Vlad Deshkovich's Instablog Investor focused on the technology sector. Vlad Deshkovich http://seekingalpha.com/author/vlad-deshkovich/instablog As Domestic Sales Of Soda Fall, Beverage Companies Adapt To A Changing Market http://seekingalpha.com/instablog/6954501-vlad-deshkovich/1469771-as-domestic-sales-of-soda-fall-beverage-companies-adapt-to-a-changing-market?source=feed 1469771 Soda consumption in the US is on the decline. More than ever people are opting for healthier alternatives to soft drinks, spurred on by a government initiative to put excess sugar consumption in the public's eye. Beverage titans Coca-Cola(KO) and PepsiCo. (PEP) have been forced to deal with slipping soda intake in the United States for eight years, and there is no sign that the trend is going to reverse itself. As preferences for drinks have continued to shift, beverage companies are entering new markets and buying up niche brands in order to diversify themselves and keep revenues steady.

Soda is a universal treat. Seeing somebody enjoy a nice bottle of pop is as common a sight as there can be here in America. The numbers, however, tell a different story: Americans are getting away from calorie-laden soft drinks. Beverage Digest has published data that reveals soft drink sales volumes have declined every year since 2005; present day sales are about 11% lower than they were. Soda consumption also declined twice as quickly in 2011 than in 2012. This decline in sales will be bolstered by the fact that soda companies have had to raise prices for their products in line with rising commodity costs. Soft drinks are highly price elastic; as the price goes up, people stop buying. It is evident that soda is on the way out, but what does this mean for the corporations that are selling it?

Soft-drink sellers are very conscious of these trends. While they have spent money fighting it with their own campaigns, they are also hedging themselves by beginning to offer a larger variety of drinks. The name of the game has become diversification: Coca-Cola sells Nestea, Powerade, Zico, and Dasani, while PepsiCo has Tropicana, Aquafina, and Gatorade. Dr. Pepper Snapple Group continues to be a strong player with ready-to-drink tea offerings. As people get away from soda, they begin purchasing the alternatives, which happen to be owned by the same companies.

Seeing the big picture eliminates any need to worry about the fate of the beverage titans. While soda sales in the US may be falling at a steady rate, Coca-Cola sold 12% more soda in India and China during 2011, as well as growing the Dasani brand heavily domestically. Coca-Cola makes about 60% of its revenue abroad; PepsiCo claims about 50%. These numbers will only get higher as time goes on, as countries with developing economies get exposed to the delicious concoctions that we have been enjoying in the States for decades. Coca-Cola has also ventured into dairy, buying up a portion of recovery shake maker Core Power. These brands are well-situated to diversify and expand, and are keeping a finger on the pulse of consumer preference at all times. The decline of soda drinking here in the United States will not hamper profits as Coca-Cola and PepsiCo continue to expand their offerings abroad and domestically.

Disclosure: I am long [[KO]]. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

]]> Tue, 22 Jan 2013 03:11:18 -0500 Soda consumption in the US is on the decline. More than ever people are opting for healthier alternatives to soft drinks, spurred on by a government initiative to put excess sugar consumption in the public's eye. Beverage titans Coca-Cola(KO) and PepsiCo. (PEP) have been forced to deal with slipping soda intake in the United States for eight years, and there is no sign that the trend is going to reverse itself. As preferences for drinks have continued to shift, beverage companies are entering new markets and buying up niche brands in order to diversify themselves and keep revenues steady.

Soda is a universal treat. Seeing somebody enjoy a nice bottle of pop is as common a sight as there can be here in America. The numbers, however, tell a different story: Americans are getting away from calorie-laden soft drinks. Beverage Digest has published data that reveals soft drink sales volumes have declined every year since 2005; present day sales are about 11% lower than they were. Soda consumption also declined twice as quickly in 2011 than in 2012. This decline in sales will be bolstered by the fact that soda companies have had to raise prices for their products in line with rising commodity costs. Soft drinks are highly price elastic; as the price goes up, people stop buying. It is evident that soda is on the way out, but what does this mean for the corporations that are selling it?

Soft-drink sellers are very conscious of these trends. While they have spent money fighting it with their own campaigns, they are also hedging themselves by beginning to offer a larger variety of drinks. The name of the game has become diversification: Coca-Cola sells Nestea, Powerade, Zico, and Dasani, while PepsiCo has Tropicana, Aquafina, and Gatorade. Dr. Pepper Snapple Group continues to be a strong player with ready-to-drink tea offerings. As people get away from soda, they begin purchasing the alternatives, which happen to be owned by the same companies.

Seeing the big picture eliminates any need to worry about the fate of the beverage titans. While soda sales in the US may be falling at a steady rate, Coca-Cola sold 12% more soda in India and China during 2011, as well as growing the Dasani brand heavily domestically. Coca-Cola makes about 60% of its revenue abroad; PepsiCo claims about 50%. These numbers will only get higher as time goes on, as countries with developing economies get exposed to the delicious concoctions that we have been enjoying in the States for decades. Coca-Cola has also ventured into dairy, buying up a portion of recovery shake maker Core Power. These brands are well-situated to diversify and expand, and are keeping a finger on the pulse of consumer preference at all times. The decline of soda drinking here in the United States will not hamper profits as Coca-Cola and PepsiCo continue to expand their offerings abroad and domestically.

Disclosure: I am long [[KO]]. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

]]> pep ko long-ideas General Electric Jumps On Profit Increase; Says Boeing's Troubles Won’T Affect Production http://seekingalpha.com/instablog/6954501-vlad-deshkovich/1472081-general-electric-jumps-on-profit-increase-says-boeing-s-troubles-won-t-affect-production?source=feed 1472081 General Electric(GE) Inc. shares' jumped 3.5% by midday trading on a 7.5% increase in Q4 gross profit. The industrial conglomerate posted earnings of $0.44 a share, exceeding analyst expectations of $0.43. The company also boasted a 3.5% increase in backlogs, indicating future demand in the conglomerates' products. The world's largest jet engine manufacturer also released a post-earnings call detailing how Boeing(BA) Co.'s recent troubles won't affect its operations: GE said that Boeing has not cut the amount of engines that they needed produced. General Electric also expects to ship 200 of its "GEnx" engine throughout 2013, having shipped 113 throughout 2012. This all bodes well for General Electric, which seems to be well positioned to continue growing.

]]> Mon, 21 Jan 2013 13:16:15 -0500 General Electric(GE) Inc. shares' jumped 3.5% by midday trading on a 7.5% increase in Q4 gross profit. The industrial conglomerate posted earnings of $0.44 a share, exceeding analyst expectations of $0.43. The company also boasted a 3.5% increase in backlogs, indicating future demand in the conglomerates' products. The world's largest jet engine manufacturer also released a post-earnings call detailing how Boeing(BA) Co.'s recent troubles won't affect its operations: GE said that Boeing has not cut the amount of engines that they needed produced. General Electric also expects to ship 200 of its "GEnx" engine throughout 2013, having shipped 113 throughout 2012. This all bodes well for General Electric, which seems to be well positioned to continue growing.

]]> ge industrials Amazon WIll Outperform Earnings Expectations http://seekingalpha.com/instablog/6954501-vlad-deshkovich/1469621-amazon-will-outperform-earnings-expectations?source=feed 1469621 Amazon(AMZN) Inc. will be releasing its earnings report for Q4 2012 on January 31st 2013. Based on the company's rising profits, as well as the sector's performance in general, I believe that Amazon will release an above-expected earnings report that will send the stock higher at the end of January.

To begin with, Amazon has had 4 quarters of massive profits starting with Q4 2011.

Gross Profit (In millions USD)

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

2,551

3,601

3,158

3,346

3,487

Amazon made $1,050 million more gross profit in Q4 2011 than Q3 2011. This surge corresponded to recovering consumer sentiment out of the recession, which led to Amazon having a record quarter. Its profit has remained steady, albeit rising, throughout 2012. There is no reason for this trend to stop, as macroeconomic indicators all point to increasing consumer spending.

In order to gain insight into how Amazon will perform, we must look at its direct competitor: eBay(EBAY) Inc. Amazon and eBay have the 1st and 2nd largest market capitalizations in the industry, respectively. These two corporations are the very face of e-commerce. The two stocks have mirrored each other graphically over the last year, rising and falling at the same rate:

(click to enlarge)

While Amazon is yet to release its earnings, eBay released its earnings report several days ago, posting an excellent quarter. eBay's revenue Q4 2012 was 18% higher than its revenue Q4 2011, as well as a 16.25% profit growth from the previous quarter. Since the trend lines of the stocks are nearly identical, it is a safe assumption that Amazon will have performed just as well the previous quarter; if people are buying online with eBay, they are definitely buying online with Amazon.

What Amazon also has going for it is the unstoppable growth of e-commerce. As people are becoming more comfortable with the internet they are doing more of their shopping from home. There are heaps of anecdotal evidence in this situation, but the numbers are there as well. comScore(SCOR) Inc. publishes a report where it measures the growth of e-commerce spending. Between Q1 2010 and Q3 2012, the growth every quarter has had a range of 9% to 17%. Q4 2012 will surely be on the higher end of that. What these numbers mean is that online shopping is here, and it's here to stay. Expect Amazon to post an incredible quarter and for its stock to appreciate as a result. Going long on AMZN or EBAY is a safe bet.

Disclosure: I am long [[AMZN]].

]]> Sun, 20 Jan 2013 12:39:31 -0500 Amazon(AMZN) Inc. will be releasing its earnings report for Q4 2012 on January 31st 2013. Based on the company's rising profits, as well as the sector's performance in general, I believe that Amazon will release an above-expected earnings report that will send the stock higher at the end of January.

To begin with, Amazon has had 4 quarters of massive profits starting with Q4 2011.

Gross Profit (In millions USD)

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

2,551

3,601

3,158

3,346

3,487

Amazon made $1,050 million more gross profit in Q4 2011 than Q3 2011. This surge corresponded to recovering consumer sentiment out of the recession, which led to Amazon having a record quarter. Its profit has remained steady, albeit rising, throughout 2012. There is no reason for this trend to stop, as macroeconomic indicators all point to increasing consumer spending.

In order to gain insight into how Amazon will perform, we must look at its direct competitor: eBay(EBAY) Inc. Amazon and eBay have the 1st and 2nd largest market capitalizations in the industry, respectively. These two corporations are the very face of e-commerce. The two stocks have mirrored each other graphically over the last year, rising and falling at the same rate:

(click to enlarge)

While Amazon is yet to release its earnings, eBay released its earnings report several days ago, posting an excellent quarter. eBay's revenue Q4 2012 was 18% higher than its revenue Q4 2011, as well as a 16.25% profit growth from the previous quarter. Since the trend lines of the stocks are nearly identical, it is a safe assumption that Amazon will have performed just as well the previous quarter; if people are buying online with eBay, they are definitely buying online with Amazon.

What Amazon also has going for it is the unstoppable growth of e-commerce. As people are becoming more comfortable with the internet they are doing more of their shopping from home. There are heaps of anecdotal evidence in this situation, but the numbers are there as well. comScore(SCOR) Inc. publishes a report where it measures the growth of e-commerce spending. Between Q1 2010 and Q3 2012, the growth every quarter has had a range of 9% to 17%. Q4 2012 will surely be on the higher end of that. What these numbers mean is that online shopping is here, and it's here to stay. Expect Amazon to post an incredible quarter and for its stock to appreciate as a result. Going long on AMZN or EBAY is a safe bet.

Disclosure: I am long [[AMZN]].

]]> amzn Technology