Monthly Archives: May 2016

Amazon Effect in Retail

When Amazon.com (AMZN) reports second-quarter earnings Thursday after the markets close, all eyes will be on the e-commerce giant’s retail and cloud computing businesses.

On average, analysts are expecting $29.56 billion of revenue and $1.11 of earnings per share. Amazon posted $23.18 billion in sales and 19 cents of EPS during the corresponding period a year ago.

“We believe Street estimates for the quarter are reasonable,” wrote RBC Capital Markets analyst Mark Mahaney in a recent note.

Margins will be a critical factor for the second quarter, he noted, while acknowledging that investments in international markets, Amazon Web Services (AWS) and Pillar Projects will weigh on the Seattle-based company’s profitability.

Retail revenue growth in North America and overseas will also be an important data point for Amazon, Mahaney added.

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Should retail and AWS hold up, Amazon will likely post another solid quarter, said Maxim Group analyst Tom Forte in an interview.

“I’d be careful and sell some of the other retailers that have moved up here ahead of Amazon,” said founder of TheStreet Jim Cramer.
“That may be a more important story/ Amazon may be taking an increasing part of the pie.”

Amazon has been on a solid run this year, with stock up about 9.1% year to date. Shares closed up about 1.1% to $736.67 per share on Wednesday and traded up $10.78, or 1.5%, Thursday to $747.82 per share.

AWS, which competes with Microsoft’s (MSFT) Azure and Alphabet’s (GOOGL) Google Cloud Platform, has emerged as Amazon’s engine of growth thanks to the tech market’s ongoing shift to cloud from hardware. Last year, Amazon saw its cloud revenue grow by an impressive 70% to $8 billion.

What About The Viacom Case

In a trial planned for October, a Massachusetts court is expected to rule on whether Sumner Redstone, the company’s controlling shareholder, was mentally competent to make a series of decisions that would remake the media company, owner of Paramount Pictures, MTV and other cable-TV networks such as Nickelodeon.

On Thursday, a Massachusetts probate court judge rejected a motion by Redstone’s lawyers to throw out a lawsuit filed by CEO Philippe Dauman and director George Abrams that Redstone, Viacom’s chairman emeritus, wasn’t mentally fit to have both men removed from the holding company board that controls Viacom as well as a trust that will assume control of his $40 billion media empire when he does or becomes incapacitated.

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Probate Judge George Phelan in Canton, Mass. rejected a motion by Redstone’s lawyers to throw out the case, setting up the likelihood that a decision is near in the long-running and very public tug-of-war over who will run Viacom, owner of Paramount Pictures, MTV and Nickelodeon.

Phelan said that he would examine the 93-year-old Redstone’s medical records and take additional testimony to determine whether Redstone, who is ailing, was competent to remove Dauman and Abrams from National Amusements Inc., the privately-held movie-theater chain that owns nearly 80% of controlling shares in Viacom and CBS (CBS) , and the six-person family trust.

Redstone and his daughter Shari Redstone would have preferred that the Massachusetts court not taken up the Dauman-Abrams lawsuit thereby deferring to a Los Angeles court where they counter filed to uphold the National Amusements board changes.

Lets grow up the revenue

MasterCard’s (MA)  shares continued to rise Thursday, after posting better-than-expected second quarter results, as the credit processor said it didn’t feel any significant impact from Brexit, is winning deals to expand its market share and is strengthening its international presence.

“This is a company that’s really standing out from a performance perspective with double digit earnings and revenue growth,” said Jim Tierney, AllianceBernstein chief investment officer of U.S. concentrated growth, in a phone interview. “This is a company in a really lousy global environment that grew their revenues 13% and grew their earnings 13%.”

New and renewed partnerships and acquisitions, along with a strong U.S. economy allowed the credit card processor to be upbeat about the future, while also being cautious about China’s new rule regarding payment networks and pending litigation. In June China released its final payment network regulations, allowing Visa and MasterCard to operate in its country, however MasterCard needs more clarification on how to move forward in the new environment.

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Purchase, N.Y.-based card-processing network posted adjusted earnings of 96 cents a share, compared with the 90-cent average of estimates in a Bloombergsurvey, benefited from strong consumer spending, as purchase and transaction volumes were up by double digits.

Revenue increased 13% from a year ago to $2.7 billion, beating estimates of $2.6 billion, as worldwide transactions climbed 14% to $13.7 billion.

Other revenue, which includes MasterCards’s advising and consulting services businesses, was up 25%, mostly due to the newly acquired acquisition of cloud-based analytics provider, Applied Predictive Technologies (APT) in April and its safety and security product offerings, the company said.

Still, the bottom-line benefits of revenue growth were curbed by a 15% increase in expenses, which reached $1.3 billion as the company invested in strategic initiatives and grappled with increasing legal cost. Net income increased 7% to $983 million, reflecting costs related to legal cases in the U.K., the company said.

In the U.K. retailers said that MasterCard’s cross-border interchange fees were “anticompetitive,” and the company estimated a settlement of $270 million. In June of 2015, the company paid $61 million to retailer Tesco.

“The court ordered a portion of the damages it had been seeking and that amount, along with anticipated legal fees and cost, was taken as a charge in the second quarter,” Ajay Banga, MasterCard president and CEO said on the conference call.