MasterCard Incorporated (NYSE: MA): Q4 Earnings Preview 2010

MasterCard Incorporated (NYSE: MA) is scheduled to release its fourth-quarter financial results before the market open on Thursday, February 3, 2011. Analysts, on average, expect the company to report earnings of $3.04 per share on revenue of $1.42 billion. In the year ago quarter, the company reported earnings of $2.24 per share on revenue of $1.30 billion.

MasterCard Incorporated, together with its subsidiaries, provides transaction processing and related services to customers principally in support of their credit, deposit access, electronic cash and automated teller machine payment card programs, and travelers cheque programs.

In the preceding third quarter, the Purchase, New York-based company's net income was $518 million, or $3.94, compared to $452 million, or $3.45 per share, in the year-ago quarter. Revenue grew 4.7% to $1.42 billion from $1.36 billion. Analysts, on average, expected the company to report earnings of $3.54 per share on revenue of $1.41 billion. 

MasterCard, like other payment solutions company, is benefiting from a broad trend away from cash and checks and toward electronic forms of payment. When purchases are made using debit and credit cards carrying the MasterCard logo, the company collects fees from each transaction. That makes the company's results sensitive to consumer spending. However, unlike credit-card companies, MasterCard doesn't lend money, so it wasn't hit hard by the credit crisis.

The company is cultivating new business in emerging markets. Expanding its presence in high-growth China, MasterCard plans to enhance its partnership with China UnionPay, the state-owned company, which has the monopoly on issuing credit cards in the country, for exploring business opportunities together. . China UnionPay is the sole bank card transaction processing company in the region.UnionPay is the biggest card company globally in terms of card issuance and the second largest brand in the Asia-Pacific region in terms of transaction volume, thereby beating the oldest and globally renowned competitors such as Visa Inc. (NYSE: V).

In an effort to expand its international business, MasterCard recently obtained the naming rights of Wukesong Arena in Beijing for a five-year period. MasterCard derives nearly 60% of its revenue from overseas

The company has relatively few opportunities for growth in the United States, where rival Visa dominates the debit processing market and most consumers already use credit and debit cards. Moreover, uncertainty stemming from financial overhaul, which includes curbs on debit-card transaction fees, has taken some shine off MasterCard's shares.  Last month, the Federal Reserve proposed capping fees banks can charge merchants for debit-card transactions at 12 cents. While that directly affects bank revenues from debit cards, the banks could try to get Visa and MasterCard to lower their fees to use their networks in order to offset the revenue loss. Final recommendations on the proposal are set to be issued in April.

Full Disclosure: None.

Broadcom Corp. (NASDAQ: BRCM): Q4 Earnings Preview 2010

Broadcom Corp. (NASDAQ: BRCM) is scheduled to release its fourth-quarter financial results after the closing bell on Tuesday, February 1, 2011. Analysts, on average, expect the company to report earnings of 74 cents per share on revenue of $1.90 billion. In the year ago quarter, the company reported earnings of 49 cents per share on revenue of $1.34 billion.

Broadcom ships nearly a billion chips a year for use in devices all up and down the digital food chain, from the tiny radio in a Bluetooth earpiece to the processors that enable the Internet's largest data servers to communicate.  Broadcom is the leading supplier for 11 of the 18 types of chips it makes, including those that go into Blu-ray players and cable modems. The company designs chips for for many of the world's bestselling consumer devices: Android phones and Wiis, iPhones and iPads, to name a few. 

Broadcom has grown by acquiring smaller firms that develop complementary technologies in network communications. In the last decade, it has bought 43 companies, many of them in Europe, Asia and the Middle East.

In the preceding third quarter, the Irvine, California-based company's net income was $327 million, or 60 cents a share, compared to $85 million, or 16 cents a share, in the year-earlier quarter. Revenue surged 44% to $1.8 billion. Analysts, on average, expected the company to report earnings of 71 cents per share on revenue of $1.75 billion. Analysts, on average, expected the company to report earnings of 71 cents per share on revenue of $1.75 billion. 

Recently, the company raised its revenue outlook for its fiscal fourth quarter, citing stronger-than-expected demand in the mobile and wireless markets. Broadcom Corp. said that it now expects fourth quarter net revenue at the top end of its prior range, at $1.9 billion. Previously, the company had estimated revenue in the range of $1.8 billion to $1.9 billion.

The company has benefited from sturdy demand for products in its mobile markets. Broadcom is well placed in the fast-growing wired and wireless communications markets, with cutting-edge solutions for a growing number of connected users who are demanding more content and bandwidth. The market for wireless connectivity devices are expected to grow, driven by the increasing demand for smartphones, tablets, netbooks and digital TVs. Broadcom is focused on the most innovative technologies related to connectivity, bandwidth and content. Broadcom’s product leadership and solid financial performance and strong cash flow generation continue to be strong positives. 

Meanwhile, smartphone chipmakers and hardware manufacturers are poised for substantial growth in 2011 on the strength of even stronger smart phone sales. Infrastructure growth and improvements worldwide have created more markets for the smartphone. The rapidly growing, billion plus populations of China and India, for example, still have relatively low smartphone sales. Between the two countries, there are under 200 million smartphone users combined.

Full Disclosure: None.

Yum! Brands, Inc. (NYSE: YUM): Q4 Earnings Preview 2010

Yum! Brands, Inc. (NYSE: YUM) is scheduled to release its fourth-quarter earnings after the closing bell on Wednesday, February 2, 2011. Analysts, on average, expect the company to report earnings of 60 cents per share on revenue of $3.50 billion. In the year ago period, the company reported earnings of 50 cents per share on revenue of $3.36 billion.

YUM! Brands, Inc., together with its subsidiaries, operates as a quick service restaurant company worldwide. Through the five concepts of KFC, Pizza Hut, Taco Bell, LJS and A&W (the Concepts), the Company develops, operates, franchises and licenses a worldwide system of restaurants, which prepare, package and sell a menu of food items.

In the preceding third quarter, the Louisville, Kentucky-based company's net income was $357 million, or 74 cents a share, compared to $334 million, or 69 cents a share, in the year-ago quarter. On an adjusted basis, the company earned 73 cents a share in the latest quarter. Revenue rose to $2.86 billion from $2.78 billion in the same quarter last year. Analysts, on average, had expected the company to report earnings of 73 cents a share on revenue of $2.87 billion. 

At its last earnings call in October, the restaurant operator boosted its 2010 earnings guidance to $2.48 per share from its prior outlook of $2.43 per share. In December, the company reaffirmed that it is on track to post 14 percent earnings-per-share growth in 2010, helped by new restaurant openings in China and its other international markets.

The company expects to deliver at least 10 percent EPS growth in 2011, excluding special items, which would mark its 10th straight year of meeting or exceeding this annual EPS growth target.

Recently, the company's board approved the share repurchase of an additional $750 million.  Yum will buy back shares over the next 18 months. The company currently has $130 million of share buyback remaining under the $300 million share repurchases authorized by the board in March 2010. Year to date, ended September 4, 2010, Yum repurchased $7.6 million for a total of $283 million.  Since 2004, the company has returned over $1 billion and $6 billion via dividend and share repurchase programs, respectively.

The restaurant chain operator has enjoyed strong growth in international markets in recent years. Yum Brands has particularly gained immensely from growing Chinese appetite for American fast food. China's growing middle class and rising per capital income offers tremendous potential for further growth of the company. At the time of its spin off from PepsiCo, just 22% of its profit came from international operations, a figure that has since nearly tripled to 65% and is expected to hit 75% by 2015. Yum's China business is very lucrative, with margins topping 20 percent.

Recently, the company said that China would surpass the United States as the fast-food restaurant operator's top profit generator this year, even as the Chinese market's potential remains largely untapped. Yum has more than 3,700 restaurants, mostly KFC outlets, in China and has a big lead over Western rivals like McDonald's Corp (NYSE: MCD) in the world's fastest-growing major economy. The company aims to open more than 20,000 restaurants in China.

Yum!'s chief of India operations said in November he expects revenue to grow between 35% and 45% in 2011. Comparable same-store sales, or sales at stores open at least one year -- a closely watched metric in the restaurant industry -- should increase in the mid-teen percentages, Niren Chaudhary told Reuters at the World Economic Forum's India summit. 

Yum expects to build 475 new restaurants in China next year and 900 outlets in its other international markets, from Europe to Asia and Africa.

Yum Brands recently announced that it has put restaurant chains Long John Silver's and A&W All-American Restaurants up for sale as it pushes to expand in international markets. Yum! said the divestments come as it narrows its focus for long-term growth plans toward greater expansion in China and other international markets while concurrently growing sales at Taco Bell, Pizza Hut and KFC in the U.S. Yum! said that it "does not expect the eventual sale to have a material impact to its ongoing earnings or cash flow."

However, the fast food chain is facing pressure in United Sates as heightened competition and escalating price-war in fast food space could erode the company's bottomline. Moreover, costs for labor and commodities like chicken are on the rise and could bite profits.

Full Disclosure: None.

Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR): Q1 Earnings Preview 2011

Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) is scheduled to release its fiscal first-quarter earnings after the closing bell on Wednesday, February 2, 2011. Analysts, on average, expect the company to report earnings of 17 cents per share on revenue of $543.71 million. In the year ago period, the company reported earnings of 12 cents per share on revenue of $349.36 million.

Green Mountain Coffee Roasters, Inc. operates in the specialty coffee industry in the United States and internationally. The Company operates in two business segments: the Specialty Coffee business unit (SCBU) and the Keurig business unit (Keurig).

In the preceding fourth quarter, the Waterbury, Vermont-based company's net income was $26.99 million or $0.20 per share compared to $14.05 million or $0.11 per share in the previous year. After adjusting for acquisition-related expenses of $4.96 million, net income for the quarter was $29.81 million or $0.22 per share. After adjusting for acquisition-related expenses of $4.96 million, net income for the quarter was $29.81 million or $0.22 per share. Analysts, on average, expected the company to post earnings of $0.20 per share per share on revenue of $359.18 million.

At its last earnings call in December, the company said that it expects first non-GAAP earnings in the range of $0.14 to $0.18 per share and anticipates total consolidated net sales growth of 55% to 65%.

For fiscal year 2011, the company cut its non-GAAP earnings guidance to a range of $1.19 to $1.29 per share from the previous range of $1.24 to $1.29 per share. The company also expects net sales growth of 45% to 53%, up from prior estimates of 44% to 50% reflecting higher pricing and anticipated lower unit volume as a result of the previously announced price increase. Green Mountain told investors “not to rely on” its July 28 forecast for K-Cup shipments to rise 64% to 68% in fiscal 2011. Furthermore, the company said it will no longer provide shipment forecasts for its K-Cups or Keurig single-cup coffee brewing machines.

The company said that it’s investing in packaging and production lines to keep up with demand for K-Cups. Green Mountain, which has been heavily advertising its Keurig brewers as a winter holiday gift, said it expects K-Cup sales to increase in 2011.

Green Mountain has seen its sales rise as it incorporated the Keurig single-cup coffee business to its lineup. But like many coffee-related businesses, it is struggling with massive increase in coffee bean prices, which remain volatile.

GMCR holds all patents for K-Cup portion packs, so all packs sold today are either manufactured by the company or sold by licensees who pay royalties to Green Mountain. The patents covering the K-Cup technology expire between 2012-2017 (with some possible extensions). After Green Mountain loses exclusivity on this technology, anyone who wants to make K-Cups will be able to do so. The company has spent the past few years acquiring different coffee brands in an effort to insulate itself from the ill effects of this coming shift.

During the quarter in review, the company announced the successful completion of its LJVH Holdings Inc. or Van Houtte acquisition for an aggregate cash purchase price of CAD$915 million, or USD$905 million. GMCR said that it expects the Van Houtte acquisition to be neutral to slightly dilutive to earnings per share in the first twelve months after closing, and accretive thereafter. GMCR expects to adjust its fiscal 2011 estimates to include the effects of the acquisition when it reports its fiscal first quarter results. GMCR financed the Van Houtte acquisition through a combination of cash on hand and new debt financing.

The specialty-coffee roaster is currently under the scrutiny of the Securities and Exchange Commission (SEC) and is facing numerous class action lawsuits alleging securities fraud.  In particular, plaintiffs are alleging false and misleading disclosures in violation of federal securities laws.

Full Disclosure: None.

Visa Inc. (NYSE: V): Q1 Earnings Preview 2011

Visa Inc. (NYSE: V), the world’s largest electronic payments network, is scheduled to release its fiscal first-quarter earnings after the closing bell on Wednesday, February 2, 2011. Analysts, on average, expect the company to report earnings of $1.20 per share on revenue of $2.22 billion. In the year ago quarter, the company reported earnings of $1.02 per share on revenue of $1.96 billion.

Visa Inc. operates retail electronic payments network worldwide. It facilitates commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities. The company owns and operates VisaNet, a global processing platform that provides transaction processing services, primarily authorization, clearing, and settlement, as well as related value-added services.

In the preceding fourth quarter, the San Francisco, California-based company's net income was  $774 million, or $1.06 per class A share,  from $514 million, or 69 cents per class A share, in the year-ago quarter. On an adjusted basis, which excludes the revaluation of the company's Visa Europe put option, the company earned 95 cents per class A share in the latest quarter. Total operating revenues grew to $2.12 billion from $1.88 billion. Analysts, on average, expected the company to report earnings of 95 cents per share on revenue of $2.09 billion.

At its last earnings call in October, the company said that it continues to expect annual earnings per share growth of greater than 20% and net revenue growth in the range of 11% to 15%. Further, the company re-affirmed its volume and support incentives to be in the range of 16.0%-16.5% of gross revenue; advertising, marketing and promotional expenses to be less than $900 million and annual free cash flow to exceed $3 billion in fiscal 2011.

The company continues to benefit from strong secular demand growth, increased payment volumes, meaningful international exposure, high barriers to entry, excellent pricing power, impressive operating leverage, and consistent growth in processed transactions.

However, uncertainty stemming from financial overhaul, which includes curbs on debit-card transaction fees, has taken some shine off Visa's shares.  Last month, the Federal Reserve on Thursday proposed capping fees banks can charge merchants for debit-card transactions at 12 cents. While that directly affects bank revenues from debit cards, the banks could try to get Visa and MasterCard to lower their fees to use their networks in order to offset the revenue loss. Final recommendations on the proposal are set to be issued in April.  According to Visa, the debit caps, set to take effect in July, won’t affect Visa’s results until the fiscal fourth quarter of 2011.

The company is repurchasing shares and boosting dividends as lawmakers, litigators and regulators challenge the company’s fees and rules. Late in October, the board of Visa announced the authorization of a new $1.0 billion share buyback program, which is expected to be completed by September 30, 2011, but could be expanded or extended depending on the market conditions and the board’s approval. Although regulatory compliances as a result of the ongoing financial overhaul reform in the U.S. and litigation could weigh on the financials of the company in fiscal 2011 and ahead, Visa has been delivering growth by minimizing expenses, generating strong cash flow and maintaining a healthy capital position.

Full Disclosure: None.

Sprint Nextel (NYSE: S): Q4 Earnings Preview 2010

Sprint Nextel (NYSE: S), the third-largest US wireless carrier, is scheduled to release its fourth quarter earnings before the market open on Thursday, February 10, 2011. Analysts, on average, expect the company to post a loss of 30 cents a share on revenue of $8.17 billion. In the year ago quarter, the company posted a loss of 34 cents per share on revenue of $7.87 billion.

Sprint Nextel Corporation offers wireless and wireline communications products and services to consumers, businesses, and government users in the United States, Puerto Rico, and the U.S. Virgin Islands.

The company has been steadily losing money and customers amid stiff competition. In the preceding third-quarter, the  the Overland Park, Kansas-based company company's net loss was  911 million, or 30 cents a share, compared to $478 million, or 17 cents, in the year-ago quarter. Revenue increased 1.4% to $8.15 billion from $8.04 billion. Analysts, on average, expected the company to post a loss of 28 cents per share on revenue of $8.03 billion. During the third quarter, Sprint gained approximately 644,000 subscribers, representing 364,000 retail subscribers and 280,000 wholesale and affiliate subscribers. This was reportedly the best wireless subscriber growth since 2006.

A its last earnings call in November, the company said that it expects postpaid, prepaid and total net subscriber results to improve in the fourth quarter. The last time Sprint posted a year of postpaid net customer growth was 2006. It had one growth quarter in 2007.

The company is rapidly expanding its 4G footprint and has continued to introduce newer devices  that can take advantage of this faster network and promote a better data usage experience for customers. HTC EVO 4G and Samsung Epic 4G have been two such successes for the carrier. So far, the company has unveiled 18 4G devices, including the BlackBerry PlayBook tablet computer from Research In Motion Ltd. (NASDAQ: RIMM). The company's 4G network has since expanded to 71 markets, and with reliable service, it’s appealing for business clients. In comparison, Verizon’s LTE 4G network began limited service at the end of 2010, while AT&T’s is still only in the testing phase.  Sprint recently announced a 2011 target for launch of tablets capable of connecting to its 4G high-speed wireless network. The move could produce upside to Sprint’s recorded revenue per subscriber, as new subscribers join Sprint’s network and existing subscribers add premium high-speed data plans to their service.

Sprint plans to emphasize its low-cost plans for unlimited wireless data use, a pitch that will grow more compelling as more people use mobile phones and tablets to surf the Web and watch video. The company offers unlimited data service for $69.99 a month, while AT&T eliminated its unlimited plan and Verizon charges more. Sprint is well positioned to leverage the growing wireless smartphone market in the U.S. with its rich portfolio of popular smartphone offerings and more advanced devices in the pipeline. 

The wireless carrier recently said that it would spend up to $5 billion over the next three years to upgrade its network. Sprint said it had reached deals with Alcatel-Lucent SA , Ericsson AB and Samsung Electronics Co. for the project. Sprint also said it would start phasing out the Nextel portion of its network beginning in 2013.

Among other developments, the company raised the price of its 3G Everything data plans by $10. The so-called “premium data” charge will bring Sprint’s 3G data plans into the exact same price range as their current 4G pricing plans.

Full Disclosure: None.