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August 2018

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Bank of America Corp is due to add a billion in earnings if it is able to execute its vision for card business by targeting growth market segments

Bank of America Corp (NYSE:BAC) is expected to add $1 billion in run rate to its earnings as well as boost its return on assets by 13 bit points if it is able to leverage its growing card business by targeting the right market segments. Analysts at Bernstein are highly optimistic on the scenario and have an Outperform rating on the stock and a full year price target of $17.

John McDonald, analyst at Bernstein, met with the top executives from Bank of America’s retail segment and returned with positive sentiments regarding the potential for profitability if the company can overcome certain challenges. According to the analyst, Bank of America’s card business is currently in growth mode and has the potential to substantially bolster the company’s profits if the execution strategy is handled with discipline. According to McDonald, the takeaway from a successful execution of 7% Compound Annual Growth Rate balance, should help the card segment rake in a cool billion in earnings.

The Bank of America has a solid position in the card industry and is one of the major players. The company has also proven that it can drive profitability from the segment and is ranked only second in general card outstanding metric with $90 billion at the end of the fourth quarter of 2015. Bank of America also ranks third in general purpose card purchase volume in the U.S with a total of $221 billion in fiscal year 2015. The company has 26 million accounts with active cards.

Bank of America believes that its card segment has strong growth potential and seems to be in the process of streamlining it card products, reducing them to 60%, to fully exploit a number of the most promising market segments. Bank of America’s card products will now be targeted in terms of clients at mass market, mass affluent, affluent and high net worth market segments with value added services such as reward cards for travel.     

 

Before Jabil Circuit and Red Hat release their quarterly earnings, The Country Caller sheds light on their earnings predictions

Jabil Circuit, Inc. (NYSE:JBL) and Red Hat Inc. (NYSE:RHT) have announced their earnings call to be held in the aftermarket hours on Wednesday, September 21. Jabil Circuit would declare its earnings for the fourth quarter of fiscal year 2016 while Red Hat would do likewise for 2QFY17.

Both the business have exhibited exceptional results in the past. Even in their last respective quarters, both US-based businesses revealed top and bottom level beat on Street projections. Therefore, they are predicted to publish similar results in their upcoming earnings season as well.

Jabil Circuit

One of the largest contract managers in the world has been anticipated by the Street analysts to provide earnings per share of 24 cents in the fourth quarter. Relative to this, earningswhispers.com is poised on surpassing the expectations by looking forward to the company posting 27 cents in EPS for the season.

These earnings numbers are published to fulfill circuit board assembler’s EPS guidance given of 15-35 cents. If Street analysts are made content, EPS gains of 14.28% from previous season would be observed, as it gave anounced EPS of 21 cents in that quarter. However, the EPS decline of 6.9% year-over-year would be noticed as well, when it reported 58 cents in EPS for 4QFY15.

Furthermore, the St. Petersburg-based enterprise has been given $4.27 billion figure for its revenues by consensus analysts. This is slightly lower than the estimize.com’s predictions, which are stated at $4.28 billion. Analysts at both places would be made happy if the $4.5 billion business fulfills its revenue guidance of $4.15-4.35 billion. Moreover, sales loss of 9.21% YoY would be observed if happiness is provided to Street analysts at it gave out $4.7 billion in revenues for the same quarter in last year.

Red Hat Inc.

For 2QFY17, the software provider has been looked forward by anlaysts to give earnings of 54 cents for the season. This would result in earnings miss on earningswhisper.com figure, which predicted an EPS of 55 cents for the quarter. However, the Street projections are in-line with the EPS guidance issued by the company.

If Street made happy on the bottom line, the EPS would gain roughly by 3.85% sequentially as it reported 52 cents in EPS for 1QFY17. Also, the EPS would observe increment of 10.2% as it announced earnings of 49 cents in 2QFY16.

Likewise, the revenue projection of Street has been stated at $590.82 million. This is about $2 million larger than estimize.com’s prediction, which estimated a $592.35 million for net sales of the season. The guidance has been given as $583-587 million.

Nonetheless, if analysts who project net sales of $590.82 million are made happy, the revenues would climb 4.04% as it reported $567.9 million in net sales for last quarter. Also, the net sales would increase 17.22% YoY as it observed $504 million in its net sales for 2QFY16.

The Country Caller has discussed its bullish views in a number of articles, while we stick to our bullish thesis

One of the most neglected stock in the auto-sector seems to have caught the bull’s attention, as General Motors Company (NYSE:GM) shares are up over 10% in the last one month. While the recent rally may be attributed to the recent presidential election results, the fundamentals of GM cannot be disregarded either. TheCountryCaller has discussed its bullish views in a number of articles, while we stick to our bullish thesis.

As discussed, the bullish views are not only confined to TCC, as one of the world’s most renowned investment firm, Berkshire Hathaway also re-affirmed its faith in the Detroit-based company. The recent developments within the company are also favorable to its long-term success, as the $51.55 billion company has reached out an agreement with ride sharing app Uber.

Going forward, US automobile sales are expected to pick up in 2017, while it would surely benefit the 108-year-old company. The number one automaker in the US is making its foray into the electric vehicle space, and has challenged the legacy of its Palo Alto-based rival Tesla Motors. Given that GM is better off than its competitor in terms of resources, it may succeed in this market too.

That being said, a bearish thesis was released yesterday by Barenberg, as the sell-side firm added that the risk/reward ratio of the company is too low. Moreover, it raised its concern that the automaker may miss the Street estimates in the upcoming quarter.

TCC argues that the company has successfully surpassed the Street’s bottom-line estimates in the last six quarters, which is commendable. Moreover, investor optimism is on a rise, as short interest fell by 3% as per the recent data. The Street also confirms its bullish views, as well-known equity research firms like Barclays PLC and Morgan Stanley stick to higher price targets.

Oppenheimer has an Outperform rating on Rackspace stock

Last week media reports surfaced that Rackspace Hosting, Inc. (NYSE:RAX) is negotiating the terms of its sale with Apollo Global Management LLC. Shares of the former subsequently jumped by 11% in Friday’s trading session as news of Apollo valuing Rackspace at $27 per share surfaced. With shares crossing the $27 mark on last week’s close, the price declined by 1.13% in early trading today.

Analysts at the investment firm Oppenheimer, however, believe that Rackspace would be valued a bit more than the aforementioned price. The firm in an updated research note sent out to clients and investors today bumped its price target to $32 from $30. Analysts at the firm believe that each of Rackspace’s shares would be valued in the low to mid $30s in the acquisition. The firm currently has an Outperform rating on Rackspace’s stock.

The cloud computing company has on various previous occasions scouted various options of its sale. Rackspace had earlier on reveled that it had hired the services of investment bank Morgan Stanley to look out for strategic alternative. This was roughly two years ago. In regards to the newest acquisition deal insiders as quoted by Reuters have expressed caution noting that there is a high possibility of a buyout not materializing.

Apollo is a private equity and credit investment firm. It has a total of $186 billion worth of assets in its possession. The firm has also been known to invest in companies belonging to media, communication, industrial and energy sector. Recently, the firm has been moving in to make major investments in the technology sector as well. Meanwhile, Rackspace has been motivated to seek out options of its sale in response to rising competition in the cloud space from the likes of Microsoft and IBM. Rackspace’s buyout by Apollo would most certainly result in the former going private.

Tesla’s Powerwall is expected to present a tough competition to Australian clean energy companies

It has been a month since the launch of Tesla Motors Inc (NASDAQ:TSLA) second-generation residential storage system, Powerwall 2, and it’s already gaining a lot of traction particularly in Australia. The new battery pack is not only competitive with the national grid but it also has a calculable payback period.

The Australian Financial Review (AFR) reported that Michael Vostermans, a storage battery expert, got several Powerwall 1 battery packs when it was launched in Australia in late-2015. However, the 6.4kWh battery could hardly fulfill half the energy consumption of his household of three members in Rydalmere, New South Wales.

Additionally, he calculated that it would take the system at least 18 years to pay off the initial investment, which was over twice its warranty period. Therefore, it didn’t make much sense to buy the battery pack.

Since then, the company has launched the Powerwall 2, which has over twice the storage capacity of 14kWh and a built-in inverter, for just over AUD 10,150 ($7,600), including installation and supporting hardware.

The technology is known to be a game-changer, reducing the payback period to a range of six to nine years, according to Mr. Vorstermans. He has placed an order for the Powerwall 2 to store electricity generated by his 4kW of solar panels, set for delivery in February 2017.

He told AFR, “I am buying between six and nine years of solar power in advance – that’s the way I look at it – and anything I get out of it after that is free power.”

Bruce Mountain, another local energy expert, believes that Powerwall 2 puts an end to the “fabulous lunch” of its local rivals from AGL Energy, Energy Australia, Origin Energy, and Redflow. He believes that the new product’s “astounding” progress could allow Australians to beat all discounted power offer from the grid.

Redflow CEO Simon Hackett said in a blog post that Tesla Powerwall 2.0 has created an “Apple vs. Android” moment in the energy storage industry, going against its peer to add a built-in inverter which has lowered the overall cost of the system.

Viacom and DISH reached a mutual agreement following a heated exchange, preventing Viacom blackout

The power struggle within the cable and satellite entertainment industry saw a new low as Viacom, Inc. (NASDAQ:VIAB) and DISH Network Corp (NASDAQ:DISH) waged war against each other in order to derive incremental marginal revenue. Viacom wanted DISH to pay increased licensing fee in order to retain its channels, while, on the other hand DISH was found wanting a better deal. After threats of blackouts were slung from both sides, tides have seemed to settle down as the two agreed on a contract with a term of five years.

Todd Juenger, Bernstein analyst, believes that the deal might have been a strategic ploy employed by DISH in order to keep Viacom under check. The analyst believes that at the end of the five year term, the next agreement will be on DISH’s terms as Viacom will be left with little options. DISH’s online TV streaming platform Sling has been gaining popularity in the US at a rapid rate and will become a necessity for Viacom in future, which, DISH can and will be using to its advantage. Sling has shaped up to be the future of TV and is delivering what the customers have been craving for, with attractive pricing, customizable modules and lucrative core package.

With Sling’s eventual rise on horizon, networks have started to bid on available slots in order to reach a substantial part of US viewership. Viacom will be tiered in to the add-on modules at Sling with flat licensing fee for the next five years without any increases. The analyst’s model suggests DISH being the ultimate winner from the deal as his model suggests greater earnings for DISH from the deal than Viacom. Mr. Juenger maintained an Underperform rating on Viacom and raised PT to $37 from $30.

The analyst recommendations for Viacom stock contain five strong Buy, nine Buy, 19 hold, four Underperform and one Sell recommendation. The stock is currently traded at $42.92.