Activision Blizzard Inc. (NASDAQ: ATVI): Q4 Earnings Preview 2010

Activision Blizzard Inc. (NASDAQ: ATVI) is scheduled to release fourth-quarter earnings after the closing bell on Wednesday, February 9, 2011. Analysts, on average, expect the company to report earnings of 51 cents a share on revenue of $2.35 billion. In the year ago quarter, the company reported earnings of 49 cents per share on revenue of $2.50 billion.

Activision Blizzard, Inc., through its subsidiaries, publishes online, personal computer, console, and hand-held games worldwide. The company develops and publishes video games, as well as maintains its proprietary online-game related service, Battle.net. It also publishes interactive software products and peripherals internationally. The company's products cover various game categories, including action/adventure, action sports, racing, role-playing, simulation, first-person action, music, and strategy. Its products include Guitar Hero, Call of Duty, Tony Hawk, Spider-Man, X-Men, James Bond, and Transformers, as well as Diablo, StarCraft, Warcraft, and World of Warcraft.

In the preceding third quarter, the Santa Monica, California-based company's net income was $51 million, or 4 cents a share, compared to $15 million, or 1 cent per share, in the prior-year quarter. Revenue grew 6% to $745 million from $703 million. On an adjusted basis, the company earned 12 cents a share on revenue of $857 million. Analysts, on average, expected the company to report earnings of 9 cents per share on revenue of $750.00 million.

At its last earnings call in November, the company said that it expects fourth-quarter GAAP net revenues of $1.26 billion, and a GAAP loss per share of 1 cent. On a non-GAAP basis, the company expects net revenues of $2.2 billion and 47 cents earnings per diluted share for the fourth quarter.

For the calendar year, Activision expects a record non-GAAP operating margin of 29%. For fiscal year 2011, Activision expects to benefit from the growing installed base of consoles and increased online sales, especially for the core game of platforms.

Activision also expects to release the hero brand, Spider-Man, X-Men, Transformers, and True Crime: Hong Kong in fiscal 2011.

The video game industry is undergoing a significant transition, with increasing contribution from digital downloads, used game sales, game rentals, subscriptions, social network games and mobile game apps as compared to retail sales. The consumer demand for video game is likely to increase with the gradual improvement in the overall U.S. economy for 2011. The sector has seen an increasing amount of its casual gamers shift towards gaming on smartphones or Facebook applications recently.

The company released six new titles in the fourth quarter of 2010, which include Call of Duty: Black Ops, World of Warcraft: Cataclysm, Guitar Hero: Warriors of Rock, D J Hero, Tony Hawk: SHRED, Spider-man: Shattered Dimensions, GoldenEye 007 and Bakugan.

Early in November, the company released Call of Duty: Black Ops, gritty military-themed shooter game that is the seventh installment of the popular "Call of Duty" franchise. The company sold about 5.6 million copies of "Call of Duty: Black Ops" for $360 million on its first day, setting a new record for the video game industry.

In December, the company released World of Warcraft: Cataclysm, the third expansion of the popular massively multiplayer online role-playing game World of Warcraft that was originally released in late 2004. Activision Blizzard sold 3.3 million copies of Cataclysm in its first 24 hours of release.

Going forward, Activision has one of the strongest product pipelines. This includes Blizzard Entertainment’s two expansion packs to StarCraft II, the highly-anticipated next generation of the Diablo series, and Blizzard's yet to be announced MMO title.

Full Disclosure: None.

Pepsico Inc. (NYSE: PEP): Q4 Earnings Preview 2010

Pepsico Inc. (NYSE: PEP) is scheduled to release its fourth-quarter earnings before the market open on Thursday, February 10, 2011. Analysts, on average, expect the company to report earnings of $1.04 a share on revenue of $17.64 billion. In the year ago period, the company posted earnings of 90 per share on revenue of $13.30 billion.

PepsiCo, Inc. manufactures, markets, and sells various snacks, carbonated and non-carbonated beverages, and foods worldwide. The Company’s portfolio includes oat, rice and grain-based snacks, as well as carbonated and non-carbonated beverages, in over 200 countries.

In the preceding third quarter, Purchase, New York-based company's net income was $1.92 billion, or $1.19 a share, compared to $1.72 billion, or $1.09 a share, in the year-ago quarter. On an adjusted basis, the company earned $1.22 in the latest quarter. Revenue jumped 40% to $15.51 billion from $11.08 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of $1.22 per share on revenue of $15.36 billion.

At its last earnings call in October, the company said that for fiscal 2010 it is targeting an 11 to 12 percent growth rate for core constant currency EPS from its fiscal 2009 core EPS of $3.71, which is within the previous guidance range of 11 to 13 percent. Based on current spot rates, foreign exchange translation would represent a one percentage point unfavorable impact on the company's full-year, core EPS. As a result, growth in core EPS for the year is expected to be in the 10 to 11 percent range.

Industrywide sales of carbonated soft drinks had been falling in the United States even before the recession slammed the brakes on consumer spending. Some consumers, taking heed of growing awareness of nutritional health, opted for drinks such as bottled water, juice and tea. 

On the bright side, a strong new product pipeline, robust international sales, on-going manufacturing productivity initiatives, and an active stock program are all positives for PepsiCo. PepsiCo International too is reporting growing revenues and profits across many regions, especially developing markets. Asia Pacific markets, such as China and India, are leading the way with double-digit volume increases in snacks and beverages. The Middle East and Africa region is also seeing excellent results from countries such as Turkey and Egypt.The company has been investing significantlyincountries likeChina, Mexico and Russia over the past few years.

PepsiCo’s heightened emphasis on nutritious convenience foods puts the company in position to grab market share at a time when consumers are becoming increasingly health-conscious. The market share gains from increased focus on nutritious food offerings could increase profitability for PepsiCo’s Quaker Foods, Tropicana, and Gatorade product lines. New distribution of healthy food products in China and a low-calorie fruit puree set to test U.S. markets could spark market share gains for the company. A new Gatorade product line expected for Spring 2011 could also advance the company’s market penetration.

Pepsi has started to introduce a new line of healthy food options in China, where reports of chronic illnesses have been increasing. As consumers become more health-conscious, Pepsi and some of its competitors in the global packaged food market are introducing foods that include traditional Chinese folk medicine ingredients like wolfberry plants, chrysanthemum teas and tremella. Between 2005 and 2009 the wellness foods and beverages market in China increased by 28%, reaching $1.5 billion in 2009. Pepsi now plans to continue its expansion into China with a $2.5 billion investment over the next 3 years. In October last year, it launched Quaker Herbal Oatmealin flavors such as wolfberry and tremella, a fungus considered in China to have therapeutic properties. 

As a part of its strategy to penetrate the market for nutritious convenience foods, Pepsi will soon begin distributing an 80-calorie fruit puree called Tropolis (marketed as a snack rather than a beverage) in test markets through its Tropicana division. The new product could piggyback success of PepsiCo’s Naked Juice smoothie line (for which a bottle typically contains 200 to 400 calories). Pepsi will market the product in apple, grape and cherry flavors (at $2.49 to $3.49 for a 4-pack) to mothers and children. The company reportedly worked closely with its target audience to develop the product, and has high hopes for its success.

Recently, PepsiCo Inc. said that it completed its $3.8 billion acquisition of a majority stake in Wimm-Bill-Dann Foods, a Russian company that produces dairy products, juices, mineral water and baby food. The company said the acquisition of about 66 percent of outstanding shares increases its stake in Wimm-Bill-Dann to about 77 percent. It expects to make an offer on or before March 11 for all remaining shares. PepsiCo said the deal makes it the largest food-and-beverage business in Russia and strengthens its position in the fast-growing Eastern European and Central Asian markets.

Full Disclosure: None.

Cisco Systems Inc. (NASDAQ: CSCO): Q2 Earnings Preview

Cisco Systems Inc. (NASDAQ: CSCO) is scheduled to release its fiscal second-quarter earnings after the market close on Wednesday, February 9, 2011. Analysts, on average, currently expect the company to report earnings of 35 cents a share on revenue of $10.23 billion. In the year ago quarter, the company reported earnings of 40 cents per share on revenue of $9.82 billion. Cisco hasn’t missed profit estimates since at least 2005.

Cisco Systems, Inc. designs, manufactures, and sells Internet Protocol (IP)-based networking and other products to the communications and IT industry worldwide. The company is often considered as a technology-industry bellwether as it dominates the market for routers and switches.

The company's business segments for financial data reporting are defined by geographic region or "theaters": United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. The U.S./Canada segment provided 54.3 percent of fiscal 2010's total revenue. 

In the preceding fiscal first-quarter, the San Jose, California based company's net income was  $1.93 billion, or 34 cents a share, compared to $1.79 billion, or 30 cents a share, in the year-ago quarter. On an adjusted basis, the company earned 42 cents a share in the latest quarter. Revenue climbed to $10.75 billion from $9 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 40 cents per share on revenue of $10.74 billion. 

Cisco's global operations and a clientele spanning businesses and government agencies has made it one of the technology sector's bellwethers. The management team's record of controlling costs and growing the business through acquisitions also made them a darling of tech investors over the years. But a fragile global economy has proven more damaging than initially expected. At its last earnings call in November, Chief Executive John Chambers pointed to “air pockets” in the market, highlighted by weak demand in the government sector. The networking giant said that it expects second quarter net sales to grow 3% to 5% year-over-year, implying second quarter net sales of $10.11 billion to $10.31 billion. For the fiscal year 2011, the company anticipates net sales to grow 9% to 12%, implying net sales of $43.64 billion to $44.84 billion. 

Competition in the company’s core markets has been intensifying for some time. However, Cisco has been diverting resources to rapidly enter a wide range of adjacent businesses in relatively short order. According to industry experts, Cisco still faces competitive hurdles, as other big tech giants, including one-time partner Hewlett-Packard (NYSE: HPQ), scramble for a larger piece of the corporate IT market, especially with the shift toward cloud computing, which is boosting the demand for data center systems. Cloud computing allows companies to tap computing power through a network instead of in-house data centers. 

Overall, after Cisco’s shocking guidance late last year, the company is seen offering a more upbeat view of the coming quarters. The company has said it can grow by entering new markets like data center servers, video conferencing and smart grid technology. But investors said they would like more reassurance that these projects will soon turn more profitable.

Recently, Cisco Systems agreed to buy Inlet Technologies, a privately-held digital media processing firm, for $95 million in cash and "retention-based incentives in exchange for all shares" of the Raleigh, North Carolina-based company. The acquisition is expected to close in within the first half of 2011. Last month, Cisco Systems agreed to acquire privately-held Pari Networks, a provider of network configuration and change management and compliance management solutions that will complement Cisco's smart service capabilities. Based in Milpitas, Calif., with part of its employee base in Hyderabad, India, Pari Networks' technology will integrate into Cisco's smart services and help to manage the health and stability of customer networks. The acquisition is expected to be complete in the third quarter of Cisco's fiscal year 2011, subject to various standard closing conditions. 

During, the company announce that its board of directors has authorized up to $10 billion in additional repurchases of its common stock. Cisco previously authorized up to $72 billion for its current stock buy-back program, according to the statement. Cisco said the stock buy-back program had no fixed termination date.

Full Disclosure: None.

The Coca-Cola Company (NYSE: KO): Q4 Earnings Preview 2010

The Coca-Cola Company (NYSE: KO) is scheduled to release its fourth-quarter earnings before the opening bell on Wednesday, February 9, 2011. Analysts, on average, expect the company to report earnings of 72 cents per share on revenue of $9.75 billion. In the year ago quarter, the company reported earnings of 66 cents per share on revenue of $7.51 billion.

The company manufactures, distributes and markets non-alcoholic beverage concentrates and syrups. It also manufactures, or authorizes bottling partners to manufacture, fountain syrups, which it sells to fountain retailers such as restaurants and convenience stores, which use the fountain syrups to produce finished beverages for immediate consumption, or to fountain wholesalers or bottlers, which in turn sell and distribute the fountain syrups to fountain retailers. In addition, it manufactures certain finished beverages, such as juices and juice drinks and water products, which it sells to retailers directly or through wholesalers or other distributors, including bottling partners.

In the preceding third quarter, the Atlanta, Georgia-based company's net income was $2.06 billion, or 88 cents a share, from $1.9 billion, or 81 cents, in the year-earlier quarter. On an adjusted basis, the company earned 92 cents per share in the latest quarter. Revenue grew 5% to $8.43 billion from $8.044 billion. Analysts, on average, expected the company to report earnings of 89 cents per share on revenue of $8.30 billion. 

The company expects currency to have a minimal to low single-digit negative impact on operating income in the fourth quarter. On productivity front, the company is on track to deliver $500 million in annual savings from its initiatives by the end 2011.

Industrywide sales of carbonated soft drinks had been falling in the United States even before the recession slammed the brakes on consumer spending. Some consumers, taking heed of growing awareness of nutritional health, opted for drinks such as bottled water, juice and tea.

However, Coca-Cola is expanding agressively in international market, especially emerging markets, to improve revenue growth. The soft drinks maker is planning to more than double its number of bottling plants in China over the coming decade as part of the group's aim to triple the size of its sales to the country's rapidly emerging middle class. Coke derives more than three-quarters of its revenue from international markets, and is therefore able to offset falling sales in the United States with strong growth in emerging markets like India, China and Brazil. Coca-Cola executives say they expect 60 per cent of the new growth to come from China, India and other emerging markets, with only 15 per cent from developed markets.

Last year, Coca-Cola Co unveiled goals that call for the revenue generated by the company and its bottlers to double to roughly $200 billion by 2020, with profit margins increasing. Coke also said it hopes to more than double the number of soft drink servings it sells to over 3 billion per day by the end of 2020.

Full Disclosure: None.