Electronics retailing giant Best Buy (BBY) will announce its Q1 results on May 20. We expect the company to report better year-over-year revenues largely due to its price matching policy. However, margins could come in lower due to aggressive pricing and its net profit may not see much upside.

Best Buy was in the news this quarter for three main reasons: the commencement of its price matching policy, setting up its Samsung-branded boutiques in its stores and the decision to exit Europe by selling off its stake in its joint venture with Carphone Warehouse.

CEO Hubert Joly seems to have taken some steps to arrest the slide in Best Buy’s stock, and these efforts are yielding results as evident from the stock performance over the last three months. The earnings results will clarify whether the price movement is sentiment-driven or backed by improved business prospects.

Exiting Europe

Last month, Best

Quick Take

• Baidu’s operating margin dropped dramatically in Q1 2013 on account of investments in infrastructure, marketing and R&D as well as the consolidation of its online video platform.
• This trend is expected to continue in 2013 as the company invests in R&D and marketing to enhance its market share in the mobile search. Currently, Baidu’s market share on mobile devices is less than half its share on desktops.
• While the decline in margins seems disappointing, we believe it is necessary for Baidu to invest in long-term growth opportunities.
• The Chinese Internet market is undergoing a transition with increasing usage of mobile devices for accessing the Internet. Hence, the success on mobile platform is critical for Chinese Internet companies to achieve strong long-term growth.

Baidu (BIDU) is the leading online search provider in China. While its top-line continues to grow at a healthy rate, the company’s profitability has suffered in

Western Digital (WDC), one of the leading manufacturers of hard disk drives, has collaborated with SanDisk (SNDK), a flash memory or NAND market leader, to launch its first hybrid disk drive (SSHD). ^[1] The move comes as the storage device maker catches up with its largest competitor Seagate (STX) to tap the expected surge in demand of SSHDs. Below we discuss how the deal could benefit Western Digital going forward.

We have a $64 price estimate for Western Digital, a slight premium to the current market price. Western Digital’s stock has risen over 30% this year.

Demand For Hybrid Drives Are Expected To Surge

SSDs have a few advantages over conventional HDDs as these drives allow for faster data access and are very thin compared to HDDs. However, SSDs are currently much more expensive per GB than HDDs, leading to slow adoption of SSDs as

The Travelers Companies, Inc. (TRV) is the sixth largest property and casualty insurer in the U.S. with a market share of 4.5% in terms of premiums earned. [1] We have revised our price estimate for Travelers to $94, implying a premium of 10% to the market price.

In our valuation model, we have divided the company into three business divisions: Business and Financial Insurance, Personal Insurance and Investment Income. In this article, we focus on Business and Financial Insurance, which accounts for 60% of the company’s revenues and 65% of operating income.

Workers’ Compensation

Travelers’ main insurance product line in this division is workers’ compensation accounting for almost 30% of the net written premiums. The line covers employers for workplace injuries to employees. The benefits offered include medical benefits, disability benefits, death benefits and vocational rehabilitation benefits. The products included in this line of insurance include both fixed premium policies,

Having released its new BB10 platform with high-end handsets earlier this year, BlackBerry (Nasdaq:BBRY) is now targeting the emerging markets with low-end smartphones. At the BlackBerry Keynote address held on May 14, the handset maker took the wraps off the Q5 – its long awaited QWERTY replacement for the earlier generation low-end Curve handsets that were a rage in the emerging markets.

While BlackBerry will look to improve margins and return to full-year profitability with the help of high-end smartphones, the low-end models will be used primarily to stem the subscriber loss it has been suffering for push email and BBM services in the recent quarters. With the handset division in the doldrums, BlackBerry’s services have grown in importance to contribute the most value to its stock – almost 30% by our estimates. The success of the low-end BB10 models is therefore very important if the company has to stay

Quick Take

• Limited Brands is expected to release its Q1 fiscal 2013 earnings on May 22.
• According to a recent press release, the company will report a moderate 3% increase in overall comparable store sales.
• Victoria’s Secret started the quarter strongly, but its growth slowed subsequently due to lower demand for apparel products, aggressive promotions and a weak response to new product launches.
• At Bath & Body Works, the growth remained slow but steady due to the mixed impact of lower store traffic and strength in core product categories.

Limited Brands (LTD), the parent company of Victoria’s Secret and Bath & Body Works, is expected to release its Q1 fiscal 2013 earnings on May 22. According to a recent press release, the company will report overall comparable store sales growth of 3% with similar growth across its main brands. The retailer will also report lower margins

Quick Take

• Urban Outfitters will release Q1 fiscal 2014 results on May 20.
• The direct-to-consumer channel will continue to drive the retailer’s results aided by several new initiatives. The company has seen robust growth in its mobile channel as well which is likely to continue.
• However, the prolonged cold weather in the U.S. might have a negative impact on Urban Outfitters’ spring clothing sales.

Urban Outfitters (URBN) is scheduled to release its Q1 fiscal 2014 earnings on May 20. [1] We believe that while the strong direct-to-consumer (online) channel will continue to be the primary growth driver, the unusually cold weather in the U.S. could weigh on the results. The longer term outlook looks better as Urban Outfitters has been actively investing in boosting its online sales. This business generates significantly higher margins than the retailer’s other businesses, and constitutes roughly 40% of its value.

Strength In Direct-To-Consumer Business Will

Quick Take
• Boeing plans to resume 787 Dreamliner deliveries to airlines in the coming weeks as it has received FAA’s approval on its proposed fix for the plane’s battery issues.
• The resumption of 787 deliveries will help Boeing repeat its strong 2012 performance of delivering over 600 commercial airplanes to customers.
• Recently, the company also hiked the 787 production rate to seven airplanes per month. Higher deliveries will add to growth in the company’s results in 2013.

Last week, Boeing (BA) produced the first 787 Dreamliner at an increased production rate of seven airplanes per month. [1] The aircraft manufacturer plans to further raise the 787 production rate to 10 airplanes per month by 2013 end driven by their huge order backlog of 840 undelivered airplanes. [2]

Further, with the battery issue resolved and the 787 deliveries set to resume in the coming few weeks, higher 787 deliveries as a

Lifestyle company Ralph Lauren (RL) is scheduled to report its Q4 2013 financial results on May 23, 2013. We expect Ralph Lauren to post strong sales growth this quarter with higher sales at factory stores, Club Monaco, e-commerce sites, and North American wholesales stores. Moreover, the profitability is expected to improve on account of lower input costs and better expense management.

While we expect Ralph Lauren to post strong sales growth in the Americas region, we will keep a close eye on European and Asian sales this quarter. We think the sales growth at retail segment will outpace overall revenue growth in the coming quarters as Ralph Lauren leverages its strategic initiative of growing its direct-to-consumer business.

Recap of Q3 2013 Results

In Q3 2013, Ralph Lauren posted revenue of $1.8 billion, which represented a year-over-year increase of 2%. Excluding the impact of strategic changes such as store closures associated

Amazon’s (AMZN) revenue growth in the recently reported quarter stood at 22%. Although the figure came down compared to last year, it is still impressive for a company that’s garnering $16 billion in quarterly revenues.

There is no doubt that the overall e-commerce growth is propelling revenue growth for Amazon, but there are other finer points to consider. The company has been pushing its Kindle tablet which can act as a catalyst in promoting its merchandise sales. In addition to this, Amazon’s management seems clear about its focus on absolute cash flows rather than percentage margins. This strategy essentially implies that the company will continue to offer deep discounts to push its sales. As far as margins are concerned, growth in Amazon’s Web Services business should help support the company’s profitability.

Growth In E-Commerce Market

Market research firm Forrester expects U.S. online retail sales to grow rapidly and take market

Quick Take
• UTC’s Goodrich and International Aero Engine (IAE) acquisitions of 2012 have positioned it well to benefit from the long-term growth anticipated in the commercial aviation industry.
• In the near term, integrated product offerings and synergies from the Goodrich acquisition will add to UTC’s aerospace growth.
• At the same time, UTC’s Geared Turbofan engine series PurePower PW1000G is expected to drive up engine shipment volumes at Pratt & Whitney.

United Technologies (NYSE:UTX) transformed its aerospace business last year through multiple acquisitions and divestitures to take advantage of the growing global commercial aviation industry. The company acquired the aerospace parts manufacturer, Goodrich, for over $18 billion to gain a leadership position in the aerospace supply chain. Integrated product offerings resulting from this acquisition have provided United Technologies [UTC] with a significant competitive advantage against other major aerospace parts manufacturers like General Electric (NYSE:GE) and Honeywell. Further, synergies from this acquisition

Quick Take

• Office 365 has advantages over traditional Office 2013 which will make it popular among prospective clients in the coming years.
• Office 365, with a revenue run rate of over $1 billion in Q1 CY13, is priced to sell and should boost top-line.
• Cloud-based Office 365 will bolster revenue in price sensitive and piracy plagued emerging economies and further stabilize Microsoft’s market share in the productivity domain.
• Office 365 will also aid Microsoft in up-selling and cross-selling its other products.

Microsoft Corporation (MSFT) is the leader in the productivity software segment with its flagship Microsoft Office productivity suite. With the launch of Office 2013 and Office 365 in February, Microsoft has made big waves in the productivity market. The Office productivity suite is Microsoft’s biggest revenue driver and makes up 39% of its estimated value. This segment generated approximately $24 billion in revenue in 2012, and we expect this

Despite declining revenues, Texas Instruments (TXN) retained its position as the leading global supplier of semiconductors for industrial electronics in 2012, as per a research by iSuppli. After showing robust growth in 2010 and 2011, the industrial electronics market declined by 5.4% in 2012, on account of a slowdown in global markets where the chips are used - security, test and measurement, motor drives, metering, medical electronics, renewable energies, etc. Though TI’s revenue from the segment declined by 6.6% annually ($2.1 billion), it accounted for majority of the industrial electronics market last year. [1]

Having exited the smartphone and tablet markets in September 2012, TI is now focused on expanding its footprint in embedded applications such as industrial equipment, automotive, enterprise communications, etc. The company feels that the embedded markets offer greater potential for sustainable growth compared to mobile devices. TI derives 17% of its product revenue from the industrial

Disney (DIS) registered overall revenue growth of close to 10% in Q2 fiscal 2013, which is impressive for a company of its size. ^[1] It primarily operates in the mature market of North America, which accounts for three-fourths of its total revenues. As a result, the company’s performance is primarily tied to the state of the U.S. economy and overall quality of its produced content. It is impressive to see Disney demonstrating growth across all its major segments, except for the weakness in broadcasting. ESPN continued to lead the way with growth in both advertising and affiliate fees. ABC broadcasting saw some weakness due to pressure on ratings, but Disney’s own TV stations did reasonably well. Its parks and resorts business benefited from higher attendance and guest spending, growing its operating income by a staggering 73%. ^[1]

Overall, we feel that given Disney’s

Leading graphic processors developer Nvidia (NVDA) announced its Q1 2014 earnings on May 9. With $955 million in revenues, it witnessed a 13.7% sequential decline but registered 3.2% annual growth. Seasonal factors, declining PC shipments and lower Tegra sales were the key factors responsible for the slow quarter. Nevertheless, the results were better than Nvidia’s expectations as it saw strong sales of its high-end GPUs for PC gaming and increasing acceptance of the Kepler architecture in PCs and beyond. Additionally, on account of a richer mix of higher margin products, increasing strength in GPUs and prudent cost management, Nvidia earned record gross margins of 54.3% in the quarter.

As mainstream PCs continue to be cannibalized by tablets, Nvidia intends to focus on retaining its lead in visual computing, extending GPUs beyond PCs and leveraging Tegra processors to tap the fast growing market for new computing devices. The company is gaining

A single-minded focus on the credit card industry gives Capital One (COF) a very unique business model compared to the country’s biggest banking groups, who are either extremely diversified in their financial services offerings like JPMorgan Chase (JPM) and Bank of America (BAC), or are focused on the traditional loans-and-deposits model like Wells Fargo (WFC) and U.S. Bancorp (USB). The credit card business model has a lot of potential simply because card loans demand the highest interest rates among all retail loans offered by banks. Net interest margins on credit cards for banks are normally twice or three times the figure for other retail loans like auto or student loans.

But then, there really is no such thing as a free lunch. The high returns come with a higher risk due to the short term, unsecured nature of credit card loans. And card loans are often the first to go

The pressure on Merck's (MRK) revenue growth is likely to continue in 2013, as the company battles multiple patent expiries and unfavorable currency movements. It is likely that there will be no respite in the near term, although the revenue declines for some of the major drugs will moderate in the latter half of 2013. Merck's best bet lies in its R&D to develop key drugs that can tap growing markets of oncology, immunology, and diabetes. There are some drugs in the pipeline and some of them seem promising, but it is too early to determine their marketability. In this analysis, we'll look at Merck's problems and what the company is doing to mitigate them.

Patent Expiration Issues Continue to Haunt Merck

Like other major pharmaceutical companies, Merck is also battling against the impact of patent expiry of its several major drugs including Singulair, Propecia, Clarinex, Maxalt, Cozaar, and Hyzaar.

Boston Scientific's (BSX) stock rallied over 5% on Thursday after the medical device maker released the much-awaited four-year follow-up data from the Protect AF clinical trial pertaining to its Watchman devices. In this new data, Watchman exhibited more efficacy over Warfarin in preventing death and strokes in atrial fibrillation patients.

This could come as a major boost for Boston Scientific, which has been grappling with declining sales and market share in the Cardiac Rhythm Management (CRM) division. The CRM division consists of products that help in the treatment of abnormal heart conditions by the use of pacemakers and implantable cardioverter defibrillators (ICDs). Below we take a detailed look at how this event could impact the division and our price estimate.

Efficacy Over Warfarin Could Boost Watchman Sales

Atrial fibrillation (irregular heartbeat) is one of most common cardiovascular conditions affecting almost 3 million people in the U.S. alone. Boston

ArcelorMittal (NYSE:MT) released its first-quarter earnings on May 10. The company reported revenues of $19.7 billion down 13% from $22.7 billion in Q1 2012. Accordingly, the closely watched EBITDA figure fell 26% year-over-year to $1.57 billion. The lower sales and EBITDA figures were due to lower shipments and selling prices. Steel shipments fell by 5.7% year-over-year to 20.95 million tonnes. ArcelorMittal reported an overall net loss of $345 million but reiterated its full-year guidance for 2013, assuming that iron ore prices retain their 2012 levels at $130/tonne and margins of steel prices over raw material costs also remain the same as last year’s [ArcelorMittal Q1 2013 6-K, SEC].

For the last few months, the company has been concentrating on reducing its debt, selling off non-core assets, idling excess production capacity and cutting costs across divisions. This was essential because all major rating agencies had downgraded its debt rating

Quick Take

• Sina will report its Q1 2013 results on May 16, 2013.
• We expect strong revenue growth for the Weibo platform; however, the number of daily active users and average time spent by users could post slower growth this quarter on account of competition from WeChat.
• We think the MVAS business will continue to decline in the coming quarters though revenue from Weibo value-added services could grow rapidly.
• We will look growth signs as the company expects to see improved productivity and higher returns in 2013.

Sina (SINA), a Chinese online media company, is scheduled to report its Q1 2013 financial results on May 16. Coming on the heels of Alibaba’s 18% stake in Sina’s Weibo platform, we are keen to get more details on this partnership and how it could ramp up Weibo’s monetization in the future. We will also closely track the margins as the company expects