The Zacks Analyst Blog Highlights: Starbucks, Johnson & Johnson, Merck, First
Solar and SunPower
CHICAGO, Oct. 31, 2012
CHICAGO, Oct. 31, 2012 /PRNewswire/ --Zacks.com announces the list of stocks
featured in the Analyst Blog. Every day the Zacks Equity Research analysts
discuss the latest news and events impacting stocks and the financial markets.
Stocks recently featured in the blog include Starbucks Corporation
(Nasdaq:SBUX), Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK), First Solar
Inc. (Nasdaq:FSLR) and SunPower Corporation (Nasdaq:SPWR).
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Here are highlights from Tuesday's Analyst Blog:
Earnings Preview: Starbucks
Starbucks Corporation (Nasdaq:SBUX) is all set to unveil its fourth quarter
and fiscal 2012 results after market closes on November 1, 2012. The Zacks
Consensus Estimate for the fourth quarter is pegged at 45 cents (estimated
year-over-year growth of 21.03%) on revenues of $3.39 billion (year-over-year
increase of 11.9%). The fourth quarter estimate is at the higher end of the
company guidance range of 44 cents-45 cents.
For fiscal 2012, the Zacks Consensus Estimate is $1.78 (estimated
year-over-year increase of 16.9%) on revenues of $13.32 billion
(year-over-year increase of 13.8%).
Third Quarter Recap
Starbucks reported earnings of 43 cents per share for fiscal third quarter
2012, which missed both the Zacks Consensus Estimate of 45 cents as well as
the company expectations. Starbucks was expecting to post earnings within a
range of 44 cents - 45 cents in the quarter. The lower-than-expected results
were due to soft consumer traffic trends in the U.S. in June and a weakening
global consumer environment. Starbucks has also been struggling in Europe for
some time. Quarterly earnings however increased 19% year over year due to
top-line and margin growth.
Total sales for the third quarter increased 13% year over year to $3.3
billion. The sales growth was driven by strong global same store sales and
substantial top-line growth in the Channel Development (also referred to as
CPG business) segment. The quarterly revenues were however almost in line with
the Zacks Consensus Estimate of $3.31 billion. Following the third quarter
miss, Starbucks cut its outlook for the fourth quarter due to the economic
Agreement of Estimate Revisions
Over the past 30 days, while 2 of 23 estimates for Starbucks's fourth quarter
earnings have been revised downward, one moved in the opposite direction. For
fiscal 2012, one out of 26 estimates moved upward; as well as one estimate
moved downward over the past 30 days. For fiscal 2013, while 2 of 26 estimates
moved up, 3 moved down. There have been no estimate revisions over the past 7
days for either the fourth quarter or for the fiscal 2012.
Most of the estimates were revised after the announcement of guidance cut
during the third quarter conference call in July this year. Starbucks
announced the launch of Verismo and opening of its first store in India in the
past quarter. However, these news did not have any material impact on the
Magnitude of Estimate Revisions
The consensus estimates for the fourth quarter of 2012 as well as for fiscal
2012 have remained static at 45 cents and $1.78 over the last 30 days. The
fiscal 2013 consensus estimate stands at $2.13, unchanged over the last 30
days and at the higher end of the guidance range of $2.04 to $2.14.
Starbucks has surpassed earnings estimates in three of the past four quarters,
recording a maximum positive surprise of 2.78% in the fourth quarter of fiscal
2011. On average, the earnings surprise is a positive 0.74%.
We currently have a Neutral recommendation on Starbucks. The stock carries a
Zacks #3 Rank (a short-term 'Hold' rating).
Earnings Scorecard: J&J
Following the release of third quarter 2012 results, most of the analysts
providing estimates for Johnson & Johnson (NYSE:JNJ) have raised their
earnings estimates for 2012. The revision in estimates mainly reflects the
guidance provided by the company.
Third Quarter 2012 Recap
Johnson & Johnson's third quarter 2012 results exceeded expectations with
earnings (excluding special items) coming in at $1.25 per share, 5 cents above
the Zacks Consensus Estimate and 0.8% above the year-ago earnings of $1.24 per
Despite the negative impact of currency fluctuation, Johnson & Johnson
recorded growth on the back of strong product sales.
Revenues increased 6.5% year-over-year to $17.1 billion, beating the Zacks
Consensus Estimate of $16.9 billion. While operational factors favorably
impacted sales by 10.8%, currency fluctuations had a negative impact of 4.3%.
Results included the impact of the recently completed Synthes acquisition,
which contributed 5.8% to global operational sales growth.
The Pharmaceutical segment put in a strong performance with sales increasing
7.0% year-over-year to $6.4 billion (operational growth of 11.3% and negative
currency impact of 4.3%). Recently launched products like Zytiga, Incivo,
Stelara, Xarelto, Simponi and Invega Sustenna continued to perform well.
Johnson & Johnson also recorded incremental sales due to the amendment of its
distribution agreement with Merck (NYSE:MRK) for Remicade. Other growth
drivers include Prezista as well as Velcade.
(Read our detailed earnings report at: J&J Beats on Higher Revenues).
Agreement of Analysts
Estimate revisions for 2012 indicate a significant positive bias. 14 of the 18
analysts providing estimates have raised their estimates for 2012 following
the release of third quarter results with no analyst moving in the opposite
Meanwhile, the estimate revisions for 2013 also show a similar trend with 11
of the 21 analysts providing estimates raising their estimates with just 2
analysts moving in the opposite direction.
Over the last 7 days, there have been no estimate revisions for 2012 and 2013.
The upward revision in estimates reflects Johnson & Johnson's strong
performance in the third quarter and raised outlook for 2012. Following the
release of third quarter results, Johnson & Johnson upped its earnings outlook
for 2012 to $5.05 - $5.10 in 2012 (old guidance: $5.00 - $5.07 per share).
Magnitude – Consensus Estimate Trend
With the significant positive bias in estimate revisions, estimates for both
2012 and 2013 have gone up by a few cents. While 2012 estimates are up by 3
cents, 2013 estimates have been raised 2 cents.
The Zacks Consensus Estimate for 2012 and 2013 now stands at $5.09 and $5.48
per share, respectively.
Neutral on Johnson & Johnson
We currently have a Neutral recommendation on Johnson & Johnson. The stock
carries a Zacks #2 Rank (Buy rating) in the short run. Even though we expect
Johnson & Johnson to continue facing headwinds in the form of EU and Japan
pricing pressure and manufacturing issues, we believe Johnson & Johnson's
diversified business model, lack of cyclicality, and strong financial position
will continue helping Johnson & Johnson pave its way through tough situations.
Earnings Preview: First Solar
First Solar Inc. (Nasdaq:FSLR) is expected to release its third quarter 2012
results on October 31, 2012. The Zacks Consensus Estimate for the third
quarter of 2012 is $1.10 per share (significant year-over-year decrease of
51.03%) on revenues of $985 million (a year-over-year decrease of 2.09%).
Second-quarter 2012, a Synopsis
First Solar Inc. posted second-quarter 2012 results with pro forma earnings
per share of $1.52, outshining the Zacks Consensus Estimate of 89 cents per
share and year-ago figure of 70 cents per share. On a reported basis, earnings
per share came in at $1.27 compared with a loss of $5.20 per share in the
prior quarter and earnings of 70 cents per share in the year-ago quarter.
First Solar's quarterly revenues were $957 million, up $460 million from the
prior quarter and $425 million from the year-ago quarter. Quarterly revenue
also surpassed the Zacks Consensus Estimate of $805 million. The significant
top-line growth was driven by an increase in the number and size of projects
under construction that met revenue recognition criteria during the quarter.
The projects include Antelope Valley Solar Ranch 1 in California and Silver
State North in Nevada.
First Solar increased its sales and earnings guidance for full-year 2012 based
on the ongoing cost structure, primarily related to the restructuring
initiatives taken by it. The company expects pro forma earnings per share to
be in the range of $4.20 to $4.70 versus its previous expectation of $4.00 to
First Solar expects sales to be in the range of $3.6 to $3.9 billion versus
its prior expectation of $3.5 billion to $3.8 billion. Post completion of the
restructuring program, the company expects to achieve 2.6 to 3.0 GW of sales
in sustainable markets and return on invested capital in the range of 13% to
17% by 2016.
The company expects module costs to be in the range of 70 cents to 72 cents
per watt and production to be in the range of 1.8GW to 1.9GW in full-year
The analysts covered by Zacks expect First Solar to post third-quarter 2012
earnings of $1.10 per share, lower than $2.25 delivered in the prior-year
quarter. Currently, the Zacks Consensus Estimate ranges between earnings of 39
cents and $1.53 a share.
For 2012, the Zacks Consensus Estimate stood at $4.47 per share, below the
prior-year earnings of 6.01 per share. The current Zacks Estimate ranges
between $4.08 and $4.75 per share.
Estimate Revisions Trend
We see slightly increasing trend for estimates for the third quarter of 2012.
Among the 23 estimates, only one estimate moved upward in the last 30 days.
However, there was no movement in the opposite direction over the last 30
For full-year 2012, among the 22 estimates, none of the estimates moved in the
upward or downward direction for the last 30 days.
The analysts seem to be neutral for third quarter as well as full year 2012.
The Zacks Consensus Estimate for the third quarter 2012 remained static for
the last 30 days at $1.10. For full-year 2012, the Zacks Consensus Estimate
did not move in the last 30 days and remained at $4.47.
With respect to earnings surprises, First Solar has topped the Zacks Consensus
Estimate in only one of the last four quarters in the range of (116.67%) to
70.79%. The average surprise over the last four quarter remained at (20.34%).
The earnings beat in June 2012 was the highest at 70.79%.
First Solar Inc. designs, manufactures, and sells solar electric power modules
using a proprietary thin film semiconductor technology. The company's solar
modules employ a thin layer of cadmium telluride semiconductor material to
convert sunlight into electricity. It sells its products to project
developers, system integrators, and operators of renewable energy projects,
primarily in Europe, with a distinct focus on Germany. First Solar also
focuses on designing and deploying commercial solar projects for utilities.
Like its solar peers SunPower Corporation (Nasdaq:SPWR), First Solar is
currently witnessing an oversupply of photovoltaic products, leading to a
steep drop in average selling prices. Also, the current macro scenario does
not bode well for the solar industry, which thrives mainly on subsidies and
grants. Moreover, we are concerned due to the volatile euro, apprehension over
a reduction in German subsidies, falling crystalline silicon prices and the
glut of modules in the market.
However, First Solar stands out among the pack due to its stable liquidity
position, which is in sharp contrast to its cash-strapped peers. In order to
counter the weak trend, the company is focusing more on utility-scale
electricity power projects. The company presently retains a short-term Zacks
#3 Rank (Hold) that corresponds with our long-term Neutral recommendation on
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