Benzinga Weekly Preview: New Amazon Smartphone Makes Its Debut
Amazon (NASDAQ: AMZN) is expected to announce plans for a new smartphone to compete against the likes of the iPhone and the Samsung Galaxy.
Amazon already has a successful line of hardware devices including the Kindle e-reader, the Kindle Fire tablet and a digital TV streaming box. Little is known about the new phone with the timing for production and sale yet to be determined.
Key Earnings Reports
FedEx is expected to report fourth quarter EPS of $2.36 on revenue of $11.67 billion, compared to last year’s EPS of $2.13 on revenue of $11.44 billion.
On June 12, Merrill Lynch gave FedEx a Buy rating with a $160.00 price objective. The analysts at Merrill Lynch noted that the company has outperformed in the fourth quarter for five consecutive years, making it more likely that the company will deliver encouraging results.
“FedEx has topped Consensus EPS estimates in F4Q in each of the past five years, with its last miss in F4Q08 in the midst of the financial crisis. In contrast, FedEx has underperformed Consensus in three of the past five F3Q results.”
On March 20, Credit Suisse gave FedEx a Neutral rating with a $136.00 price target, noting that the growth of commodity airfreight could hurt the company’s growth prospects.
“CEO Fred Smith noted that "the global express market continues to grow" and FDX continues to take share. But what has changed is commodity airfreight - which is squeezing door-to-door express. Indeed, to the extent that customers are willing to sacrifice a few extra days of transit, the packages "can be moved in [the] prolific underbellies" of passenger planes. However, the company remains bullish on global eCommerce, and has repositioned its network in order to move lighter weight deferred traffic into "the bellies of its partners," while "leaving very valuable, fast, and reliable 'purple tail fleet' available for higher yielding packages." In other words, FDX is being very selective with what it puts in its Express networks - taking on more IE, while pushing deferred shipments into FedEx Trade Networks.”
On May 27, Morgan Stanley gave FedEx an Equal-Weight rating saying that EPS estimates for the company are too high.
“Bearish call on disappointing guidance feels priced in. We’ve long argued that expectations for ~30%+ EPS growth in FY15 were too high (See Fast Track: The Question Investors Should Ask on FDX, 9/9/13 here). We still hold this view. But, with FDX range-bound for much of the past 6 months, valuation is at a point where we no longer find a tactical bearish call on earnings compelling.”
S&P Capital IQ gave FedEx a Buy rating with a $180.00 price target on June 7. The analyst team at S&P cited the company’s impressive profit improvement program as reason for their optimism.
“We are positive on FDX's profit improvement program, which seeks to add $1.7 billion to operating income by FY 16, with up to 75% of this target expected to be achieved by FY 15.We think the goal is realistic, using a combination of cost savings, efficiency improvements and incremental revenue-generating ideas.”
Jabil Circuit, Inc.
Jabil Circuit is expected to report a third quarter loss of $0.09 on revenue of $3.60 billion, compared to last year’s EPS of $0.56 on revenue of $4.47 billion.
On March 19, Merrill Lynch gave Jabil a Buy rating with a $22.00 price objective, noting that Apple’s product cycle will likely drive growth as the company is expected to be a part of the new, larger iPhones.
“Management guided F15 EPS to $1.80 at the mid-point. While Blackberry, Aftermarket Services (AMS) and APPL mix issues are all large negative drivers for 2014, in our opinion, the large EPS reset has already baked in all of these, and we think there could be upside to 2015 guidance if Jabil executes well. We expect the AAPL business to get back up to prior levels, and ex-AMS and ex-Blackberry we see earnings power north of $2.00. See our detailed analysis (Figure 1) that gives us confidence into F15 earnings power. Reiterate Buy.”
On June 7, S&P Capital IQ gave Jabil a Hold rating with an $18.00 price target, saying the company has promising future growth prospects.
“Our hold opinion is based on our view of attractive valuation coupled with limited earnings visibility. We see increasing customer concentration, as Apple will account for a large portion of total sales after the BlackBerry loss and AMS sale.”
Carmax is expected to report first quarter EPS of $0.67 on revenue of $3.60 billion, compared to last year’s EPS of $0.64 on revenue of $3.31 billion.
Merrill Lunch gave CarMax a Buy rating with a $67.00 price objective, cautioning that the outside factors like customer preferences and a lack of available credit could weigh on the company.
“Our price objective of $67 is based on about 25x our FY2016 EPS estimate. This is around the middle of the historical average for KMX during periods of growth, which is a stage that we believe CarMax should continue to experience over the next few years. Risks to our price objective are: 1) extreme fluctuations in used vehicle pricing, 2) an extensive trend of customers opting for entry-level new vehicles rather than late-model used, 3) deterioration in credit availability and decline in the ABS market.”
Credit Suisse gave CarMax an Outperform rating with a $58.00 price target on April 24, saying that new entrants into the used car space could create challenges for the company, but that the company remains a strong player in the market.
“In addition to Sonic Automotive’s previously announced intention to open multiple units, yesterday Asbury Automotive announced that they will open two units in Florida. While that may raise the competitive overstoring fear from investors, we view that as effectively a non-event for many reasons, with an overriding one being how fragmented the market currently is and the low market share KMX currently has. If there is a potential issue it will be if these two new chains focus on the 1-4 year old cars, which has been the sweet spot for KMX, with most dealers used segment more geared to older cars. However, with more cars coming off lease each year, we do not see any near-term bottleneck for supply.”
Morgan Stanley was also optimistic about CarMax on June 6 and gave the company an Overweight rating. The analysts at Morgan Stanley see used car businesses benefiting from decreasing supply.
“The seasonally adjusted Manheim Index declined sequentially for the first time in five months in May to 124.7, although was up 4.7% y/y. The unadjusted off-rental index improved 5.3% y/y but was down 2.9% m/m (historically down ~1.6% m/m in May). Details: The average used vehicle price was $10,819, up 3.7% y/y."
S&P Capital IQ gave CarMax a Hold rating with a $51.000 price target on June 7, saying that there is a possibility that the demand for used vehicles could be over estimated.
“Based on our calendar 2014 EPS, price to free cash flow and total enterprise value to EBITDA estimates, KMX recently traded at a premium to the average of publicly traded automobile retailers. We think a premium is warranted given KMX's better-than-peers net margins. Rising investment in new facilities will likely limit capital available for other purposes, but we still see ongoing share repurchases.”
Blackberry is expected to report a first quarter loss of $0.25 on revenue of $969.56 million, compared to last year’s loss of $0.13 on revenue of $3.07 billion.
Merrill Lynch gave Blackberry an Underperform rating with a $6.00 price target on March 28, saying that the company’s revenue is expected to continue eroding.
“Revenue of $976mn was below our $1.1bl and down 64% YoY. Device shipments of 1.3mn missed our 1.8mn and declined 78% YoY, driving hardware sales to $361mn, down 78% YoY. Service revenue of ~$547mn was down 42% YoY and 14% QoQ, in line with our forecast. Gross margin of 43.1% exceeded our 35.2% and was up 930bps QoQ due to cost reductions and mix while operating margins of (16%) were better vs. last quarter’ (35.1%) with opex down 30% QoQ owing to cost benefits, with EPS of ($0.08) vs. our ($0.54) and Street’s ($0.56) benefiting from one-time items. We are adjusting our forecasts accordingly. Maintain Underperform and $6 PO.”
On June 13, Credit Suisse had a similar opinion with an Underperform rating and a $6.00 price target. The analyst team at Credit Suisse noted that the company’s cash will likely continue to decline through FY15.
“For F1Q15, we are looking for revenue of $949mn (-69% yoy/-3% qoq) with GM of 37%, driving our EPS estimate of -$0.19, compared to the consensus estimates of $944mn of sales and EPS of -$0.17. FCF burn last quarter was at ~800mn. While the near term cash burn situation may improve with the recent $278mn sale of real estate holdings (lower than our $300mn estimate), the accelerating decline of services revenue (~-15% qoq) and the limited visibility of MDM remains a concern. As a result, we reiterate our underperform rating with TP of $6. Focusing on services and messaging, visibility remains low.”
On June 7, S&P Capital IQ gave BlackBerry a Hold rating with an $8.00 price objective, noting that the company is facing quite a few headwinds in the year to come despite the appointment of new CEO John Chen.
“Our hold recommendation on the shares reflects our concern regarding subscriber losses and difficulty in rebuilding enterprise relationships. BlackBerry recently agreed to sell $1.25 billion of convertible notes to a group of investors including Fairfax Financial. We believe the appointment of CEO John Chen is a positive for the company as BBRY transitions away from a hardware company to an enterprise mobile device management play.”
With Stanley Fischer as the Federal Reserve’s new vice chairman and two new nominees confirmed to the Fed’s board, the US central bank’s meeting will be closely watched next week. After four weeks of $10 billion reductions to the bank’s monthly bond purchases, most expect the Fed to stay the course. However the new roster could shift estimates for the future of the bank’s interest rates.
- Earnings Releases Expected: No notable releases expected
- Economic Releases Expected: eurozone CPI, Swiss PPI
- Earnings Expected: Adobe Systems Incorporated (NASDAQ: ADBE), Bob Evans Farms, Inc. (NASDAQ: BOBE)
- Economic Releases Expected: Chinese house prices, Japanese trade balance, US housing starts, US CPI, German ZEW economic sentiment, British RPI, British PPI, British CPI, Hong Kong’s unemployment rate, Italian trade balance
- Earnings Expected: Actuant Corporation (NYSE: ATU), FedEx Corporation (NYSE: FDX), Jabil Circuit, Inc. (NYSE: JBL)
- Economic Releases Expected: New Zealand’s GDP, US current account
- Earnings Expected From: Pier 1 Imports, Inc. (NYSE: PIR), IHS Inc. (NYSE: IHS), Blackberry (NASDAQ: BBRY), Kroger Company (NYSE: KR)
- Economic Releases Expected: Russian unemployment rate, eurozone consumer confidence, US initial and continuing jobless claims, British retail sales, Spanish trade balance
- Earnings Expected From: CarMax Inc. (NYSE: KMX), Darden Restaurants, Inc. (NYSE: DRI)
- Economic Releases Expected: German PPI, eurozone current account, Italian industrial sales
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