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Wal-Mart Stores Inc. (NYSE: WMT) reported third-quarter fiscal 2018 results before markets opened Thursday. The retailing giant posted adjusted diluted earnings per share (EPS) of $1.00 on total revenues of $123.18 billion, excluding membership fees in Sam’s Club. In the same period a year ago, Walmart reported EPS of $0.98 on revenues of $118.18 billion. Third-quarter results also compare to consensus estimates for EPS of $0.97 and $121 billion in revenue.
U.S. third-quarter same-store sales rose 2.7% at the company’s supercenter and discount stores, and comparable-store traffic rose 1.5%. Same-store sales in the company’s Sam’s Club stores were up 2.8% excluding fuel and up 4% including fuel sales. Sam’s Club total net sales, including fuel, rose 4.4% for the quarter.
Consolidated operating income fell by 6.9% year over year in the third quarter. U.S. operating income rose by 0.8% for the quarter, while the company’s international segment saw a quarterly decline of 2%. Operating income at Sam’s Club stores rose by 4.2% in the quarter, excluding fuel, and was up a sharp 12.9% including fuel sales.
Walmart reported U.S. e-commerce growth of 50% and gross merchandise value totaling 54%. These totals are lower than those reported for the first and second quarter, but Walmart continues to invest heavily in e-commerce.
In Walmart’s international division, sales rose 4.1% but gross profits were down 18 basis points and operating income was down 7.8%. For the year to date, international sales are up 1.9% and operating income is down 2.2%.
Walmart guided full-year adjusted EPS at $4.38 to $4.46. That’s an increase from former guidance of $4.30 to $4.40. Fourth-quarter same-store sales are expected to rise 1.5% to 2% at U.S. stores and in the same range at Sam’s Club stores, excluding fuel sales.
Consensus estimates call for fourth-quarter EPS of $1.33 and revenues of $134.4 billion. For the 2018 fiscal year, analysts are looking for EPS of $4.38 and sales of $496.04 billion.
Walmart CEO Doug McMillon said:
We are pleased with the storing results in the quarter across each of our business segments … We have momentum, and it’s encouraging to see customers responding to our store and eCommerce initiatives.
Traffic might be up and Walmart’s online initiatives may be working, but results are not showing up in profits. Consolidated net income was down 42.4% in the third quarter and is down 22.2% for the year to date. The company’s now charges higher online prices for some items, trying to lower the cost of shipping those orders by encouraging customers to choose in-store pickup.
Investors appear to like what they read this morning. Walmart’s shares were up about 3.5% in premarket trading to $92.99, above the 52-week range of $65.28 to $91.88. Shares closed at $89.83 on Wednesday. The consensus 12-month price target was $89.11 before the results were announced. The high target is $105.00.
TransCanada Corp's Keystone pipeline leaded roughly 5,000 barrels of oil in South Dakota, the company said thursday. Although the company isolated the problem quickly and shut down the pipeline, the leak comes only a few days before the Nebraska Public Service Commission decides whether to let the company build a controversial extension through that state. TransCanada shut down the pipeline Wednesday morning after its systems detected the leak, the company said. /The leak amounts to 210,000 gallons. Sections of the pipeline that runs from Canada's Alberta province to Illinois will be shut, although parts of the southern leg to Texas will stay open
Thursday's spill is not particularly large when compared with others. Last year Enbridge agreed to pay civil penalties totalin $62 million for leaking more than 26,000 barrels of oil in spills in Michigan and Illinois in 2010 The leak comes at an awkward time for Calgary based TransCanada. The company is seeking approval to build an extension of the pipeline and is awaiting the vote from the Nebraska authorities expected on Monday
Wal-Mart Stores Inc. (NYSE: WMT) gave upstart Amazon.com Inc. (NASDAQ: AMZN) a 10-year head start in launching an online marketplace for third-party sellers. Then, even after launching its marketplace in 2009, Walmart did not make an aggressive move in the space —until the past year.
When the company reported fiscal first-quarter 2018 results in April, Walmart said it had increased its assortment of marketplace items from 10 million in the prior year to 50 million. Amazon claims only that it carries “hundreds of millions” of items both of its own and of its marketplace partners.
There’s no question that Amazon is the big dog in the marketplace arena, but some third-party sellers are looking to diversify their online presence. According to a report at eMarketer, only 9% of Amazon sellers also sell on Walmart.com compared, for example, to 65% of eBay Inc. (NASDAQ: EBAY) sellers who also sell on Amazon.
But when it comes to third-party sellers who made more than $2 million in annual revenue last year, some 36% now sell at Walmart.com and Amazon.com. A recent survey cited by eMarketer is even better news for Walmart:
In another telling sign, when asked about other channels they want to expand to this year, Walmart, cited by 29% of Amazon sellers in the Feedvisor survey, garnered the top spot alongside sellers’ own websites, beating all other marketplaces including Shopify, eBay, Walmart’s own Jet.com and Etsy.
A study by market research firm Euromonitor also indicates that Walmart’s efforts at boosting its online presence are having an impact. eMarketer notes:
While third-party merchant retail sales on Amazon.com are nearly four times those of Walmart.com ($63 billion vs $16.6 billion in 2016), between 2011 and 2016, Walmart.com’s marketplace sellers’ retail sales rose an annual average of 58.6%, outpacing growth rates seen at Amazon, eBay, Sears, Rakuten and Etsy during the same period, the Euromonitor data showed.
One serious issue for Walmart is how to compete with Amazon’s Prime delivery service. Walmart recently began giving online shoppers a discount on certain items they order online and pick up at a nearby brick-and-mortar store. But that’s no answer for Prime, which also allows third-party sellers to have their orders fulfilled by Amazon and shipped to Prime customers just as if the products were sold directly by Amazon.
Another issue Walmart faces is that some brands don’t want to be linked to the company’s low-price image, which they believe can hurt their own brand’s value.
At stake is a brass ring for U.S. marketplaces that is expected by one estimate to grow to $780 billion in the next four or five years. That’s a sum worth fighting fo
CarGurus Inc. (NASDAQ: CARG) saw its shares hit a new high on Wednesday following the release of its most recent quarterly results. The company said that it had $0.02 in earnings per share (EPS) and $83.0 million in revenue, which compares with consensus estimates that called for breakeven earnings on revenue of $79.23 million.
During the quarter, marketplace subscription revenue totaled $73.9 million, an increase of 59%, and advertising and other revenue amounted to $9.1 million, an increase of 36% year over year.
The total number of paying dealers was 26,553 at the end of the period, an increase of 37% compared to 19,403 at the end of the third quarter of 2016. Out of the total paying dealers, United States and international accounted for 24,313 and 2,240, respectively, compared to 18,777 and 626, respectively, at the end of the third quarter of 2016.
Average annual revenue per subscribing dealer in the United States was $11,526, an increase of 16% year over year. International revenue was $2.6 million, compared to $0.7 million last year.
In terms of guidance for the fourth quarter, management expects to see EPS in the range of $0.01 to $0.02 and revenues between $85 million and $86 million. The consensus estimates are $0.01 in EPS and $81.82 million in revenue for the quarter.
Langley Steinert, founder and CEO of CarGurus, commented on the quarter:
We are very pleased with our third quarter results, which are highlighted by robust top line growth and ongoing profitability. Our strategy of building the world’s most trusted and transparent automotive marketplace is delivering a disruptive value proposition to consumers.
The recent completion of our initial public offering was an important milestone for our company. CarGurus now has greater brand awareness and enhanced resources to execute our growth strategy and further extend our rapidly growing leadership position.
Shares of CarGurus were last seen up nearly 10% at $32.75, with a consensus analyst price target of $29.00 and a post-IPO range of $25.85 to $35.42.
In late July, the National Highway Traffic Safety Administration (NHTSA) filed a notice of the agency’s intention to review and potentially revise the so-called Corporate Average Fuel Economy (CAFE) standard scheduled to take effect for model year 2021 cars and light trucks.
The Obama administration and automakers who sell vehicles in the United States agreed in 2012 to a fleet average fuel efficiency rating in the range of 40.3 to 41.0 mpg by model year 2021, rising to 54.5 mpg by 2025.
In the final few days of the Obama administration, the U.S. Environmental Protection Agency (EPA) issued a final determination on January 13 that maintained the 2012 targets. Automakers objected and President Trump ordered a review of the fuel-efficiency standards for model years 2022 to 2025.
The American Council for an Energy-Efficient Economy (ACEEE) on Thursday released a comment to be considered during the EPA’s review reporting that the link between improved fuel economy and the price of new cars and trucks is tenuous at best.
A competing study published in March by the Alliance of Automobile Manufacturers (AAM) noted the economic impact:
Our findings don’t call into question the need for regulation but we found that the federal requirements need to be fine-tuned. Due to unexpectedly low gas prices and tepid demand for electric and hybrid vehicles, the standards will have greater economic impact than envisioned when they were developed.
The AAM has consistently claimed that an average new car today costs 60% more than an early 1990s model and that is due partly to emissions and mileage standards and regulations. A study at the Heritage Foundation sets the increase due to fuel-economy regulation at a minimum of $3,800 per vehicle.
Using data from the U.S. Bureau of Economic Analysis, ACEEE claims that the average vehicle price would have been $1,900 lower in the first part of this year if the mix of passenger cars and light trucks had been the same as it was in 2009, the year new vehicle sales tanked due to the recession. The ACEEE said:
For cars alone, prices have been on a downward trajectory since 1998, well before the recession or the increase in fuel economy requirements. The claim by the Alliance of Automobile Manufacturers that car prices have increased by 60% since the 1990s just doesn’t hold up — unless you ignore inflation and prevalent consumer incentives offered by automakers.
What has driven up prices is the change in the mix of vehicles toward light trucks, SUVs and crossovers. These vehicles cost an average of 7% more, and there are some fabulously high-priced vehicles in the pickup truck class these days.
The ACEEE also cites a Consumer’s Union study that found the price of entry-level vehicles “is largely unchanged over the past 10 years. Despite increasing fuel economy requirements, affordable vehicle options remain.”
The ACEEE press release contains links to many other documents.
Cisco Systems, Inc. (NASDAQ: CSCO) reported fiscal first-quarter financial results after markets closed Wednesday. The company said that it had $0.61 in earnings per share (EPS) and $12.1 billion in revenue, compared with consensus estimates from Thomson Reuters that called for $0.60 in EPS on $12.11 billion in revenue. The same period from last year had $0.61 in EPS and $12.35 billion in revenue.
During the quarter, total revenues dipped by 2%, consisting of a drop in product revenue by 3% and service revenue falling 1%. Also 32% of total revenue was from recurring offers, up over 3 percentage points from this time last year.
Deferred revenue came out to $18.6 billion, up 10% in total, with deferred product revenue up 16%, driven largely by subscription-based and software offers, and deferred service revenue was up 5%. The portion of product deferred revenue related to recurring software and subscription offers increased 37%.
Looking ahead to the fiscal second quarter, management is expecting to see EPS in the range of $0.58 to $0.60 and revenue growth in the range of 1% to 3%. The consensus estimates are calling for $0.58 in EPS and $11.7 billion in revenue for the coming quarter.
On the books, cash, cash equivalents, and investments totaled $71.6 billion at the end of this quarter, compared with $70.5 billion at the end of fiscal 2017.24/7 Wall St.
What to Watch in Walmart’s Earnings
Chuck Robbins, CEO of Cisco, commented:
Our results in Q1 demonstrate the continued progress we’re making on our strategy. The network has never been more critical to business success. Cisco is delivering more insights and intelligence as we help our customers build highly secure, intelligent platforms for digital business.
Shares of Cisco closed Wednesday at $34.11, with a consensus analyst price target of $35.73 and a 52-week range of $29.12 to $34.75. Following the announcement, the stock was initially up over 3.5% at $35.32 in the after-hours trading session.
Even though the optical arena is huge when it comes to data transmission, big data centers, and many more applications, much of the demand for the top companies comes from China. And when China slows down, they all tend to slow down. While the worst may not be quite over, the bottom may be close, and that’s the time when more aggressive accounts need to look hard at the sector, especially with the potential for an upturn in 2018.
A new Stifel research report makes the case that while some of the top companies have come in light, and the forward guidance is below estimates, the analysts feel that the China issues may become less and less of an obstacle. The firm has four optical companies rated Buy, and all could be great additions to aggressive accounts.
This is one of the top companies still riding the wave of enterprise data center growth. Fabrinet Inc. (NYSE: FN) is a leading provider of advanced optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers of complex products, such as optical communication components, modules and subsystems, industrial lasers and sensors.
Fabrinet offers a broad range of advanced optical and electro-mechanical capabilities across the entire manufacturing process, including process design and engineering, supply chain management, manufacturing, advanced packaging, integration, final assembly and test. Fabrinet focuses on production of high-complexity products, in any mix and any volume.
The Stifel price target for the shares is $40, and the Wall Street consensus target is $42.67. The shares traded early Friday at $32.00.
This stock was hit hard recently and may be offering a very good entry point for investors. Finisar Corp. (NASDAQ: FNSR) provides optical subsystems and components for data communication and telecommunication applications in the United States, Malaysia, China and elsewhere. Its optical subsystems primarily consist of transmitters, receivers, transceivers, transponders and active optical cables that provide the fundamental optical-electrical or optoelectronic interface for interconnecting the electronic equipment used in communication networks, including the switches, routers and servers used in wireline networks, as well as the antennas and base stations used in wireless networks.
The company also offers wavelength selective switches, which are used to switch network traffic from one optical fiber to multiple other fibers without converting to an electronic signal. In addition, it provides optical components comprising packaged lasers, receivers and photodetectors for data communication and telecommunication
applications, as well as passive optical components for telecommunication applications.
Stifel has a $27 price target, and the consensus target is $29.10. The shares traded at $18.50 Friday morning.
This top company looks to benefit big-time from the Microsoft Azure project. Lumentum Holdings Inc. (NASDAQ: LITE) is a provider of optical and photonic products for a range of end market applications, including data communications and telecommunications networking, as well as commercial lasers for manufacturing, inspection and life-science applications.
The company operates in two segments. OpComms segment products include a range of components, modules and subsystems to support and maintain customers in its two primary markets: telecom and datacom. Products from its Commercial Lasers segment serve customers in markets and applications, such as manufacturing, biotechnology, graphics and imaging, remote sensing, and precision machining, such as drilling in printed circuit boards, wafer singulation and solar cell scribing.
The $75 Stifel price target compares with the $72 consensus estimate and the recent $57.55 a share price.24/7 Wall St.
Will Analysts Ever Reach the Top of the World With Amazon Price Targets?
This smaller capitalization company may offer big upside potential. Oclaro Inc. (NASDAQ: OCLR) designs, manufactures and markets lasers and optical components, modules and subsystems for the optical communications, industrial and consumer laser markets worldwide.
The company’s products generate, detect, combine and separate light signals in optical communications networks. It offers client-side transceivers, including pluggable transceivers; line side transceivers; tunable laser transmitters, such as discrete lasers and co-packaged laser modulators; lithium niobate modulators to manipulate the phase or the amplitude of an optical signal; transponder modules for transmitter and receiver functions; and discrete lasers and receivers for metro and long-haul applications.
Stifel has set its price target at $10. The consensus target is $9.58, and shares were last seen trading at $6.35.
Continuing on the path that brought e-commerce sites like Jet.com, Bonobos and ModCloth into its tent, mega-retailer Wal-Mart Stores Inc. (NYSE: WMT) is reported to be discussing another acquisition. This one involves beauty product subscription service Birchbox.
The cosmetics/beauty industry hauled in an estimated $62.5 billion in revenues in the United States last year. According to marketing expert Brandon Gaille, women spend an average of $144 annually on beauty products, and 57% of women have purchased skin care products (the largest subcategory of beauty products) at Walmart or Target stores. Just 10% of women generate 80% of the industry’s revenues.
Birchbox, launched in 2010, offers a monthly sampler of products for $10 to its subscribers. The idea is to get subscribers to make full-price purchases at Birchbox of sample items they like.
To date the company has received more than $80 million in investor capital and now generates some $200 million in annual sales, about 35% of which comes from full-price sales. A report at Recode also noted previously undisclosed venture debt secured in 2015 that comes due next year.
The company reportedly has “multiple offers” to restructure the debt so it may not be interested in being acquired. Recode reports, however, that “several people close to the company [say] that they believe a sale is more likely.”
According to Statistic Brain, personal care products accounted for 14.5% of Walmart’s sales last year, second in size only to electronics. Women accounted for 10.5% of sales. Walmart rolls consumables like health and beauty products in with grocery sales, which accounted for 56% of U.S. sales in 2016.
Neither Birchbox nor Walmart commented on the Recode report.
Walmart stock traded up about 0.3% in the afternoon Wednesday, at $81.88 in a 52-week range of $65.28 to $81.92, a new high posted earlier this afternoon. The stock’s 12-month consensus price target is $80.97.
INTERNET PRESENCE GROWING
NOVEMBER NEWSLETTER 8.
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