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March 2019

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The Country Caller sheds light on whispers figures for DSW and Abercrombie & Fitch before their earnings call

DSW Inc. (NYSE:DSW) and Abercrombie & Fitch Co. (NYSE:ANF) will release their financial earnings on Tuesday, August 30 before the opening bell. DSW Inc. would conduct its earnings call for second quarter of fiscal year 2016 whereas Abercrombie & Fitch Co is expected to do the same for 2QFY17. Both the companies have disappointed their investors with dissatisfying results in the past, including expectations miss on both bottom line and top line in the last earnings session. However, the Street projects them to do slightly better this season.

DSW Inc.

The $2.13 billion enterprise is predicted by the Street to report earnings per share of 31 cents. This estimate is two cents higher than the number projected by earningswhispers.com which expects to broadcast EPS of 29 cents. Therefore, if it gives out 31 cents in EPS, it would observe increase of 22.5% from 1QFY16. Also, 26.19% year-over-year increment would also be exhibited if expectations are met.

Furthermore, the consensus has issued an estimate of $656.2 million for net sales. On the other hand, estimize.com has predicted a higher figure of $658.48 million for the footwear retailer, beating the Street estimate by approximately $2.28 million in revenues. If the Ohio-based company fulfills the expectations, the consensus would look forward for the company to note 4.66% YoY rise in its net sales. However, 3.64% decline in revenues would become apparent if $656.2 million in net sales is announced for this season.

Abercrombie & Fitch Co

The Street hopes the retailer would announce loss of 19 cents per share. Street has more hopes than earningswhispers.com as it has projects Abercrombie to post bigger loss of 23 cents per share. If the upscale casual clothing provider posts 19 cents in loss, it would see a decline of 40 cents in its loss from the previous quarter. However, the 12 cents earnings per share of 2QFY16 is projected to convert into a loss of 19 cents this season.

Furthermore, the consensus has projected the $1.53 billion enterprise to declare revenues of $788.62 million. This is slightly higher than estimize.com projection which amounts to $786.96. Moreover, by meeting the expectations of Street analysts, it would see a rise of 15.05% from 1QFY17. Also, it would see increase of 3.56% from 2QFY16 in net sales.

CISCO will gain from economies of scale as more businesses turn to fewer but larger technological solutions providers and dive into data analytics

UBS believes Cisco Systems Inc. (NASDAQ:CSCO) will most likely become a preferred customer choice, as it has positioned itself well in network intelligence, mastering a complex aspect of corporate IT, thus enjoying economies of scale. Analyst Steven Milunovich reiterated a Buy on the company with price target $29.

As companies get picky and partner with a handful of large vendors for technology and networking solutions, Cisco will most likely gain for providing the bundle—CSCO Chief Digital Officer, Kevin Brandy, noted within 9 months of his joining. Since the firm integrates and allows operations via different product platforms, it is a trusted data center supplier linking together and automating applications, networks, and security mapping.

Recently, UBS CIO survey revealed that approximately 66% users look up to Cisco as their core data center supplier. The analyst adds, “Another example is security, where the level of fragmentation probably is unsustainable. Cisco is perhaps the best positioned vendor to consolidate the security market given its large balance sheet, dominant position in the network for visibility into threat information, and leading market share.”

CEO Chuck Robbins and top the management is more involved in Cisco decision-making as technology shapes businesses today. Faster and more accurate data analytics are high in demand as businesses use them for forward decisions and strategizing. Manufacturing, financial services and the retail sector are jumping to embrace this technological change. An example of its application is that Wi-Fi tracks and analyzes consumer behavior in malls, thus providing crucial intelligence. Cisco provides analytics and embeds security while offering this Wi-Fi. The company is expected to announce more analytics in near term.

The most complex aspect of IT infrastructure is perhaps the network. However, Cisco’s ability to provide data flow mapping in such depth is a feat unachieved since IBM SNA. Ownership of the network has benefited CSCO immensely. Mr. Brandy quoted that acquisition of Jasper has lead Cisco to become a top Internet of Things (IoT) platform. He saw IoT as the “true business strategy” where intelligence is generated through the network-collected data.

Majority analysts are bullish on stock as 18 analysts currently covering the stock rate it a Buy, 14 rated it as Hold, while only one gave Sell rating.

JPMorgan’s Ryan Brinkman doubts Tesla’s ability to hit 500,000 units by the end of 2018

Tesla Motors Inc (NASDAQ:TSLA) plans to delivery half a million electric vehicles by 2018, instead of 2020, under the new Build Plan. JPMorgan Chase & Co. (NYSE:JPM) not only doubts the company’s ability to achieve that target even with its strong expansion plan, but is also skeptical over the stock for various reasons.

Analyst Ryan Brinkman maintained his Underweight rating on Tesla but increased his price target by $15 to $185, after the first quarter of fiscal year 2016 (1QFY16) earnings release. He was previously hopeful that the company could meet the 500,000-unit target by 2020 with improved execution. But achieving the same target within two years from now seems extremely unlikely now.

“We think they stood an outside chance of doing this. But these new targets we think standstill less chance of being accomplished within the given more aggressive timeframe,” Mr. Brinkman wrote noted. The research firm believes Elon Musk has created even more hurdles for his company, as capacity acceleration gives “perfect rationale for a large equity capital raise.”

Mr. Brinkman also highlighted increasing competition for Tesla, as General Motors Company (NYSE:GM), Nissan Motor Co Ltd. (OTCMKTS:NSANY), and a number of German automakers are developing EVs which would start hitting the market by the end of this year. This year, GM is slated to release its Chevy Bolt EV. The JP Morgan analyst even warned that the Model 3 average selling price might be far more than “the advertised starting price” of $35,000.

While Tesla management has maintained its full-year guidance of delivering 80,000-90,000 cars this year, with an average production of 1,600-18,000 units per week, the analyst raised his forecast by 740 units to 80,810 units, including 52,412 sedans and just 28,398 sports utility vehicles. Tesla expects that the Model X deliveries will be slightly more than those of the Model S at the end of this year.

Additionally, Mr. Brinkman has reduced his earnings estimate to a loss per share of 45 cents, down from an earnings per share estimate of $0.04 for 2QFY16. While he was expecting the company to deliver 18,750 units this quarter, the company guided for 20,000 units. Tesla now plans to delivery 17,000 units due to in-transit deliveries to the overseas markets. Interestingly, the analyst increased his Model 3 delivery target for 2017 from 20,000 to 50,000 units, compared to the company’s guidance of 100,000-200,000 units.