NVDA: Revenue Shortfall Warning

On 12 August 2010 NVIDIA (NASDAQ: NVDA) will report its results for fiscal 2011's second quarter, which will end on 1 August 2010.  However, NVIDIA has already announced that Revenue in the quarter will be much less than the guidance the company provided on 13 May 2010.

The guidance, issued in conjunction with first quarter results, had been to expect second-quarter Revenue 3-to-5 percent below the first quarter's $1.0 billion.  These percentages translated into a Revenue guidance range of $950 million to $970 million.

NVIDIA's press release dated 28 July 2010 states that Revenue is now estimated at only $800 million to $820 million.  In other words, Revenue in the second quarter will be 18 to 20 percent less than Revenue in the first quarter.

They blamed the revenue shortfall on "increased memory costs and economic weakness in Europe and China [... that ...] led to a greater-than-expected shift to lower-priced GPUs and PCs with integrated graphics."


NVIDIA did not identify how the revenue shortfall would affect its bottom line, but we have made a (very) rough estimate.

In our "look-ahead" for NVIDIA's current quarter, posted 1 July 2010, we used the midpoint of the company's original Revenue guidance to forecast earnings of $120 million ($0.20 per share).

We have now revised our Income Statement model to reflect NVIDIA's lower estimates for Revenue.  We also reduced the expected Gross Margin from 46.5 percent to 41.5 percent because slumping sales often lead to production and distribution inefficiencies.  The 41.5-percent figure is just a guess. 

We assume there will be some minor savings in revenue-dependent marketing costs.

Leaving most other assumptions unchanged, our new estimate for the quarter is Net income of $35 million ($0.06 per share).


Please click here to see a full-sized, normalized depiction of the projected results next to NVIDIA's quarterly Income Statements for the last couple of years.  Please note that our organization of revenues, expenses, gains, and losses, which we use for all analyses, can and often does differ in material respects from company-used formats.  The standardization facilitates cross-company comparisons.

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ADP: Income Statement Analysis for the June 2010 Quarter

Automatic Data Processing (NASDAQ: ADP) earned $0.42 per share in fiscal 2010's fourth quarter, which ended 30 June 2010.  This EPS amount was 41 percent less than the $0.70 ADP made in the same quarter of 2009. 

The prior-year result was boosted by a tax benefit of $0.24 per share.  Excluding this one-time benefit, diluted quarterly earnings from continuing operations declined from $0.45 in June 2009 to $0.42 per share in June 2010.

This post examines ADP's Income Statement for the latest quarter and compares the entries on each line to our "look-ahead" estimates.  Reported earnings fell $0.01 short of the $0.43 per share we had forecast.

The principal sources for the income statement analysis were the earnings announcement and the webcast presentation [pdf].

In a second article, we will report ADP's scores as measured by the GCFR financial gauges.  The follow-up post will also provide the latest figures for the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

Automatic Data Processing performs payroll, human resource, data processing, and outsourcing Business Services for more than 500,000 clients, large and small, in the United States and other countries.  ADP pays one of every six private sector employees in the U.S.  The company is one of four remaining of U.S. firms with a AAA bond rating.  It is also an S&P 500 Dividend Aristocrat, having hiked its dividend for 35 consecutive years.

Fortune Magazine deemed ADP to be Most Admired in the Financial Data Services industry.  Additional background information about ADP and the business environment in which it is currently operating can be found in the look-ahead.

Please click here to see a full-sized, normalized depiction of the actual and projected results for the just-concluded quarter, as well as the quarterly Income Statements for the last couple of years.  Please note that our organization of revenues, expenses, gains, and losses, which we use for all analyses, can and often does differ in material respects from company-used formats.  The standardization facilitates cross-company comparisons.

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COP: Income Statement Analysis for the June 2010 Quarter

ConocoPhillips (NYSE: COP) earned $2.77 per diluted share on a GAAP basis in the second quarter of 2010, which ended 30 June.  The company reported earnings of $0.57 per share in 2009's second quarter.

Earnings in the most recent quarter were affected by numerous special items.  Excluding dispositions and an impairment, adjusted earnings were $1.67 per share.

This post examines ConocoPhillips' Income Statement for the latest quarter and compares the entries on each line to our "look-ahead" estimates.  Both reported and adjusted earnings surpassed our $1.54 estimate.

The principal sources for this income statement analysis were the earnings announcement and the conference call presentation [pdf].

In a second article, we will report Conoco's scores as measured by the GCFR financial gauges.  The follow-up post will also provide the latest figures for the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

ConocoPhillips is one of the ten biggest Integrated Oil and Gas companies, which produce, refine, transport, and market energy products.  Its market capitalization is approximately $80 billion, and its Revenue was almost $150 billion in 2009.  The company was formed in 2002 when Conoco, Inc., merged with Phillips Petroleum.  It added Burlington Resources, with its extensive natural gas operations, in March 2006 (when gas prices were high).

In March 2010, Conoco publicized its plan to sell half of its 20 percent stake in Russia's Lukoil (OTC: LUKOY).  The most recent earnings announcement stated that the company now intends to sell its entire Lukoil investment by the end of 2011.

Additional background information about ConocoPhillips and the business environment in which it is currently operating can be found in the look-ahead.

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BP: Income Statement Analysis for the June 2010 Quarter

BP (NYSE: BP) lost about $5.41 per diluted ADS in 2010's second quarter, which ended 30 June.  This figure compares to the profit attributable to BP's shareholders of $1.39 in the second quarter of 2009.

As a result of the tragic drilling rig explosion and oil spill in the Gulf of Mexico on 20 April 2010, the second quarter included a pre-tax charge of $32.2 billion, which includes the $20 billion compensation claims fund.  On an after-tax basis, the charge was about $22 billion (approximately $6.94 per ADS).

This post examines BP's Income Statement for the latest quarter.  Because of the uncertainty about the Gulf disaster's costs and how BP would account for them, we did not issue "look-ahead" estimates prior to the company's report.  We normally compare each line of the Income Statement to our estimates.

The principal sources for the income statement analysis were the earnings announcement, a supplemental press release, and the conference call presentation [pdf].

In a second article, we will report BP's scores as measured by the GCFR financial gauges. The follow-up post will also provide the latest figures for the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

BP p.l.c., the former British Petroleum, is a large Integrated Oil and Gas firms with worldwide interests.  The Deepwater Horizon disaster has caused BP's market value to fall from $190 billion to $120 billion on a fully diluted basis. 

Already large, BP became a behemoth by merging with Amoco in 1998 and acquiring Arco soon thereafter.

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MSFT: Income Statement Analysis for the June 2010 Quarter

Microsoft (NASDAQ: MSFT) earned $0.51 per diluted share in fiscal 2010's fourth quarter, which ended on 30 June 2010.  This EPS amount was 50 percent more than the $0.34 Microsoft made in the same quarter of 2009.

This post examines Microsoft's Income Statement for the quarter and compares the entries on each line to our "look-ahead" estimates.  Reported earnings were $0.04 per share more than the $0.47 we had forecast for the quarter.

The principal sources for the income statement analysis were the earnings announcement, the conference call presentation [ppt], and the transcript [docx].

In a second article, we will report Microsoft's scores as measured by the GCFR financial gauges.  The follow-up post will also provide the latest figures for the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.


Before getting into the details, we will take one step back to introduce the subject of today's analysis.

Microsoft develops and sells the operating system software that runs on more than 90 percent of personal computers, and it also has dominant application software and server software franchises.  In addition, the company provides various online services, such as the Bing search engine and online advertising.  Microsoft also sells video game consoles, entertainment devices, and computer peripherals.  Additional background information about Microsoft and the business environment in which it is currently operating can be found in the look-ahead.

Please click here to see a full-sized, normalized depiction of the actual and projected results for the just-concluded quarter, as well as the quarterly Income Statements for the last couple of years.  Please note that our organization of revenues, expenses, gains, and losses, which we use for all analyses, can and often does differ in material respects from company-used formats.  The standardization facilitates cross-company comparisons.
 

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NOK: Income Statement Analysis for the June 2010 Quarter

Nokia Corp. (NYSE: NOK) earned €0.06 per diluted share on an IFRS basis in the 2010's second quarter, which ended on 30 June. This EPS amount was 40 percent less than the €0.10 Nokia made in the same quarter of 2009.

On a non-IFRS basis, which excludes items such as restructuring charges and intangible asset amortization, second-quarter earnings fell from €0.15 to €0.11 per share.

This post examines Nokia's Income Statement for the latest quarter and compares the entries on each line to our revised "look-ahead" estimates.  Reported earnings fell short of the €0.07 per share we had forecast by €0.01 per share.

In a second article, we will report Nokia's scores as measured by the GCFR financial gauges. The follow-up post will also provide the latest figures for the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.


Before getting into the details, we will take one step back to introduce the subject of today's analysis.

A Finnish company with a rich history, Nokia Corporation has been the leading global producer of mobile phones since 1998. Nokia also sells the network infrastructure that supports these phones. The company has three business segments: Devices and Services (D&S), Nokia Siemens Networks (NSN), and NAVTEQ. Despite a substantial head start, Nokia has been losing market share to upstarts such as Apple's (NASDAQ: AAPL) iPhone in the smartphone product category. Additional background information about Nokia and the business environment in which it is currently operating can be found in the look-ahead.

Please click here to see a full-sized, normalized depiction of the actual and projected results for the just-concluded quarter, as well as the quarterly Income Statements for the last couple of years. Please note that our organization of revenues, expenses, gains, and losses, which we use for all analyses, can and often does differ in material respects from company-used formats. The standardization facilitates cross-company comparisons.

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TDW: Earnings Preannouncement

Tidewater (NYSE: TDW) is not scheduled to announce the company's results for fiscal 2011's first quarter, which ended on 30 June 2010, until 5 August.

However, the company today "preannounced" partial and preliminary results for the June quarter.  Tidewater estimates diluted earnings will be between $0.75 and $0.80 per share.  The company noted that the Wall Street consensus estimate was $0.95 per share at the time of the preannouncement.

In our "look-ahead" for Tidewater's June 2010 quarter, posted 20 June 2010, we forecast earnings of $0.84 per share.  This is $0.04 above the high end of the newly announced range.

Tidewater now estimates vessel revenue of approximately $262 million in the June quarter.  Our $266 million target for the company's total revenue shouldn't be too far off because Tidewater typically reports a modest amount of "other marine revenues" in addition to vessel revenue.

The company's estimate for vessel operating costs remains at $155 million.

Since preannounced Revenue and operating cost figures are generally consistent with our earlier targets, it appears general and administrative costs might have exceeded our estimate or that gains on asset dispositions might have been lower.  It's also possible that currency exchange fluctuations had a negative effect on the results.

We will have to wait until 5 August to learn the specifics.




Full disclosure: Long TDW at time of writing.

AAPL: Income Statement Analysis for the June 2010 Quarter

Apple (NASDAQ: AAPL) earned $3.51 per diluted share in fiscal 2010's third quarter, which ended on 26 June.  This EPS amount beat by 74 percent the $2.01 Apple made in the same quarter of 2009.

This post examines Apple's Income Statement for the latest quarter.  We did not issue "look-ahead" estimates because readers can spend their time more productively by following the well-researched projections of Apple experts such as Turley Muller and Andy Zaky.

The principal sources for this review were the earnings announcement, the accompanying data sheet, and the conference call with analysts (transcript made available by Seeking Alpha).

In a second article, we will report Apple's scores as measured by the GCFR financial gauges.  The follow-up post will also provide the latest figures for the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.


Before getting into the details, we will take a step back to introduce the subject of today's analysis.

Apple Inc. has been recognized by Fortune as the world's most admired company for the last three years.  It is known for elegant product design, innovation, customer loyalty, secrecy, and the cult-like status afforded CEO (and savior) Steve Jobs.

It sells Macintosh® desktop and laptop computers, iPhone™ portable devices, iPad tablet computers, iPod® music and video players, operating system software (including OS X and iOS), software applications and Apps, digital entertainment, and various accessories.

The iPad launched on 3 April 2010, so the June quarter was the first to include sales of this widely anticipated item.

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PEP: Income Statement Analysis for the June 2010 Quarter

PepsiCo (NYSE: PEP) earned $0.98 per diluted share on a GAAP basis in the fiscal 2010's 12-week second quarter, which ended on 12 June.  The reported EPS amount was 7 percent lower than the $1.06 PepsiCo made in the same quarter of 2009.

Core earnings increased from $1.02 to $1.10 per share in the second quarter.  Core earnings exclude acquisition-related gains and expenses, inventory valuation adjustments, and other unusual gains and losses.  (The exclusions from the GAAP figures are intended to provide better insight into the company's fundamental financial performance.)

This post examines PepsiCo's Income Statement for the quarter and compares the entries on each line to our "look-ahead" estimates.  Reported earnings were $0.11 less than the $1.09 we had forecast for the second quarter, but core earnings were a mere $0.01 more than our target.

The principal sources for this review were the earnings announcement, the ensuing conference call [pdf] (transcript made available by Seeking Alpha), and the formal 10-Q report.

A challenge when working with PepsiCo's latest financial data is that comparisons of current and historic results are complicated by two large acquisitions earlier this year.

In a second article, we will report PepsiCo's scores as measured by the GCFR financial gauges.  The follow-up post will also provide the latest figures for the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.

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HD: Look Ahead to July 2010 Quarterly Results

This post describes our model of Home Depot's (NYSE: HD) Income Statement for fiscal 2010's second quarter, which will end on 1 August.

The purpose of the model is to establish a baseline for identifying surprises, positive or negative, in the quarterly results the company will report.  Estimates for each line of the Income Statement are derived from management's guidance, the company's historical financial results, and other publicly available data.

We begin by reviewing background information about Home Depot and the business environment in which it is currently operating.

The Home Depot, Inc. (NYSE: HD) is the largest retailer of do-it-yourself merchandise, which includes building materials, home improvement supplies, and lawn and garden products.  The company has 2,244 retail stores, of which 88 percent are in U.S. states or territories.

Home Depot earned nearly $2.7 billion in fiscal 2009, which was nearly 18 percent more than in 2008.  Revenue slipped 7 percent to $66.2 billion.  (Fiscal 2009 ended on 31 January 2010.)

As a result of the market swoon this spring, Home Depot's market capitalization is now under $50 billion.

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INTC: Income Statement Analysis for the June 2010 Quarter

Intel Corporation (NASDAQ: INTC) earned $0.51 per diluted share (a record amount) on a GAAP basis in fiscal 2010's second quarter, which ended on 26 June.  In the  same quarter of 2009, Intel reported a $0.07 loss per share, in large part because the company paid a $1.5 billion fine for European antitrust violations.

Excluding last year's fine, second quarter earnings rose from $0.18 to $0.51 per share.

This post examines Intel's Income Statement for the quarter and compares the entries on each line to our "look-ahead" estimates.  The reported EPS amount was $0.09 more than the $0.42 we had forecast for the second quarter.

The principal sources for the income statement analysis were the earnings announcement and the CFO's commentary [pdf].

In a second article, we will report Intel's scores as measured by the GCFR financial gauges.  The follow-up post will also provide the latest figures for the various financial metrics we use to analyze Cash Management, Growth, Profitability and Value.


Before getting into the details, we will take one step back to introduce the subject of today's analysis.

Intel is the foremost manufacturer of integrated circuits for computers, servers, hand-held devices, and communication products.  The company has nine product groups, with PC Client and Data Center being the two largest.  Additional background information about Intel and the business environment in which it is currently operating can be found in the look-ahead.

Please click here to see a full-sized, normalized depiction of the actual and projected results for the just-concluded quarter, as well as the quarterly Income Statements for the last couple of years.  Please note that our organization of revenues, expenses, gains, and losses, which we use for all analyses, can and often does differ in material respects from company-used formats.  The standardization facilitates cross-company comparisons.

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WMT: Look Ahead to July 2010 Quarterly Results (Revised 14 July)

This post describes our model of Wal-Mart's (NYSE: WMT) Income Statement for fiscal 2011's second quarter, which will end on 31 July.

The purpose of the model is to establish a baseline for identifying surprises, positive or negative, in the quarterly results the company will report.  Estimates for each line of the Income Statement are derived from management's guidance, the company's historical financial results, and other publicly available data.

We begin by reviewing background information about Walmart and the business environment in which it is currently operating.

A retailing behemoth, Wal-Mart Stores, Inc., earned over $14 billion on net sales of $405 billion in the fiscal year that concluded last January.  The Revenue figure, along with a drop in energy prices, enabled Walmart to regain from Exxon Mobil (NYSE: XOM) the top position on the Fortune 500 list of America's largest corporations. 

Although the discounter's net sales rose only 1.0 percent in fiscal 2010, the company achieved an 8.8-percent increase in the income attributable to its shareholders from continuing operations.

Walmart has three reportable business segments: Walmart U.S., International and Sam’s Club.  Walmart U.S. had net sales of $258 billion in fiscal 2010, or nearly 64 percent of the overall amount.  The International segment had sales of $100 billion, and sales at Sam's Club totaled nearly $47 billion.  At last count, Walmart operated 4304 stores in the U.S. (including Sam's Club) and 8416 in other countries.

Net sales by Walmart U.S. grew 1.1 percent last year, but comparable store sales declined 0.7 percent.  Concerned about slow sales at home, Walmart recently replaced the leader of Walmart U.S.

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CSCO: Look Ahead to July 2010 Quarterly Results

This post describes our model of Cisco Systems (NASDAQ: CSCO) Income Statement for fiscal 2010's fourth quarter, which will end on 31 July.

The purpose of the model is to establish a baseline for identifying surprises, positive or negative, in the quarterly results the company will report.  Estimates for each line of the Income Statement are derived from management's guidance, the company's historical financial results, and other publicly available data.

We begin by reviewing background information about Cisco Systems and the business environment in which it is currently operating.

Cisco Systems, Inc., the proud plumber of the Internet, has a dominant role in markets for enterprise networking products and services. 

Earnings fell 24 percent in fiscal 2009, which ended in July 2009, from $8.05 billion to $6.13 billion.  Revenue declined 8.7 percent, from $39.5 billion to $36.1 billion.  Services provided 19 percent of total Revenue in 2009.

The company's market capitalization is around $125 billion. 

Cisco categorizes its products as routers, switches, and advanced technologies.  However, the company's reportable business segments are not defined by product types but by geographic region: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan.  The U.S./Canada segment provided 53.6 percent of fiscal 2009's Total Revenue.

Juniper Systems (NASDAQ: JNPR) is usually considered Cisco's most direct competitor in the enterprise market.

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NVDA: Look Ahead to July 2010 Quarterly Results

This post describes our model of NVIDIA's (NASDAQ: NVDA) Income Statement for fiscal 2011's second quarter, which will end on 1 August.

The purpose of the model is to establish a baseline for identifying surprises, positive or negative, in the quarterly results the company will report.  Estimates for each line of the Income Statement are derived from management's guidance, the company's historical financial results, and other publicly available data.

We begin by reviewing background information about NVIDIA and the business environment in which it is currently operating.

NVIDIA is best known for the powerful Graphics Processing Units that rapidly perform the huge numbers of calculations required to produce hyper-realistic images for computers and video games.

NVIDIA lost $68 million on Revenue of $3.3 billion in fiscal 2010, which ended on 31 January.  In fiscal 2009, NVIDIA lost $30 million on Revenue of $3.4 billion.  Fiscal 2010 included a $140 million charge associated with the repurchase of stock options from employees, and it also included a $119 million warranty charge.

The company's current market capitalization is about $6 billion.  In March 2010, NVIDIA extended for three years a program for repurchasing up to $2.7 billion of its common shares

Prior to fiscal 2011 (the current year), NVIDIA's business was divided for reporting purposes into four segments: GPU, Professional Solutions, Media and Communications Processors, and Consumer Products.  The GPU and MCP segments have since been consolidated.

The GPU segment, which had Revenue of $1.7 billion in fiscal 2010 (53 percent of the total), sells products for desktop and notebook personal computers.  NVIDIA GPUs are also installed in computers made by Apple (NASDAQ: AAPL), Hewlett Packard (NYSE: HPQ), Dell (NASDAQ: DELL), and now Lenovo!  Advanced Micro Devices (NYSE: AMD), by purchasing ATI Technologies in 2006, became NVIDIA's most direct competitor in the marketplace for discrete GPUs and the computer graphics cards built around them.

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