Earnings Preview: Starbucks to report 2Q

NEW YORK (AP) — Starbucks reports its fiscal second-quarter results Thursday, which should give investors an indication of how international expansion and new products are affecting the coffee company’s profit.

WHAT TO WATCH FOR: The Seattle-based company, which has more than 18,000 locations around the world, reports global sales growth for cafes open at least a year, with a breakdown of the figure by region. Although Starbucks has delivered strong growth in the Americas and Asia, where it has stepped up new cafe openings, Europe has remained a weak spot.

Executives have said they’re working to turn around results by improving service and offering more tailored products.

The company’s other growth strategy is to offer consumers more than coffee. To do that, it’s bought other companies: A chain of tea shops, Teavana; La Boulange, a San Francisco bakery chain; and Evolution, a bottled juice company. The idea is that products from those companies will be sold in Starbucks cafes, helping boost sales.

Starbucks also introduced a single-serve coffee machine last year to tap into the fast-growing market for single-serve coffee.

WHY IT MATTERS: Starbucks is facing more competition from fast-food chains such as McDonald’s, which have been increasing their coffee offerings. Burger King earlier this year introduced a new line of coffees and Wendy’s is testing fancier coffees such as lattes as well.

Starbucks has nevertheless managed to grow by expanding beyond its core coffee offerings.

LAST YEAR’S QUARTER: Starbucks Corp. earned 40 cents per share on revenue of $ 3.2 billion.

WHAT’S EXPECTED: Profit of 48 cents per share on revenue of $ 3.58 billion, according to FactSet.


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Earnings Preview: Starbucks to report 2Q

NEW YORK (AP) — Starbucks reports its fiscal second-quarter results Thursday, which should give investors an indication of how international expansion and new products are affecting the coffee company’s profit.

WHAT TO WATCH FOR: The Seattle-based company, which has more than 18,000 locations around the world, reports global sales growth for cafes open at least a year, with a breakdown of the figure by region. Although Starbucks has delivered strong growth in the Americas and Asia, where it has stepped up new cafe openings, Europe has remained a weak spot.

Executives have said they’re working to turn around results by improving service and offering more tailored products.

The company’s other growth strategy is to offer consumers more than coffee. To do that, it’s bought other companies: A chain of tea shops, Teavana; La Boulange, a San Francisco bakery chain; and Evolution, a bottled juice company. The idea is that products from those companies will be sold in Starbucks cafes, helping boost sales.

Starbucks also introduced a single-serve coffee machine last year to tap into the fast-growing market for single-serve coffee.

WHY IT MATTERS: Starbucks is facing more competition from fast-food chains such as McDonald’s, which have been increasing their coffee offerings. Burger King earlier this year introduced a new line of coffees and Wendy’s is testing fancier coffees such as lattes as well.

Starbucks has nevertheless managed to grow by expanding beyond its core coffee offerings.

LAST YEAR’S QUARTER: Starbucks Corp. earned 40 cents per share on revenue of $ 3.2 billion.

WHAT’S EXPECTED: Profit of 48 cents per share on revenue of $ 3.58 billion, according to FactSet.


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Earnings Preview: Discover to report 1Q results

LOS ANGELES (AP) — Discover Financial Services is expected to post a smaller profit in the December-February quarter, a period that typically sees robust holiday spending before cardholders shift toward paying down debt. The credit-card issuer and payments-network operator reports before markets open Tuesday.

WHAT TO WATCH FOR: How cardholder spending and payment trends fared during the quarter, as well as an update on the company’s efforts to press further into direct banking and home equity loans.

Investors also will want to know whether its cardholders’ late payment rates took a hit this year after an increase in Social Security payroll taxes went into effect in January.

Sales at U.S. retailers declined a seasonally adjusted 0.4 percent in March. That followed a 1 percent gain in February and a 0.1 percent decline in January.

Still, that didn’t slow spending by holders of rival credit card issuers American Express and Capital One Financial.

Earlier this week, American Express said cardholder spending rose 6 percent in the first three months of the year, while Capital One noted annual increases in revenue in its domestic card business.

Wall Street also will be seeking an update on Discover’s payment-services business, which competes with Visa and MasterCard. In the fourth quarter, Discover saw dollar volume increase 13 percent.

Last summer, Discover acquired a foothold in mortgage lending after purchasing the business from Tree.com Inc. for $ 45.9 million. Discover also has waded into fixed-rate private student loans.

Its latest results also should provide some sense of how the new lines of businesses are paying off.

WHY IT MATTERS: Discover, which is based in Riverwoods, Ill., is best known for its namesake card and is the sixth-largest U.S. credit-card issuer. The company has been working to grow its credit card business, while also pushing further into direct banking, offering auto, personal and student loans. Last month, it announced plans to begin offering home equity loans beginning in the second half of this year.

Consumers are feeling wealthier and more inclined to spend, thanks to rising home values and stock prices that have hit records. When consumers spend more, that can help boost credit card use, benefiting card issuers like Discover.

WHAT’S EXPECTED: Analysts polled by FactSet, on average, expect Discover to report earnings of $ 1.12 per share on $ 1.98 billion in revenue.

LAST YEAR’S QUARTER: In last year’s fiscal first quarter, Discover posted earnings of $ 1.18 per share on revenue of $ 1.84 billion.


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Earnings Preview: Higher profit seen for AT&T

NEW YORK (AP) — AT&T Inc., the largest telecommunications company in the U.S., reports first-quarter results Tuesday before the stock market opens. It follows chief rival Verizon, which reported strong wireless results on Thursday.

WHAT TO WATCH FOR: The first quarter is generally a sleepy one for cellphone companies, lacking in major phone launches. That means it’s time to take profits, and AT&T is expected to show a profit increase from last year.

The number of net new devices signed up on service contracts is usually a figure of focus. AT&T is likely to add fewer than the 677,000 added by Verizon in the quarter — it hasn’t beat Verizon on this measure since 2010, before Verizon had the iPhone.

There have been rumors this year that AT&T is interested in investing overseas, but the company has so far lent no support to those ideas. They’re likely to come up again as analysts get a chance to talk to executives on a conference call after the earnings release.

There is turmoil in the lower ranks of the wireless industry, as No. 4 T-Mobile USA is set to buy No. 5 MetroPCS Communications Inc., and two suitors are vying for Sprint Nextel Corp., the No. 3 contender. AT&T is somewhat insulated from the upheaval, but faces its own challenges, as Verizon extends its lead and growth slows.

WHY IT MATTERS: Dallas-based AT&T had customers for 77.8 million wireless devices and 34.8 million landlines at the end of last year. Its stock is a component of the Dow Jones industrial average.

WHAT’S EXPECTED: Analysts polled by FactSet expect earnings of 64 cents per share on revenue of $ 31.7 billion.

LAST YEAR’S QUARTER: AT&T earned $ 3.6 billion, or 60 cents per share, in the first quarter of 2012. Revenue was $ 31.8 billion.


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Earnings Preview: Google’s 1Q hinges on ad market

SAN FRANCISCO (AP) — Google’ first-quarter earnings report, which arrives after the market closes Thursday, is likely to reveal how effectively the company is managing its dominance of the Internet search market as it expands into the mobile device market.

WHAT TO LOOK FOR: The results cover the first three months of the year, a time when Internet advertising tails off after the traditional holiday marketing frenzy. But that doesn’t prevent Google from growing at an impressive clip for a company of its size. Google’s ad sales, its main moneymaker, are expected to rise by nearly 20 percent from the same time last year, based on analysts’ estimates. Most of the gains flow from Google’s leadership of Internet search, where it handles about two of every three requests for online information.

Google’s ability to keep growing has given the company a market value of nearly $ 260 billion, second only to Apple Inc. among technology companies. Google’s stock price has climbed by more than 10 percent so far this year, slightly better than the Standard & Poor’s 500 index.

Assuming Google’s ad growth is in range of forecasts, watch for how investors react to several other factors. One of the biggest keys will be the average price Google gets for ads running alongside search results. That rate, known as advertisers’ “cost per click,” has fallen from the previous year in five consecutive quarters. The erosion has been driven by an audience that is increasingly using smartphones and tablet computers — devices that don’t yet command as high a price as ads on the larger screens of laptop and desktop computers.

But ad pricing decreases have slowed, raising investor hopes that the pendulum is swinging back in Google’s favor. Google executives insist that advertisers eventually will pay more to sell things on mobile devices as people use more and more of them. To help speed the transition, Google is changing the way it sells ads to prod more marketers into buying spots on mobile devices at the same time they plan campaigns aimed at PCs. That switch is scheduled to take effect this summer.

As it is, investors expect the first-quarter drop in Google ad prices to be smaller than the six percent decrease registered during the final three months of last year.

The progress of Google’s $ 12.4 billion acquisition of cellphone maker Motorola Mobility Holdings will be another area of interest. Motorola Mobility has proven to be a financial headache for Google so far. The division, which Google runs separately from the rest of the company, has sustained losses totaling $ 1.1 billion since Google completed the acquisition last summer. Another loss was expected in the first quarter, though analysts are hoping it will be less than the $ 353 million setback in the final three months of last year.

Google has been trying to cut the losses by cutting jobs and shedding the part of Motorola Mobility that makes set-top boxes for cable television. The company began laying off about 1,200 Motorola Mobility employees last month, adding to the 4,000 people that Google let go last year. Google will get rid of another 7,000 Motorola Mobility workers when it completes its $ 2.35 billion sale of the set-top box operations to Arris Group Inc. That deal is supposed to be completed Wednesday. Google began this year with 11,100 Motorola Mobility employees and 37,500 workers in its core business.

Although Google primarily prized Motorola Mobility for its portfolio of more than 17,000 patents, the company also plans to release smartphones from Motorola. Those devices will compete with an array of other smartphones running on Google’s Android software, which has emerged as the world’s most popular mobile operating system. Google gives Android away for free, betting that the company will make money from additional traffic coming to its advertising-driven services. Although it’s not mandatory, most device makers relying on Android highlight Google’s search engine, maps and YouTube video service.

The conference call to review Google’s first-quarter earnings will give analysts a chance to get more information from CEO Larry Page about the company’s mobile ambitions. One of the hot topics may be Google Glass, an Internet-connected device that works like a smartphone and is worn like a pair of glasses. A tiny display screen is within the field of vision. Computer programmers and 8,000 winners of a Google contest will be getting a test version of Glass this year. The device currently costs $ 1,500, but Google hopes to lower the price by the time it is released on the mass market next year.

WHY IT MATTERS: Google Inc. is a good way to monitor the health of digital commerce because it runs the Internet’s largest advertising network and is now a major player in the mobile computing market. It’s also one of the world’s most powerful companies, so what happens to it can affect millions of people and businesses.

WHAT’S EXPECTED: Analysts, on average, expect earnings of $ 10.64 per share on revenue of $ 11.11 billion, according to FactSet. The earnings projection excludes the costs of employee stock compensation and the revenue figure excludes Google’s advertising commissions.

LAST YEAR’S QUARTER: Google earned $ 2.9 billion, or $ 8.75 per share, in the same quarter of 2012. Excluding expenses for employee stock compensation expenses, Google would have earned $ 10.08 per share. Revenue totaled $ 10.6 billion. Google didn’t own Motorola Mobility during the first three months of last year.


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