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March 2019

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The Country Caller takes a dig at the upcoming earnings of Priceline Group & CVS Health ahead of their Q3 announcements

This earnings season, Priceline Group Inc (NASDAQ:PCLN) and CVS Health Corp (NYSE:CVS) are all set to report their financials for the third quarter of fiscal year 2016. According to earningswhispers.com and Estimize, both the companies are expected to beat the Street on both top and bottom lines. The Country Caller discusses the whisper numbers in detail below.

Priceline Group

The consensus expects $29.92 in EPS for the Q3 of PCLN. This hints toward a 18.02% annual rise as the company reported $25.35 in EPS for the same quarter last year. For the preceding quarter, Priceline reported $13.93 in EPS, which suggests that the consensus expects 29.92% sequential growth in earnings. According to earningswhisper.com’s estimate, the company would beat the Street on bottom line by one cent at $29.93 EPS.

For 3QFY16, the consensus projects PCLN to report $3.62 billion in revenues. This estimate reflects a YoY growth of 16.77% as the company reported $3.10 billion revenue a year ago for the same period. Whereas, according to last quarter sales of $2.55 billion, the consensus is looking for a 41.96% rise in sales. However, Estimize’s estimate of $3.628 billion revenue suggests that the company will beat the Street on top line slightly.

CVS Health Corp

For the quarter ended September 30, EarningsWhispers.com expects CVS to report earnings of $1.59 per share, suggesting the company to beat the Street’s estimate of $1.57 EPS. A year ago earnings of $1.28 per share reflects a YoY increase of 22.65%. For the preceding quarter, the company reported $1.22 in EPS.

The consensus anticipates CVS’ revenue to come in at $45.31 billion, which is slightly below Estimize’s projection of $45.336 billion. That would be 17.38% higher than its revenue of $38.6 billion a year ago. For 2QFY16, revenue came in at $37.2 billion, which implies a 21.80% QoQ rise in revenue this quarter.

We explain why Shell provides a lucrative investment bet

The recovery in oil prices along with hints of balance in supply demand fundamental for oil markets, we continue to believe that Royal Dutch Shell plc (ADR) (NYSE:RDS.A) could provide significant upside to investors. This is because currently, Brent Crude trades at around $55 per barrel, very much close to target of $60 presented by Shell where it could report significant positive cash flows. Moreover, as it is likely the case, Oil might sustain at $60 in the next year and the stock price could rally in tandem with oil prices. 

One might also expect arena of $70 per barrel in oil markets in a very bullish scenario, but $60 too presents satisfactory performance expectation from Shell. This is because the capital projects on which Shell is working on since 2014, and will continue work on until 2018, are based on very low level of operational expenditure of around $15 per barrel. 

Moreover, the company is almost halfway through its project cycle, and this would mean that its Capital Expenditure would not consume major chunk of its cash flows in the future presenting further upside. In addition to lower Capital Expenses, Shell has worked hard to trim down its operational expenses too. With the company focusing towards lower cost assets, the numbers could be expected to inch down further. 

On annual basis from 2013-2015, the company has produced free cash flows of around $12 billion, which was when oil traded at around $90 per barrel. With oil hovering around much lower, Shell expects its Free Cash Flows to be at $25 billion even at $60 per barrel, which signifies the efficiency level of the company. 

In past twelve months, Shell’s stock has traded at a multiple of 15x of its cash flow. This is at operating cash flow of around $16.9 billion. As the company expects its Free Cash Flow to be at $25 billion, the same multiple predicts much higher price for Shell even with conservative oil price estimate of $60 per barrel. Hence, we believe this could present a lucrative investment option to investors.

The energy giant has been suspended from bidding for the lease of a FPSO platform for the lucrative Libra field

Shortly following the aftermath of the corruption scheme, allowing Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) to enjoy a sigh of relief, the latest trouble that has hit the company is a court decision; according to which, the energy giant has been suspended from bidding for the lease of a first floating production, storage, and offloading (FPSO) platform for the lucrative Libra field. In response to that, the company has announced to file an appeal in the court.

 

Sinaval, the association of Brazilian shipbuilders, got hold of an injunction that suspended Petrobras from taking part in the bid. Reason behind the suspension was that the company failed to abide by the country’s rules for local content.

 

Libra, the offshore oil field in the Santos basin is the country’s biggest crude reserve containing nearly 8-10 billion barrels of crude. Having such a large amount of oil makes Libra a great potential for the state-run company’s path to recovery. While many Big Oil companies solely had to face the economic slowdown in oil & gas prices, times were more different, tougher for Petrobras. The company not only went through the plunging crude oil environment, but was also trapped in the corruption scandal; the latter dented its financial profile as well as shook Brazil’s economy. Its top executives were charged with several lawsuits over reportedly having received bribes for inflating engineering contract prices.

 

First production from the Libra oil field is slated to come up in 2020. Although the first decision was won by Petrobras that argued that it abided by the local laws, but the tenders were quite expensive. However, the latest decision comes out in favor of Sinaval.

It shall be noted that apart from the energy major that has a 40% holding in Libra, other Big Oil like Royal Dutch Shell plc (ADR) (NYSE:RDS.A) have 20% holding while French oil giant Total SA (ADR) (NYSE:TOT) and CNPC have 20% and 10%, respectively.

According to media reports, Tesla could be planning to roll out an additional Model S version with a 100 KWh battery pack

While Tesla Motors Inc (NASAQ:TSLA) fans drool over speculations relating to the company’s highly anticipated launch of the mass market electric Model 3 sedan due on March 31, a side rumor hints Tesla could pull out even more from inside the hat very soon.

These rumors suggest Tesla may have another addition to its Model S line-up – a dual motor high performance version with a 100 kWh battery pack that is a Tesla Model S P100D.

A current Tesla owner and a computer geek Jason Hughes, talking to Teslarati over the weekend said the company has already supplied the badge graphic for the new version in the latest firmware update two months ago. In a Tweet on Friday, he sent the message as a computer code to the world that was decoded by a Tesla Motors Fan Club member LuckyLuke and happened to be the same badge.

Tesla started off with an 85 KWh battery pack for the Model S when it was launched in mid-2012. But since last year, when the company launched a new base model with a 70 KWh battery pack, it has discontinued the 85 KWh battery pack, and is now using a 90 KWh battery pack along with dual motors and high performance options. The move has extended the price differential to $12,000 between the base model and the 90 Kwh versions.

Now Tesla is aiming to increase the battery storage to 100 KWh which some analysts claim could extend the range of the Model S to 300 miles – an important milestone from a marketing standpoint and otherwise. Almost all major automakers have said they are working to roll out a production electric vehicle with a 300 mile range, but it seems Tesla could beat them all.

Notably though, Tesla has not confirmed the launch of the 100 KWh Model S package perhaps because it wants to keep it under the covers till the media and the fans were done absorbing the shimmers of the Model 3 being unveiled later this month. The Model 3 – being more of a mid-priced vehicle will carry only a 200 mile range, 65 miles shorter than the 85 KWh premium Model S when it goes on sale next year. GM too is rolling out its mass market electric vehicle Chevy Bolt to compete with the Model 3 with the same range.

We believe Tesla may have some insights to share relating to the Model S P100D at the unveiling event of the Model 3 on March 31.

Shares for Tesla climbed 2.71% on Friday to $201.04. So far this year, shares for the company are down 16.24%.

 

A glance over the specifics of the transaction and how it will help General Electric to grow further

General Electric Company (NYSE:GE) capital division has announced that it has signed a purchase and leaseback transaction with Qatar Airways. The deal consists of five Airbus A350-900s. This will help the company to expand its carrier fleet.

Earlier in June, Qatar Airways walked away by canceling its first Airbus A320 neo order. The main reason behind the cancellation was some of the delays that were expected from the supply side.

General Electric has hugely existed from its capital division. Investors then started to show greater interest in the stock and have started to take notice. This is because the company was hit hard at times of the credit crisis. This was the time when its financial markets suffered hugely. The company sold its last finance division in October last year to Wells Fargo.

Recent Developments:

General Electric purchased Doosan’s heat recovery steam turbines worth $250 million. This is expected to general healthy revenues from Alstom and will enable General Electric to play tough with the competition.

Furthermore, the Company’s Chief Technology officer announced that he has no plans of moving to Boston, the new headquarters in Fort Point. Boston is known as one of the best technology areas, due to which General Electric moved.

General Electric is known for its diversity in the industry. Its air and defense sector and the technology sector have certainly given a boost to the revenues of the company. The sale of the finance division will allow it to focus more of the industrial side, which it considers to be one of the most lucrative segments of the company.

General Electric stock jumped 0.27% to $31.27 as at 2:16 PM EDT yesterday. The company has a huge market cap of $279.86 billion. The stock has a 52-week range of $19.37-33.

HSBC prepared to move some staff from London to Paris, followed by UK Prime Minister Theresa May’s statement

HSBC Holdings plc (ADR) (NYSE:HSBC) Chief Executive Stuart Gulliver expressed the gradual move of some staff to Paris, following Brexit. While speaking at the World Economic Forum in Davos, Mr. Gulliver discussed UK Prime Minister Theresa May’s role towards the referendum, a day before the Prime Minister officially announced that Britain is moving out of the European single market.

HSBC has been one of the most vocal corporations on Brexit, stating that the outcome is not the most favorable to banks, but they are prepared. In the interview on Wednesday, Mr. Gulliver said that he plans to move the staff responsible for 20% of the trading revenue. He said, “Activities specifically covered by EU legislation will move, and looking at our own numbers, that’s about 20% of revenue.”

Previously, HSBC stated that more than 1,000 jobs would be required to move from London, which is the major hub for market access to whole Europe. The staff will start moving after two years when the process is completed. The shift of the staff will not take much time, as claimed by Mr. Gulliver. HSBC has all the licenses already placed for such a shift. The lender would only need to set up a subsidiary in France, which would take few months.

In a separate statement while speaking with Bloomberg, Mr. Gulliver expressed that the macro-economic conditions do not allow now to achieve Return on Equity (ROE) of 12%-13%. Therefore, the new targets are set to 10%, given the headwinds from low interest rates, Brexit move, and lack of growth in Europe.

HSBC stock has seen a significant gain in market value since the election day in November 2016. Banking sector has overall enjoyed the rally, but investors are still concerned about the continuation of the bull market. The stock trades higher in pre-market over Mr. Gulliver’s interview.

Oppenheimer’s Colin Rusch expects product launch delays as the company has its hands full with various projects

Last week, Tesla Motors Inc. (NASDAQ:TSLA) officially closed its acquisition of SolarCity Corp. (NASDAQ:SCTY) after shareholders both of the companies approved the transaction worth $2.1 billon. Following the report, Oppenheimer updated its thesis on Tesla shares, reiterating its Perform rating today; the firm does not have a price target for the stock.

Colin Rusch, the analyst at the research firm, said that Tesla stock will now track the company’s execution on the production ramp of its more affordable compact sedan, the Model 3, and its price will trade within a range depending on the Model S and Model X quarterly deliveries and gross margins.

He believes that the clean-tech company has its hands full with ambitious production targets, battery and solar production ramp at Gigafactories in Sparks, NV and Buffalo, NY, respectively. Therefore, it would not be surprising for him if Tesla delays launches of its upcoming products, the Model 3 and solar roof “given the magnitude of the company’s agenda.” The investment firm added: “We believe the company is also seeing the beginning of used inventory and what we believe is the challenge of introducing a consumer electronics type product cycle into a durable goods end market.”

Mr. Rusch lifted his loss per share estimate from $2.09 to $2.30 and lowered his revenue forecast from $7.0 billion to $6.8 billion for this year. For the next year, he improved his bottom-line and top-line projections from loss per share of $0.23 to $0.15 and from revenues of $7.7 billion to $9.0 billion. The research firm said that it will continue monitoring Tesla’s solar financing and capital expenditure, as well as expecting “a multi-pronged strategy.”

As of 12:14 PM EST, Tesla shares ticked up 0.65% to trade at $197.93, after rallying about 7% over the last week. Despite such mixed report, Tesla investors remain optimistic after the takeover of the nation’s biggest installer, as they could now see the long-term picture that CEO Elon Musk was trying to show them. Last week, The Country Caller reported that Tesla, along with SolarCity, has completely put an end to the fossil fuel dependence of the Island of Ta’u, deploying a new microgrid project of Powerpacks and solar arrays.

BP aims to benefit massively by acquiring stake in various projects all over the world

BP plc (ADR) (NYSE:BP) has been in the news lately for investing on various projects all over the world. The energy giant has acquired stake in various companies for both – natural gas and oil exploration. It has also decided to move its US headquarters to Denver, bringing in jobs to that area. In recent news, the energy giant has 10% of the Abu Dhabi based company for Onshore Petroleum Operations. The deal is worth $2.2 billion with the Abu Dhabi emirate.

BP will pay for the deal by transferring its 2% share capital to the government of Abu Dhabi as reported by various sources after the deal was announced. It will make BP the concession holder of the Bab, Bu Hasa, Shah, and Asab oilfields, which the energy giant will operate for the next 40 years. Bloomberg reported that these oil fields would account for approximately 30 billion barrels of oil over the next 40 years.

BP CEO Bod Dudley informed Bloomberg, “This deal will provide an output of 160,000 barrels a day, in addition to the 95,000 barrels BP now produces in Abu Dhabi”.

The British energy giant has been operating in Abu Dhabi since 1939 and held almost 10% stake in the company since 1970. The concession had expired in 2014 and the low oil price environment hindered in awarding any long-term contract.

The Chief Executive of Abu Dhabi National Oil Company and Minister of State, Sultan Al Jaber, told the press, “This agreement marks a milestone in our efforts to forge new partnership models that bring technology, expertise and financing aimed at maximizing the value of our resources and supporting the transfer of knowledge.”

The shares of the oil giant fell in the last session by 0.08% and closed at a price of $36.56. The shares are still seen falling in the pre-market hours today. The stock price has fallen by 0.30% as of 5:35AM EST and traded at $36.45.

Cowen & Company affirms confidence in the recently announced deal and sees it as highly favorable for 5G ecosystem

On Thursday October 27, Cowen & Company offered positive read on the recently announced merger deal between Qualcomm, Inc (NASDAQ:QCOM) and NXP Semiconductor NV (NASDAQ:NXPI). The firm sees the deal as highly positive for Qualcomm, which it had been suggesting since November. Following the deal, Cowen has iterated an Outperform rating on Qualcomm stock, along with a $74 price target. The price target calls for a 5.57% upside potential over the closing price of $70.09.

Cowen analyst commented, “While not without integration challenges (QCOM is fabless) is partially integrated with significant mfg operations), the bottom line is that we love this deal for QCOM and we have been suggesting for almost a year, since last November (QCT Better, QTL Worse), and five additional times in the intervening period.”

Given the considerable accretion to this deal and the fact that Qualcomm needs NXP, the firm is surprised that acquisition target, NXPI, would not push for a higher price. According to the firm, the deal brings an entirely new and fertile ground for Qualcomm, such as Internet of Things. Furthermore, as 5G technology takes shape, the deal would prove to be “highly synergistic” with the company’s ongoing efforts. “While many IoT devices will be low ASP commodities, Automotive and Industrial are IoT verticals that we see as more profitable for semiconductors, and this is precisely the exposure that QCOM gains with NXPI,” said Cowen.

Qualcomm’s connectivity and processing solutions combined by NXP’s analog, sensor and industrial networking capability could make QCOM a dominant player in automotive and industrial applications. Additionally, the deal also brings further leverage to the company in defining 5G ecosystem. All in all, QCOM stock is sure to have positive impact of the NXP deal as focus on smartphone units – iPhone specifically – will now be mitigated significantly, says the analyst.

The developer once again takes the software giant’s questionable moves under discussion

Founder of Epic Games, Tim Sweeney, has been vocal about his sentiments on the gaming industry. The developer had expressed his feelings about Universal Windows Platform and Microsoft Corporation’s (NASDAQ:MSFT) attempt to try to build a wall around its platform by keeping games exclusives to Windows Store.

In a recent interview with Edge magazine, Tim Sweeney expressed his belief that Microsoft will try to dominate the digital store competition by crippling Steam on Windows 10.  

“Slowly, over the next five years, they will force-patch Windows 10 to make Steam progressively worse and more broken.”

He believes that the effect will happen gradually, but it will never be completely broken, just enough to make gamers sigh in despair and seek Windows Store as an alternative. It is true that Microsoft has begun pushing new first-party games behind Windows 10 and Windows Store exclusivity. The fact that the company has over 270 million users actively using the new operating system gives it the power to dictate its policies to people who have no other option. If a gamer wants to play the upcoming Gears of War 4, he must jump to Windows 10 and buy it from the Windows Stores – there really is no other option.

Another fear outlined by the developer is that if Microsoft succeeds in convincing people to use UWP instead of Win32, they could use Windows Store to distribute it. “Once we reach that point, the PC has become a closed platform,” he added.

It is certainly a dangerous thought awaiting Microsoft’s response. Previously, the company had responded to Tim Sweeney’s comments and invited him for an open discussion.