent quarters, we believe that asset management revenues will drive Schwab’s top line in the long term as it continues to consolidate its presence in the global ETF market. The Trefis price estimate for Charles Schwab stands at $47 per share, which is in line with the market price. You can view our interactive dashboard on How have Charles Schwab’s earnings fared in recent quarters? to observe the quarterly revenue trends and modify yearly earnings to gauge the impact on the stock price, and see more of our financial services company data here. What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs For  CFOs and Finance Teams  |  Product, R&D, and Marketing Teams More Trefis Data Like our charts? Explore  example interactive dashboards  and create your own
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    Sina Likely To Report Forgettable Q1 Results, But Revenues Should Recover Sharply In The Near Future
  • By , 5/21/19
  • tags: SINA TWTR FB GOOG BIDU YELP
  • Sina  (NASDAQ:SINA) reports its Q1 results on May 23. While Chinese technology company expected its revenues to grow around 18-25% in 2019 at the beginning of the year, the renewed U.S.-China tariff war should negatively impact Sina’s top line in the near future. We expect the company’s Q1 results to be weak, but also believe that its growth weakness will bottom out over subsequent quarters –  paving the way for the company to report a growth rate which is closer to the lower end of its guidance. We maintain our price estimate of $73 per share for Sina, which is now around 55% higher than the current market price. A sizable chunk of this price difference can be attributed to the sell-off in Sina’s shares over recent weeks as the trade war between the two largest global economies intensifies. However, we believe that investor concerns are overblown. Our interactive dashboard on Sina’s Q1 Earnings Estimate  outlines our forecasts and estimates for the company for the rest of the year. You can modify any of the key drivers to visualize the impact of changes on its valuation. Also, you can see all of our technology company data here . A Quick Look At Sina’s Revenue Sources Sina makes money through advertising on its mobile and web properties, and through its fintech offerings and mobile value-added services. Most of the company’s revenue is generated in China. Sina’s fiscal year ends in December. The company has two business segments (total revenue of $2.1 billion in 2018) Display Advertising (revenue of $1.8 billion in 2018, 85% of total revenue): Segment revenue is derived from mobile and web advertising. Weibo, a microblogging site (also called the Twitter of China), has been the major contributor of the company’s growth. Others (revenue of $319 million in 2019, 15% of total revenue): Segment revenue is derived from online payments and loan facilitation services. Sina’s total revenues grew by $1.1 billion over 2016-2018 (CAGR of 43%) Revenue growth had been driven by Weibo (with revenues increasing from $652 million in 2016 to $1.7 billion in 2018) due to an increase in digital advertising spends. Alibaba remains a major customer for Sina, with its contribution to revenues increasing from $58 million in 2016 to $118 million in 2018. The company has seen some weakness in Other revenues due to government regulation in the peer-to-peer lending industry. Q4 performance and Q1 expectations: Display Advertising: In Q4, revenues grew to $484 million (+14% y-o-y). Taking into account seasonal trends, we expect revenues to be $388 million in Q1 2019 (+6% y-o-y) Others: In Q4 revenue, Other revenues were $89 million (+12 y-o-y). We expect these revenue to be $77 million for the latest quarter (+5% y-o-y) We forecast Sina’s EPS figure for full-year 2019 to be $6.18. Taken together with our forward P/E multiple of 12x for the company, this works out to a $73 per share price estimate for the company’s stock, which is around 55% higher than the current market price. Do not agree with our forecast? Create your own price forecast for Sina by changing the base inputs (blue dots) on our interactive dashboard .
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    Sluggish PC Demand, Trade War Concerns Would Have Hurt HP's Fiscal Q2 Results
  • By , 5/21/19
  • tags: HPQ IBM MSFT HPE
  • HP Inc. (NYSE:HPQ) reports its fiscal Q2 results on May 23. The company had reported Q1 earnings that were in line with consensus, although revenues had fallen short of expectations due to declines in desktops, notebooks and supplies. With the demand for desktops and notebooks continuing its downward trend, we expect HP’s top line to remain under pressure in Q2. Also, given the renewed U.S. – China trade standoff, we will be looking for management commentary around the potential impact of this on HP’s business. Notably, HP has been involved in a protracted legal dispute regarding its ill-fated acquisition of Autonomy in 2011, which resulted in a multi-billion dollar write off for HP in 2012. Autonomy’s CFO was recently sentenced on account of fraud and Autonomy’s CEO Mike Lynch is facing trial in the U.K. for similar lapses, and this will likely pave the way for HP to recoup some of its losses from the Autonomy deal in the near future. We continue to maintain our fair value estimate of $29 per share. Our interactive dashboard on HP’s Q2 Earning Estimates  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. Also, you will find more  technology company data here. A Quick Look At HP’s Revenue Sources HP makes money selling personal computing devices, printing products and related technology solutions. There are two main segments of HP’s revenue ($57.1 billion in 2018) Personal systems group ($36.4 billion in 2018, 64% of total revenue): Segment revenue is derived from sale of notebooks ($22.5 billion in 2018), desktops ($11.6 billion in 2018) and workstations, handhelds and others ($2.2 billion in 2018). Imaging and printing group ($20.8 billion in 2018, 36% of total revenue): Segment revenue is derived from sale of hardware ($7.2 billion 2018) and supplies ($13.6 billion in 2018). Revenue trends and Q2 expectations Personal systems group added $6.3 billion over fiscal 2016-2018 (CAGR of 10%) with notebooks revenue growing by $5.6 billion over this period (CAGR of 15%), desktop revenue growing by $1.6 billion (CAGR of 8%), and workstation and other revenues declining by $803 million. HP has been focusing on premium form factors (convertible notebooks) and Device as a Service to offer contractual solutions. In Q1, segment revenue grew to $9.7 billion (+2% y-o-y). For Q2, we expect segment revenue to grow to $9.4 billion (+7% y-o-y). Imaging and printing group added $2.5 billion over fiscal 2016-2018 (CAGR of 7%) with hardware revenue growing by $845 million (CAGR of 6%) and supplies revenue growing by $1.7 billion (CAGR of 7%). HP has been focusing on contractual solutions, Graphics and 3D printing. In Q1, segment revenue declined marginally to $5 billion. For Q2, we expect segment revenue to grow to $5.7 billion (+9% y-o-y). We forecast HP’s EPS figure for full-year 2019 to be $2.03. Taken together with our forward P/E multiple of 14x for the company, this works out to a $29 per share price estimate for the company’s stock, which is about 50% ahead of the current market price. Do not agree with our forecast? Create your own price forecast for HP by changing the base inputs (blue dots) on our interactive dashboard .