Cisco Systems Inc. (NASDAQ: CSCO): Q4 Earnings Preview 2011

Cisco Systems Inc. (NASDAQ: CSCO), the world's largest computer networking gear maker, is scheduled to release its fiscal fourth-quarter earnings after the market close on Wednesday, August 10, 2011. Analysts, on average, expect the company to report earnings of 38 cents a share on revenue of $10.98 billion. In the year ago quarter, the company reported earnings of 43 cents per share on revenue of $10.84 billion.

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.

In the preceding fiscal third-quarter, the San Jose, California based company's net income was $1.8 billion, or 33 cents a share, compared to a profit of $2.2 billion, or 37 cents a share, in the year-ago quarter. On an adjusted basis, the company earned 42 cents a share in the latest quarter. Adjusted income was 42 cents a share. Revenue rose to $10.9 billion from $10.4 billion. Analysts, on average, expected the company to report earnings of 37 cents a share on revenue of $10.86 billion.

At its last earnings call in May, the company said that it expects revenue to be flat to up 2% from the year-earlier period, which translates to a range of roughly $10.8 billion to $11 billion. The company said it also expects adjusted earnings in the range of 37 cents a share to 39 cents a share.

Last month, the company slashed nearly 6,500 jobs globally in an attempt to cut mounting costs. Separately, the networking-equipment giant has agreed to sell its Juarez, Mexico-based video equipment unit to Foxconn Technology Group, the terms of which were not disclosed. Cisco expects to recognize total pre-tax restructuring charges to its GAAP financial results of not more than $1.3 billion over several quarters, consisting of severance and other one-time termination benefits. The company estimates that about $750 million of these charges will be recognized during the fourth quarter of fiscal year 2011, including nearly $500 million relating to the voluntary early retirement program. The remaining is expected to be recognized during fiscal year 2012. The company also expects to incur other charges related to its reorganization program.

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. Cisco has also diversified in recent years.

Cisco has been struggling to cope with rising costs that has threatened to derail its growth. Moreover, a fragile global economy has proven more damaging than initially expected. Moreover, competition in the company’s core markets has been intensifying for some time. On the bright side, 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.

Full Disclosure: None.

Starbucks Corp. (NASDAQ: SBUX): Q3 Earnings Preview 2011

Starbucks Corp. (NASDAQ: SBUX), the world's largest specialty coffee retailer, is scheduled to release fiscal third-quarter earnings after the closing bell on Thursday, July 28, 2011. Analysts, on average, expect the company to report earnings of 34 cents a share on revenue of $2.85 billion. In the year ago quarter, the company reported earnings of 29 cents per share on revenue of $2.61 billion.

Starbucks Corporation, together with its subsidiaries is the roaster and retailer of specialty coffee. It purchases and roasts whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a range of food items, a selection of premium teas, and beverage-related accessories and equipment, through Company-operated retail stores.

In the preceding fiscal second-quarter, the Seattle, Washington-based company's net income was $261.6 million, or 34 cents a share, compared to a profit of $217.3 million, or 28 cents a share, in the year-ago quarter. Total net revenues increased 10% to $2.8 billion. Analysts, on average, expected the company to report earnings of 34 cents a share on revenue of $2.73 billion.

At its last earnings call in April, the company said that it is now targeting high single-digit revenue growth for its fiscal year 2011, driven by mid single-digit same-store sales growth. Previously, the company targeted mid-to-high single-digit revenue growth, driven by low-to-mid single-digit same-store sales growth. The company also lifted its fiscal 2011 earnings outlook to a range of $1.46 to $1.48 per share from its prior outlook of $1.43 to $1.47 per share. The latest earnings guidance include higher commodity costs, which are now expected to have an unfavorable impact of about $0.22 per share for the full fiscal year. The additional $0.02 per share compared to the company's January guidance reflects expected higher dairy and fuel prices, the company noted.

The company has benefited from better pricing and growth in its consumer products group, which has higher margin levels than the company's retail locations. Starbucks is seeking to bolster sales at supermarkets, expand its Seattle’s Best brand, and open new international stores as part of a push to become a global consumer products giant.

The coffee giant has resumed its expansion in international markets. The company currently generates roughly 20 percent of its revenue from international markets. Starbucks expects its international business to reach sustainable double digit profit margins beginning in its fiscal 2011. In December 2010, the company outlined its multi-channel growth strategy that highlighted initiatives to increase sales through multiple brands and channels as well as increase its focus on large emerging markets such as China and India. The company set a target to open 1,500 stores in China by 2015.

Starbucks plans to initiate about 500 net new stores globally in fiscal 2011; approximately 100 in the U.S. and approximately 400 internationally, the majority of which are expected to be licensed stores. The company assumes capital spending to be approximately $500 million-$600 million in fiscal 2011.

Full Disclosure: None.

MEMC Electronic Materials Inc. (NYSE: WFR): Q2 Earnings Preview 2011

MEMC Electronic Materials Inc. (NYSE: WFR) is scheduled to release its second-quarter earnings after the closing bell on Wednesday, July 27, 2011. Analysts, on average, expect the company to report earnings of 8 cents per share on revenue of $702.80 million. In the year ago quarter, the company reported earnings of 6 cents per share on revenue of $448.30 million.

MEMC Electronic Materials, Inc. designs, manufactures, and sells silicon wafers for the semiconductor industry worldwide. With manufacturing and research and development facilities in the United States, Europe and Asia Pacific, the Company enables high performance semiconductor and solar applications.

In the preceding first quarter, the St. Peters, Missouri-based company's net income was $4.5 million, or 2 cents per share, compared to a loss of $9.6 million, or 4 cents per share, in the year-earlier quarter. On an adjusted basis, the company earned 9 cents a share in the first quarter. Revenue climbed to $735.9 million from $437.7 million. Analysts, on average, expected the company to report earnings of 13 cents per share on revenue of $638.82 million.

At its last earnings call in May, the company reaffirmed its earnings guidance range of $0.25 to $0.55 per share for the full year. MEMC also backed its adjusted earnings guidance range of $1 to $1.30 per share for the full year. MEMC's full-year revenue guidance remains unchanged at $2.8 billion - $3.1 billion. The company said that it still expects adjusted sales in the range of $3.4 billion - $3.7 billion for the full year.

MEMC’s solar initiatives are encouraging.MEMC Electronic Materials Inc.’s (NYSE:WFR) Singapore affiliate recently formed a strategic alliance with Korea-based Jusung Engineering Co. Ltd. Under the agreement, MEMC Singapore and Jusung will combine forces to develop and maintain a high efficiency solar cell production facility for SunEdison (an MEMC subsidiary). Jusung Engineering supplies advanced technology and tools for the fabrication of solar photovoltaic cells. Both partners will have equal interests in the project and will shell out $16.0 million each as upfront cost. In May, MEMC sealed a similar strategic deal with Electronics Manufacturing Services (EMS) provider Flextronics International Ltd. (NASDAQ:FLEX). Under the agreement, MEMC Singapore and Flextronics will combine forces to fabricate solar panels for SunEdison. MEMC also entered into a 50-50 joint venture with JA Solar Holdings Co. Ltd. (NASDAQ:JASO) in March. The two companies have agreed to build and operate a solar cell production facility in China.

However, declining price of polysilicon remains a major concern. The company recently announced the termination of the solar wafer supply agreement between its Singapore unit and Suntech Power Holding Co. Ltd. (NYSE:STP). MEMC will receive a handsome $120.0 million from Suntech for the termination. The original deal between MEMC Singapore Pte Ltd. and Suntech, the leading Chinese solar energy company, was struck in 2006. Per this 10-year deal, MEMC was required to supply solar wafers at a predetermined price. As an advance, Suntech deposited a certain security amount and allowed MEMC to take over up to a 4.99% stake in it. However, persistent downturn in polysilicon prices led the companies to amend the contract twice in 2009. Accordingly, prices were cut and volumes were raised. But as further price declines were noticed during the first half of this year, MEMC and Suntech mutually consented to put an end to the contract.

Full Disclosure: None.

DryShips Inc. (NASDAQ: DRYS): Q2 Earnings Preview 2011

DryShips Inc. (NASDAQ: DRYS) is scheuled to release its second-quarter earnings after the closing bell on Wednesday, July 27, 2011. Analysts, on average, expect the company to report earnings of 18 cents per share on revenue of $272.56 million. In the year ago period, the company reported earnings of 30 cents per share on revenue of $224.24 million.

DryShips, Inc. engages in the ownership and operation of drybulk carriers that operate worldwide. The company's fleet carries various drybulk commodities, including coal, iron ore, grains, bauxite, phosphate, fertilizers, and steel products.

DryShips is somewhat unique in the shipping industry in that it operates both drybulk carriers and also offshore oil deep water drilling units. Through its majority owned subsidiary, Ocean Rig UDW Inc., DryShips owns and operates 9 offshore ultra deepwater drilling units, comprising of 2 ultra deepwater semisubmersible drilling rigs and 7 ultra deepwater drillships, 5 of which remain to be delivered to the Company during 2011 and 2013. As of July 21, DryShips owned a fleet of 38 drybulk carriers (including newbuildings), comprising 9 Capesize, 27 Panamax and 2 Supramax, with a combined deadweight tonnage of over 3.4 million tons, and 12 tankers (including newbuildings), comprising 6 Suezmax and 6 Aframax, with a combined deadweight tonnage of over 1.6 million tons.

In the preceding first-quarter, the Athens, Greece based company's net income was $25.8 million, or 7 cents per share, compared to $13.3 million, or 4 cents per share, in the prior-year period. On an adjusted basis, the company earned 15 cents per share in the first quarter. Revenue rose to $207.4 million from $194.2 million in the same quarter last year. Analysts, on average, expected the company to report earnings of 16 cents per share on revenue of $234.12 million.

The dry bulk shipping industries' fortunes are closely tied to global growth as these ships are responsible for carrying the materials required in economic expansion. However, despite improving global macroeconomic scenario, the financial condition of this industry is worse than what it was a year or two ago. An oversupply of ships and mediocre demand has severely damaged the drybulk industry and has forced companies to search elsewhere for revenues.  With a falling dollar and the upward manipulation of the Chinese Yuan, there seems to be less reason to ship commodities long distances, as the prices of these commodities are getting closer and closer to one another. Along with these currency issues, there may be simply too little demand and too many empty boats for shipping companies. The traditional indicator of the shipping industry's health, the Baltic Dry Index, has plummeted close to 20 percent since the beginning of the year as demand for dry-bulk shipping has fallen. This downturn has sent average vessel prices down 65 percent from 2008 all-time highs. The company sees strong shipping demand over the long haul due to a "record pace of Chinese commodity imports," but this demand will likely continue to be uneven. 

DryShips is steadily transforming itself as a drillship company from a drybulk cargo operator. Therefore, both the top line and bottom line are benefiting from lucrative ultra deep-water oil drilling industry.  The company will spin off the unit in an IPO within the next few months. The planned listing of Ocean Rig shares will help unlock the value of DryShips. The unit recently secured a $1.1 billion contract from Brazil's Petrobras and has obtained all the required financing for building new drillships. 

Dryships has also invested a great deal of money trying to establish a presence in the oil-tanker market.

Among other developments, the company recently agreed to acquire the outstanding shares of OceanFreight for consideration per share of $19.85, consisting of $11.25 in cash and 0.52326 of a share of common stock of Ocean Rig UDW Inc., a global provider of offshore ultra deepwater drilling services that is 78% owned by DryShips.  OceanFreight owns four capesize and two panamax vessels with an average age of six years and tonnage of 859,622 tons. 

Full Disclosure: None.

Visa Inc. (NYSE: V): Q3 Earnings Preview 2011

Visa Inc. (NYSE: V), the world’s largest electronic payments network, is scheduled to release its fiscal third-quarter earnings after the closing bell on Wednesday, July 27, 2011. Analysts, on average, expect the company to report earnings of $1.23 per share on revenue of $2.30 billion. In the year ago quarter, the company reported earnings of $0.97 per share on revenue of $2.03 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 first quarter, the San Francisco, California-based company's net income was $881 million, or $1.23 per class A common share, compare to $713 million, or 97 cents per class A common share, in the year-ago quarter. Net operating revenue climbed 15% to $2.2 billion. Analysts, on average, expected the company to report earnings of $1.20 per share on revenue of $2.23 billion.

Early in July, Visa reaffirmed its financial forecast through 2011 with annual earnings per class A share growth of greater than 20 percent, and annual net revenue growth of 11 percent to 15 percent. For the current year, Visa's forecast translates to revenue of between $8.95 billion and $9.11 billion and earnings of at least $4.84 per share. However, the company warned that its revenue and earnings growth will slow in 2012 after new regulations on the fees banks can charge for debit card transactions kick in. Next year. Visa said it expects its revenue growth to slow to the high-single-digit to low-double-digit range. The company expects earnings-per-share growth to slow to the mid-to-high teens. The slowdown will reflect the rules announced by the Federal Reserve last week that kick in on Oct. 1 and next April. The first will limit the fees that banks can charge retailers for processing debit card transactions. The second will give merchants the power to decide which network handles their transactions. Because Visa's fiscal year ends in September it was able to keep its forecast for the current year. Since the Fed moved the date the fee cap will kick in from July 21 to Oct. 1, it will have no impact on Visa's results for fiscal 2011. U.S. debit revenue accounts for about 20 percent of the company's overall revenue, CEO Joseph Saunders said during a conference call to discuss the forecast. We expect that fiscal 2012 will bear the weight of the regulations financially and in fiscal 2013 revenue growth will regain momentum," Saunders said during the conference call. The company also said it will elaborate further on the impact of the fee cap in its earnings conference call on July 27.

On the bright side, 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.

Full Disclosure: None.

Corning Inc. (NYSE: GLW): Q2 Earnings Preview 2011

Corning Inc. (NYSE: GLW), the world's largest manufacturer of liquid crystal displays, is scheduled to release second-quarter earnings before the opening bell on Wednesday, July 26, 2011. Analysts, on average, expect the company to report earnings of 47 cents per share on revenue of $1.96 billion. In the year-ago period, the company reported earnings of 58 cents per share on revenue of $1.71 billion.

Corning Incorporated manufactures and processes specialty glass and ceramics products worldwide. Corning manufactures and processes products at approximately 60 plants in 13 countries. Corning possesses considerable advantages in the market for LCD TV glass substrate. The company has developed great economies of scale, having continuously improved upon its manufacturing technology. Corning has developed one of the most efficient methods to produce the glass substrate and patented it, allowing for production of larger and thinner panels at lower cost. With this advanced technology, GLW has obtained a majority of glass market share, as it has been able to keep pace with the rising demands of its customers (Samsung, Phillips and Sony).

In the preceding first quarter, the Corning, New York-based company's net income was $748 million, or 47 cents a share, compared to $816 million, or 52 cents, in the year-ago quarter. Revenue rose 24% to $1.92 billion. Analysts, on average, expected the company to report earnings of 44 cents on revenue of $1.87 billion.

Corning stated that the crisis in Japan did not affect its operations or supply chain in the last quarter and those suppliers that had been affected had made arrangements for second sourcing. Second quarter results will however be impacted by an inventory correction at Sharp, which intends to lower utilization rates for the purpose. Corning currently does not expect the inventory correction to continue into the third quarter.

At its last earnings call in April, CFO James Flaws said, "There are several key market trends that seem to be playing to Corning's strengths as we look to the future. These trends provide us with great opportunities across all our major businesses and position Corning to grow sales to more than $10 billion by 2014."  The company said that it expects combined glass volume in the second quarter to be consistent with the first quarter, with glass price declines expected to moderate further. For the second quarter, telecommunications segment sales are expected to increase around 20 percent sequentially and nearly 30 percent year-over-year. Environmental Technologies segment sales could decline slightly sequentially, but increase about 35 percent year-over-year. Specialty Materials is expected to grow sales by about 20 percent due to the continued strong Gorilla Glass performance. Meanwhile, Corning anticipates equity earnings to be up about 10 percent sequentially. The gross margin is expected to be down slightly, due to lower glass volumes.

Some are concerned that demand for LCD TVs in the U.S. has stalled, with market penetration of more than 80%. But others point out that demand for the product has continued to be strong in other parts of the world.

Corning continues to expand rapidly throughout the tablet and mobile phone industry.The company's telecommunications division is poised to benefit from renewed telecom spending. Increasing traffic on smart devices, growth in cloud computing and enterprise investment in IT is expected to propel growth going forward. Corning’s Specialty Materials division has also been a source of sales growth lately due to strong demand for its Gorilla Glass. This glass is being used in a number of products, mainly as a cover material for laptops and handheld devices. GLW has reported receiving requests from automakers, appliance designers and architectural industries, which could provide additional revenue opportunities in the future. Corning’s CFO Jim Flaws believes that Gorilla sales could reach $1 billion this year.

In April, Chairman and Chief Executive Wendell Weeks issued a bullish outlook for the liquid-crystal display maker, saying that the company has potential to grow to $10 billion in sales by 2014.

Full Disclosure: None.

Gilead Sciences Inc. (NASDAQ: GILD): Q2 Earnings Preview 2011

Gilead Sciences Inc. (NASDAQ: GILD), the world's largest maker of AIDS drugs, is scheduled to release its second-quarter earnings after the closing bell on Tuesday, July 26, 2011. Analysts, on average, expect the company to report earnings of 99 cents per share on revenue of $2.07 billion. In the year ago quarter, the company reported earnings of 85 cents per share on revenue of $1.93 billion.

Gilead Sciences, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of therapeutics for the treatment of life threatening diseases worldwide.

The company virtually dominates the HIV/AIDS drugs market. According to Joint United Nations Programme on HIV/AIDS, or UNAIDS, AIDS killed about 1.8 million people globally in 2009. That makes HIV the deadliest infection ahead of tuberculosis and malaria, World Health Organization data show.

Gilead’s portfolio of anti-HIV medicines will remain under patent protection for several more years and given the continued global increase in new HIV cases, that area promises to remain a high-growth field. Still, Gilead, like rivals such as Johnson & Johnson (NYSE: JNJ), Pfizer (NYSE: PFE) and Merck (NYSE: MRK), is scrambling to develop new drugs in-house, while also acquiring smaller companies that own promising pipelines. The company is specifically looking at increasing its presence in the Asian hepatitis B virus (HBV) market, where the infection is quite prevalent.

The company has now seen net income fall in each of the last two quarters. Revenue has fallen in the past two quarters. The company's U.S. sales have been hit by temporary cutbacks at state-funded AIDS drug assistance programs (ADAPs) in Florida and Texas.

In the preceding first-quarter, the Foster City, California-based company's net income was $651.1 milion, or 80 cents per share, compared to $854.9 million or $0.92 per share, in the prior-year quarter. On an adjusted basis, the company earned 87 cents per share in the latest quarter. Revenue declined 8% to $1.93 billion from $2.09 billion. Analysts, on average, expected the company to report earnings of 97 cents per share on revenue of $2.04 billion.

At its last earnings call in April, Gilead reiterated its fiscal 2011 guidance. The company said that it continues to expect full year product revenue in the range of $7.9-8.1 billion in 2011, reflecting an increase of 7-10% over 2010 product sales. The guidance includes an adverse 5-6% impact from U.S. health care reform, as well as the impact of pricing pressures in some countries in the European Union. Gilead expects gross margins in the range of 74% to 76% in 2011.

Gilead is aiming to broaden its expertise in the fields of oncology and inflammatory diseases. In August, the Food and Drug Administration is expected to approve a new HIV combination drug. The company is also seeking to counter the loss of revenues through acquisitions. During the quarter in review, Gilead agreed to acquire Calistoga Pharmaceuticals, Inc., a privately-held biotechnology company for $375 million. Gilead anticipates that the deal will close in the second quarter of 2011. Calistoga Pharmaceuticals is involved in the development of medicines to treat cancer and inflammatory diseases. Calistoga could earn up to an additional $225 million if certain milestones are achieved.

Full Disclosure: None.

Amazon.com Inc. (NASDAQ: AMZN): Q2 Earnings Preview 2011

Amazon.com Inc. (NASDAQ: AMZN), the largest online retailer, is scheduled to release its second-quarter earnings after the closing bell on Tuesday, July 26, 2011. Analysts, on average, expect the company to report earnings of 35 cents per share on revenue of $9.37 billion. In the year ago period, the company reported earnings of 45 cents per share on revenue of $6.57 billion.

Amazon.com, Inc. operates as an online retailer in North America and internationally. It also manufactures and sells the Kindle e-reader. The Company offers programs that enable sellers to sell their products on its Websites and their own branded Websites. Amazon’s Cloud storage solution offers what would be an easy way to transfer, share and sync files between a smart phone, tablet or even PC/Mac.

In the preceding first-quarter, the Seattle, Washington-based company's net income was $201 million, or 44 cents a share, compared to a profit of $299 million, or 66 cents a share, in the year-earlier quarter. Revenue jumped 38% to $9.86 billion from  $7.13 billion in the first quarter of 2010. Analysts, on average, expected the company to report earnings of 61 cents per share on revenue of $9.52 billion..

At its last earnings call in April, Amazon said that it expects revenue in a range between $8.85 billion and $9.65 billion, compared with the $8.75 billion expected by analysts. Operating income is expected to come in between $95 million and $245 million; Wall Street was looking for $356.4 million for the period. In a conference call, Amazon Chief Financial Officer Tom Szkutak said the company expects to open nine fulfillment centers this year after adding 13 in 2010.

The company has benefited from strong consumer demand for its  Kindle e-reader, solid e-commerce growth and accelerating demand trends witnessed over the recent holiday period. As usual, investors will be alert for any concrete details on sales of Amazon's Kindle e-reader. The company has never disclosed how many it has sold, though it has said the Kindle is its best-selling product and that millions of people read Kindle books on the device itself and on free Kindle apps for smart phones and computers.  The company has already launched a new, lower-priced version of the device that displays ads on the main screen.

Amazon is one of a handful of players jockeying to capture the growing market for digital books, which was $966 million last year and is expected to triple by 2015, according to Forrester Research. The Kindle competes with devices such as Barnes & Noble Inc.'s (NYSE: BKS) Nook and Apple Inc.'s (NASDAQ: AAPL) iPad. The company is now selling more electronic books for its Kindle e-reader than physical books, the latest milestone in the reshaping of traditional media industries by digital technologies.

On the downside, there are signs that the growth trajectory at Amazon is tapering. Pronounced growth has necessitated more investments in its distribution network and underlying technology. Technology spending jumped by 58% during the March quarter, while fulfillment spending was up 57%. In April, Chief Executive Jeff Bezos that defended the company’s massive investments in technology and infrastructure.

A big part of Amazon’s growing expense line is to build out new fulfillment centers to service its growing sales base. Also, the company is investing heavily in technology that can serve its main online-retail business as well as its growing digital-media business — which sells electronic versions of books, music and movies — as well as its Web services, offering a popular array of cloud-based computing services to customers. Amazon has been building out its online music, movie and videogame stores, along with its “Cloud Drive,” which is a cloud-based digital locker service that can store media files and allow users to play them from any Internet-connected PC.

Among other developments, the company recently reached a licensing deal with CBS Corp. (NYSE: CBS) that will allow its Amazon Prime customers to stream programs from the television network's library at no additional cost. Amazon has been battling with Apple Inc., Netflix Inc. (NASDAQ: NFLX) and other companies for a share of the digital video market as consumer audiences increasingly turn to the Internet and a plethora of mobile devices to watch television shows and movies.

Full Disclosure: None.

Las Vegas Sands Corp. (NYSE: LVS): Q2 Earnings Preview 2011

Las Vegas Sands Corp. (NYSE: LVS) is scheduled to release its second-quarter earnings after the closing bell on Tuesday, July 26, 2011. Analysts, on average, expect the company to report earnings of 44 cents per share on revenue of $2.21 billion. In the year ago period, the company reported earnings of 17 cents per share on revenue of $2.30 billion.

Las Vegas Sands Corp., together with its subsidiaries, develops multi-use integrated resorts worldwide.  The Company is also creating a master-planned development of integrated resort properties, anchored by The Venetian Macao.

In the preceding first-quarter, the Las Vegas, Nevada-based company's net income was $228.2 million, or 28 cents per share, compared to a net loss of $28.9 million, or $0.04 per share, in the year-earlier quarter. On an adjusted basis, the company earned 37 cents per share in the first quarter. Revenue surged 58.2% to $2.11 billion from $1.33 billion in the same quarter of 2010. Analysts, on average, expected the company to report earnings of 44 cents per share on revenue of $2.14 billion.

The company has continued to benefit from the gaming boom in Asia. The Singapore gambling market is still relatively young, and Adelson and other company officials have touted the potential of big profits there for years. In Singapore, Las Vegas Sands opened Marina Bay Sands last year in April and first quarter 2011 revenues were $584.9 million, up 4.4% sequentially. The property has been well received by the market and it provides the company a great opportunity to explore the Asian market.

The company also has seen strong revenue growth and better margins in Macau. Macau, the only Chinese city where gambling is legal, has survived the economic downturn relatively well. Gaming-friendly policies of the local government have enabled the industry to achieve record earnings. Macau government recently announced that the world's largest gambling market posted an annual 52.4 percent rise in gaming revenue in June to 20.8 billion patacas.

However, the company’s Las Vegas business remains a concern. Las Vegas business, which was hit the hardest during the slowdown, is rebounding at a slow pace due to excess capacity in the market.

Full Disclosure: None.

First Solar (NASDAQ: FSLR): Q2 Earnings Preview 2011

First Solar Inc. (NASDAQ: FSLR) is scheduled to release its second-quarter earnings after the closing bell on Tuesday, July 26, 2011. Analysts, on average, expect the company to report earnings of 92 cents a share on revenue of $584.05 million. In the year ago period, the company reported earnings of $1.84 per share on revenue of $587.85 million.

First Solar Inc. engages in the design, manufacture, and sale of solar electric power modules using a proprietary thin film semiconductor technology. The company's solar modules employ a thin layer of cadmium telluride semiconductor material to convert sunlight into electricity. First Solar has the lowest production costs in the industry for its thin film cadmium telluride panels.

First Solar continues its focus on cost reduction with the management taking several steps to further reduce costs over the years to come.
The average manufacturing cost per watt for First Solar modules has declined steadily from $1.47 in 2005 to $0.75 in 2010. This can be primarily attributed to economies of scale and improvements in the firm?s technology and manufacturing process over the last several years.

The company has also focused on expanding manufacturing capacity in low cost manufacturing locations – with a huge chunk of production operations in Malaysia and Thailand. These continuing efforts have led to the management estimating per watt manufacturing costs between $0.52 and $0.63 by 2014 – making the company’s solar modules cost-effective enough to take non-renewable sources of energy like coal and natural gas head-on.

In the preceding first-quarter, the Tempe, Arizona-based company's net income was $116.0 million, or $1.33 per share, compared to $172.3 million, or $2.00 per share, in the year-earlier quarter. Revenue declined to $567.29 million from $567.96 million in the same quarter last year. Analysts, on average, expected the company to report earnings of $1.16 a share on revenue of $544.37 million.

At its last earnings call in May, the company said it continues to expect full year 2011 earnings of $9.25 to $9.75 per share on net sales of $3.7 billion to $3.8 billion. "Despite European market uncertainties, First Solar has good visibility into our demand for 2011," said Rob Gillette, CEO of First Solar. "We continue to execute our cost roadmaps, invest in new module capacity, build our project pipeline and develop promising new markets around the world."

Solar companies have sought to position themselves for market share gains outside of Europe, the world's primary solar-power market, after governments there have cut subsidies that have supported the sector over the past decade. Installations are expected to rise in the U.S., Canada and other markets, although Europe will continue to account for the majority of global photovoltaic installations this year.

Going forward, the company will be ramping up its production capacity to further lower its cost of production through economies of scale. At the end of the third quarter of 2010, the company operated with an annualized global manufacturing capacity of approximately 1.4 GW. The company expects to increase its manufacturing capacity to 46 production lines by the end of 2012, with an annualized manufacturing capacity of more than 2.7 GW.

First Solar, which makes thin-film solar panels that are cheaper to make but convert less sunlight into electricity than traditional silicon solar panels, was the world's top solar-panel supplier last year. While the company remains a top supplier, it faces increasing competition from low-cost Chinese solar-panel makers that are also expanding production to meet growing global demand.

First Solar remains focused on Europe, where the majority of demand is, as well as the U.S. and Canada, where the company has about 2,000 megawatts of large solar farms in various stages of development. The company is also rapidly expanding in emerging markets like China and India, that have a lot of potential, but where demand isn't yet as strong as it is in Europe.

2010 continued the significant growth of the solar market throughout the country with new markets in China and the USA advancing their demand for solar panels. Solar industry as a whole has benefited from continued strong demand thanks to growing awareness about global warming, skyrocketing oil prices, cheap financing and technological advances. Companies involved in the production of semiconductors used in solar panels have enjoyed a positive quarter. Many have experienced rising shipments over the last few quarters, resulting in a sequence of record quarters. The world is becoming increasingly environmentally conscious. Both commercial and private demand for solar power is rising. Solar options are becoming more attractive as more governments provide better options for buildings producing solar power to feed into and out of the grid as required. Meanwhile, US President Barack Obama has called for 80 percent of the nation's electricity to come from clean sources by 2035.

China aims to install 2 gigawatts (GW) of solar energy by 2011 and 20 GW by 2020. As part of this effort the government has taken several measures to incentivize developers and consumers to adopt solar technology. These incentives include the solar PV building program, Golden Sunshine program and PV utility project tenders. A Feed-in-Tariff (FiT) policy is also expected to be announced soon.

In India, the government has set aside land in areas where solar radiation is easily available to foster solar energy growth, and has announced a 30% subsidy to all homeowners who install solar panels on their rooftops. The country aims at installing 20 GW of solar capacity by 2022.

Following Fukushima’s nuclear disaster, Germany decided to go offline with 8 out of its 17 nuclear reactors and phase out the remaining by 2022. We believe this step will boost demand for renewable sources of energy with solar taking the lead. First Solar, being the largest solar modules provider to Germany, will benefit the most.

However, the governments of European countries are cutting back subsidies on solar energy and this could impact First Solar’s sales. This situation could be further aggravated by declining solar component prices in these regions by changes in the FiT structure. Lower demand would result in more inventories thereby pushing solar component prices further and impacting the company’s profitability.

Among other developments, the US government approved nearly $4.5 billion in conditional commitments for loan guarantees for three of the company's projects.

Full Disclosure: None.

Biogen Idec Inc. (NASDAQ: BIIB): Q2 Earnings Preview 2011

Biogen Idec Inc. (NASDAQ: BIIB) is scheduled to release its second-quarter earnings before the opening bell on Tuesday, July 26, 2011. Analysts, on average, expect the company to report earnings of $1.37 per share on revenue of $1.18 billion. In the year ago quarter, the company reported earnings of $1.31 per share on revenue of $1.21 billion.

Biogen Idec Inc., a biotechnology company, discovers, develops, manufactures, and markets therapeutics in the areas of neurology, immunology, hemophilia, and oncology in the United States and internationally. Multiple sclerosis affects about 400,000 people in the U.S., and 2.1 million worldwide, according to the National Multiple Sclerosis Society.

In the preceding first quarter, the Weston, Massachusetts-based company's net income was $294.33 million, or $1.20 per share, compared to $217.44 million, or $0.80 per share, in the year-earlier quarter. On an adjusted basis, the company earned $1.41 per share in the first quarter. Revenue rose 9 percent to $1.2 billion from $1.11 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of $1.41 per share on revenue of $1.18 billion.

In January, Biogen forecast full-year 2011 adjusted earnings "above" $5.70 a share on flat to single-digit revenue growth.

The Biotechnology sector can be very difficult to track as a whole because of its volatile and individual nature. Developments regarding government approvals, litigation, and discoveries all have the ability to elicit large movements in stock prices.

Biogen has suggested that it may have discovered a new way to treat multiple sclerosis. The sector is looking hard for new drugs as it prepares for looming patent cliffs. The company received conditional approval of multiple sclerosis pill Fampyra in Europe, after a positive recommendation in May that followed an earlier rejection.

On TTuesday, investors will be looking for updates on flagship multiple-sclerosis drugs Avonex and Tysabri, sold with Elan Corp. (ELN). Also, expectations are high for the second set of late-stage data on Biogen's oral MS drug, BG-12, which is expected before year-end, along with important mid-stage data on another MS treatment, daclizumab.

Full Disclosure: None.

Eastman Kodak Company (NYSE: EK): Q2 Earnings Preview 2011

Eastman Kodak Company (NYSE: EK), the photography pioneer, is scheduled to release its second quarter earnings before the opening bell on Tuesday, July 26, 2011. Analysts, on average, currently expect the company to report a net loss of 19 cents a share on revenue of $1.89 billion. In the year ago quarter, the company reported earnings of 33 cents per share on revenue of $2.41 billion.

Eastman Kodak Company provides imaging technology products and services to the photographic and graphic communications markets worldwide. It operates in three business segments: Consumer Digital Imaging Group (CDG); Film, Photofinishing, and Entertainment Group (FPEG); and Graphic Communications Group (GCG). Kodak has posted a net loss four of the last five years.

In the preceding first quarter, the Rochester, New York-based company's net loss was $249 million, or 92 cents a share, compared with a prior-year profit of $119 million, or 40 cents a share. Earnings from continuing operations totaled $227 million, compared with $389 million a year earlier. Revenue declined 31% to $1.3 billion, primarily due to a $550 million non-recurring intellectual property licensing transaction in the year ago period. Analysts, on average, expected the company to report a loss of 61 cents a share on revenue of $1.4 billion.

Kodak, which helped popularize consumer photography, has struggled in recent years amid the decline of traditional film sales. The company has largely relied on income from licensing its patents as it shifts away from its declining film business and moves into new digital areas.

Chief Executive Officer Antonio Perez, who has led the company since 2005, is using proceeds from intellectual property licensing to invest in the company's inkjet printing, packaging and software units to blunt falling revenue from camera film. Earlier this year, the company sold some of its microfilm assets and unloaded one of its sensor patent portfolios as part of its effort to generate cash.

The company is now exploring a sale of a small but important part of its U.S. patent portfolio as the imaging company seeks to stem its cash woes and capitalize on growing demand for intellectual property that can be used in wireless devices. The portfolio includes more than 1,100 U.S. patents for capturing, storing, organizing and sharing digital images.

The company is involved in a number of intellectual property disputes with tech giants like Apple Inc. (NASDAQ: AAPL) and Research in Motion Ltd. (NASDAQ: RIMM). The company recently received a mixed regulatory decision that failed to resolve its patent claims against Apple Inc. and Research in Motion Ltd. The U.S. International Trade Commission upheld in part an earlier administrative law judge ruling that Kodak's patents weren't violated, but also rejected parts of the ruling and sent the case back to the judge for a ruling later this summer. Kodak estimated in March that a favorable ruling could be worth $1 billion because Apple and RIM would be forced to settle.

Full Disclosure: None.

Ford Motor Co. (NYSE: F): Q2 Earnings Preview 2011

Ford Motor Co. (NTSE: F) is scheduled to release its second-quarter earnings before the opening bell on Tuesday, July 26, 2011. Analysts, on average, expect the company to report earnings of 60 cents per share on revenue of $31.59 billion. In the year ago period, the company reported earnings of 68 cents per share on revenue of $28.80 billion.

Ford Motor Company designs, develops, manufactures, and services cars and trucks worldwide. Ford and its subsidiaries also engage in other businesses, including financing vehicles. The company has posted $9.28 billion in profits in the past 2 years after incurring losses of $30.1 billion from 2006 to 2008. 

In the preceding first quarter, the Dearborn, Michigan-based company's net income was $2.6 billion, or 61 cents a share, compared to $2.1 billion, or 50 cents a share, in the year-earlier quarter. On an adjusted basis, the company earned 62 cents a share in the latest quarter. Total company revenues rose to $33.1 billion from prior-year quarter's $28.1 billion. Analysts, on average, expected the company to report earnings of 50 cents per share on revenue of $30.64 billion.

At its last earnings call in April, Ford said that quarterly results later in 2011 may not be as strong as its first quarter. The company cited lower expected profit at its Ford Credit unit, increasing commodity costs and investments in long-term growth plans. Ford forecast a smaller year-over-year production increase in the second quarter than the 14 percent gain through March. North American output in the second quarter may rise 8.7 percent to 710,000 units, and production may fall in all other regions from the year-earlier period, Ford said.

Industrywide U.S. vehicle sales slowed in the quarter because of costlier cars and shortages after the March 11 tsunami in Japan. Chief Executive Officer Alan Mulally is raising prices for Fiesta subcompacts and Explorer sport-utility vehicles to offset some of the $4 billion in higher costs for commodities, advertising and new-product development.

On the bright side, the company has benefited from the strength of its new products, consistently better performance at Ford Credit as well as a recovery in the North American automotive market. Unlike GM and Chrysler, Ford did not go through bankruptcy and receive billions of dollars of government loans to enable it to survive and restructure. The company went for a total overhaul of the company's product lines and technology during difficult times.

Recently, Ford said that it expects global sales to expand by 50% to 8 million vehicles by 2015 given the potential growth in Asia, mainly China and India; and rising demand for small cars. The automaker anticipates small cars to account for 55% of the total sales by 2020 compared with 48% presently. One third of the small car sales is expected to come from Asia. Ford has embarked upon an aggressive expansion plan in China that includes plans to triple its lineup in China by introducing 15 models, including the Kuga small sport utility vehicle by 2015. In order to develop these new models, Ford will build new plants raising its capital spending to about $6 billion annually by mid-decade from $3.9 billion in 2010 and the projected $5.5 billion in 2011. In order to support the increasing sales, Ford also aims to triple its dealership to 340 in India and double in China (adding 100 dealerships this year) to 680 by 2016. The company plans to expand its production capacity in China to 1.1 million vehicles by 2012. It will spend $1.6 billion to build 4 plants in the country by 2012. Ford has been gearing to catch up with its rivals in the world largest auto market. Currently, the automaker holds 2.4% of the passenger-vehicle market in the country. Ford’s sales in China grew 40% in 2010 driven by higher sales of Focus compact and Fiesta subcompacts. 

Ford is also rigorously working to reduce debt. By 2015, Ford also plans to cut its debt level to $10 billion from $16.6 billion at the end of the first quarter. The company expects the move to help regain investment-grade credit rating. The company is likely get back the investment grade rating in 2012, or by the end of 2011. An investment grade rating would allow Ford to sell bonds to a large number of institutional investors forbidden to invest in junk bonds, which would likely lower Ford's cost of borrowing.

Full Disclosure: None.

AK Steel Holding Corp. (NYSE: AKS): Q2 Earnings Preview 2011

AK Steel Holding Corporation (NYSE: AKS), the third-largest US steelmaker, is scheduled to release second-quarter earnings before the opening bell on Tuesday, July 26, 2011. Analysts, on average, expect the company to report earnings of 50 cents per share on revenue of $1.81 billion. In the year-ago period, the company reported earnings of 24 cents per share on revenue of $1.60 billion.

AK Steel Holding Corporation, through its subsidiaries, produces flat-rolled carbon, stainless, and electrical steels, and tubular products primarily in the United States and internationally.

In the first quarter of 2011, AK Steel returned to profitability, both at the operating income and net income levels. In the preceding first quarter, the West Chester, Ohio-based company's profit was $8.7 million, or 8 cents per share, compared to $1.9 million, or 2 cents per share, in the year-earlier quarter. Revenue increased 12% to $1.581 billion from $1.406 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 1 cent per share on revenue of $1.61 billion. 

At its last earnings call in April, AK Steel said that it expects shipments to be in the range of 1.50 million tons to 1.55 million tons, reflecting an increase over the first quarter. The company also expects second-quarter average per-ton selling price to be about 7% higher than the first quarter.

Steel demand and production have improved nicely in the past year due to increased government support and more balanced demand. The rebound in demand has been largely attributed to -- at least in the US -- stronger auto and non-residential construction sectors. China posted a significant surge in steel imports last month; however stricter measures may reduce the nation's demand going forward. The World Steel Association expects global apparent steel demand to increase 5.9% to 1.4 billion metric tons in 2011. The operating profit is expected to be approximately $65 per ton for the second quarter of fiscal 2011.

A run-up in raw materials costs has helped steel mills press home higher prices with their biggest customers, especially auto makers and distribution centers. AK Steel pays nearly double for iron ore pellets compared with its integrated competitors, including United States Steel Corporation (NYSE: X), which owns its own pellets. The blast-furnace operator doesn't control its own sources of iron ore, like U.S. Steel. On the bright side, AK Steel has a more diverse product portfolio than its peers. The company is focusing on markets and products that have greater potential in the long term.

However, higher input costs, particularly iron ore, is eroding margins of the company remain major concerns.

Full Disclosure: None.

Broadcom Corp. (NASDAQ: BRCM): Q2 Earnings Preview 2011

Broadcom Corp. (NASDAQ: BRCM) is scheduled to release its second-quarter earnings after the closing bell on Monday, July 25, 2011. Analysts, on average, expect the company to report earnings of 63 cents per share on revenue of $1.80 billion. In the year ago quarter, the company reported earnings of 66 cents per share on revenue of $1.60 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 dramatically expanded its product line, enabling it to create a host of new products with the lowest-possible manufacturing costs. 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.

The company has now seen net income rise in three straight quarters. The company has enjoyed double-digit year-over-year percentage revenue growth for the past four quarters

In the preceding first quarter, the Irvine, California-based company's net income was $228 million, or 40 cents a share, compared with a profit of $210 million, or 40 cents a share, in the year-ago quarter. On an adjusted basis, the company earned 68 cents a share in the latest quarter. Revenue rose to $1.82 billio from $1.46 billion. Analysts, on average, had expected the company to report earnings of 59 cents a share on revenue of $1.81 billion.average, expected the company to report earnings of 74 cents per share on revenue of $1.90 billion.

At its last earnings call in April, the company said that it expects second-quarter revenue in the range of $1.75 billion to $1.85 billion, with margins anticipated to improve 50 basis points from the first quarter.

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.

Moreover, the rapid rise in users of smartphones and tablets, alongside mobile computers has prompted a vast increase in demand for higher bandwidth services. StrataXGS, its most recent switch solution promises carriers flawless network migration onto 4G as well as improved bandwidth and connectivity capabilities. 

During the quarter in review, the company unveiled a new Fibre Channel over Ethernet (FCoE) solution on what it calls the world’s fastest Converged Network Adapter (CNA). 

Full Disclosure: None.

Texas Instruments Inc. (NYSE: TXN): Q2 Earnings Preview 2011

Texas Instruments Inc. (NYSE: TXN), the world's second largest maker of mobile phone chips, is scheduled to release its second-quarter earnings after the closing bell on Monday, July 25, 2011. Analysts, on average, expect the company to report earnings of 53 cents per share on revenue of $3.44 billion. In the year ago quarter, the company reported earnings of 62 cents per share on revenue of $3.50 billion.

Texas Instruments Incorporated engages in the design and sale of semiconductors to electronics designers and manufacturers worldwide. The company operates in four segments: Analog, Embedded Processing, Wireless and Other. The company has successfully realigned its business to reduce focus on the commoditized, low-margin market for wireless chips. Texas Instruments expects Analog and Embedded Processing to be its primary growth engines in the years ahead.

Texas Instruments makes chips for both low-end and high-end mobile phones. The low-end, used primarily in emerging markets like India and China, earns less margin, however, works out well due to the high volume involved. The high-end has higher profitability and is used in phones having better features, used primarily in the developed countries. The company also makes chips for digital cameras and televisions as well.

The company was riding a post-recession demand rebound before March’s historic earthquake and tsunami in Japan disrupted tech-sector supply chains and damaged two of TI’s factories. Before the earthquake struck, TI was experiencing weaker consumer demand for personal computers and televisions and slower-than-usual industrial demand growth, but it predicted the corrections would be short-lived.

In the preceding first quarter, the Dallas, Texas-based company's net income was $666 million or 55 cents per share, compared to $658 million, or 52 cents a share, in the year-ago quarter. The chipmaker said the earnings were impacted by about 2 cents a share due to the Japan earthquake.Revenue climbed to $3.39 billion from $3.20 billion. Analysts, on average, expected the company to report earnings of 58 cents per share on revenue of $3.40 billion. 

Last month, the chipmaker slashed its outlook for both revenue and earnings in the second quarter — citing weak demand from a single customer, which is widely known to be cell phone giant Nokia Corp. (NYSE: NOK). Nokia is the company's largest customer. The company said that it now expects second-quarter revenue to be between $3.36 billion and $3.5 billion, down from the previous range of $3.41 billion to $3.69 billion. TI also said that it now expects earnings to be between 51 cents and 55 cents a share, down from the prior range of 52 cents to 60 cents a share.

The company is generally viewed as strong long-term player in the chip market, especially given its robust position in the analog and embedded processing markets. The company continued to invest during this recession, making smart acquisitions, expanding the sales force, and expanding manufacturing capability. 

The company is focusing on tried-and-true profitable tech segments that have long product lifecycles and reasonable economic moats, while also keeping itself as a key player in the growing smartphone market. Texas Instruments is prudently investing its R&D dollars into several high-margin, high-growth areas of the analog, embedded processing and wireless markets, which has led to solid order growth in the recent past. The phasing out of the low-margin baseband business also remains on track and should generate some margin expansion every quarter. This, along with a stronger mix and cost control is resulting in great earnings momentum and solid cash flow.  Texas Instruments' compelling product line, the increased differentiation in its business, lower-cost 300mm capacity and possibly aggressive pricing strategy (in the next few quarters) should continue to drive earnings momentum.

Full Disclosure: None. 

Lorillard Inc. (NYSE: LO): Q2 Earnings Preview 2011

Lorillard, Inc. (NYSE: LO), the nation's third-biggest cigarette company, is scheduled to release its second-quarter earnings before the opening bell on Monday, July 25, 2011. Analysts, on average, expect the company to report earnings of $2.02 per share on revenue of $1.21 billion. In the year ago quarter, the company reported earnings of $1.73 per share on revenue of $1.04 billion.

Lorillard, Inc., through its subsidiaries, engages in the manufacture and sale of cigarettes in the United States. The company offers 41 different product offerings under the Newport, Kent, True, Maverick, Old Gold, and Max brand names.

The demand for company's cigarettes has been impacted by decreasing social acceptability of smoking, increased regulation, public awareness of smoking's health risks, and rising costs due to excise taxes and litigation expenses. However, Lorillard has managed to grow its profits despite negative press and increased regulatory actions.

The weak economy and high unemployment have caused some smokers to trade down to cheaper brands to save money. Lorillard's Maverick and Reynolds American's Pall Mall brands have been among the beneficiaries. Most tobacco companies have raised prices and cut costs to bolster profits as declining demand cuts into cigarette sales.

In the preceding first quarter, the Greensboro, North Carolina-based company's net income was $248 million, or $1.71 per share, compared to $232 million, or $1.50 per share, in the year-ago quuarter. Revenue rose 12.9 percent to $1.54 billion from $1.36 billion.

The company has benefited from higher unit sales volume, higher average prices and lower sales promotion costs. Newport menthol cigarette brand is Lorillard's golden asset. Newport has a market share of close to 35% in the menthol cigarette category. Newport is one fantastic asset. It is the second most popular cigarette brand in the U.S. behind Marlboro. The brand has been steadily taking market share from competitors like Altria's Marlboro Menthol, and Reynolds' Kool and Camel Menthol/Crush brands. Newport has taken market share for an amazing 19 straight years.

A hot issue at the moment is the banning of menthol and other flavored cigarettes. The argument against them is that they encourage young people and people who do not like the taste of cigarettes to smoke. However, there are concerns that a ban might increase counterfeit trading and result in easier underage access. Counterfeit cigarettes are becoming increasingly troublesome as prices continue to climb from higher taxes imposed by governments needing to replenish waning budgets. Nearly 90% of Lorillard’s revenue is derived from the sale of menthol-flavored cigarettes. 

Lorillard's most intriguing financial quality is its enormous free cash flow generation (over $1 billion in the past 12 months). The firm has largely returned it to shareholders in the form of dividends and share repurchases. 

The company recently amended its existing $1.0 billion share repurchase program to authorize an additional $400 million in repurchases, authorizing the company to repurchase in the aggregate up to $1.4 billion of its outstanding common stock.

Full Disclosure: None.