The Zacks Analyst Blog Highlights: Microsoft, Apple, Google, Nokia and Domino's Pizza
CHICAGO, July 21, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Microsoft Corporation (Nasdaq:MSFT-Free Report), Apple (Nasdaq:AAPL-Free Report), Google (Nasdaq:GOOGL-Free Report), Nokia (NYSE:NOK-Free Report) and Domino's Pizza, Inc. (NYSE:DPZ-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Friday's Analyst Blog:
Microsoft Announces Biggest Layoff in Company History
After days of speculation, Microsoft Corporation (Nasdaq:MSFT-Free Report) finally announced on Thursday that it will eliminate up to 18,000 jobs over the next one year, as it takes steps to build leaner business processes and integrate Nokia Oyj´s handset unit.
Shares of Microsoft scaled a new 52-week high as investors cheered the company's announcement to slash jobs in a strategic move. The restructuring will significantly trim its workforce as the company attempts to streamline the cost structure and thus boost the bottom line.
At present, Microsoft has nearly 127,000 employees worldwide, which is far more than its competitors Apple (Nasdaq:AAPL-Free Report) and Google (Nasdaq:GOOGL-Free Report). Microsoft will now lay off 14% of its current workforce, making this the biggest round of job cuts in its history. The last time Microsoft announced layoffs was in 2009, when 5% of its workforce was eliminated in order to deal with the recession.
This time round, Microsoft will slash about 12,500 jobs from its Nokia business, which is nearly half of the workforce inherited through the Nokia acquisition in April. Microsoft paid $7.2 billion for Nokia's (NYSE:NOK-Free Report) handset business, which was renamed Microsoft Mobile Oyj.
When it struck the deal last year in September, Microsoft had pledged to generate annual cost savings of $600 million within 18 months after the closure of the deal. Therefore, it seems that the job cuts in areas where the two companies overlap are a part of the plan to live up to its commitment.
Approximately 1000 jobs cuts are expected to take place in Finland where Microsoft plans to close down a Nokia research facility in the Oulu region that currently employs 500 people. The remaining 500 eliminations will come from other Nokia units across Finland.
Trimming its workforce will help Microsoft combat losses due to the persistent decline in worldwide PC sales as a result of the rising demand for smartphones and tablets among consumers and corporates. Furthermore, it will help to lower operating expenses and concentrate more on emerging areas like mobile, wearables, cloud-computing and productivity software, as the software developer goes from a "devices and services" company to a "cloud-first mobile-first" one.
Including the eliminations, Microsoft also announced that it will shutter two-year-old Xbox Entertainment Studios over the next few months and focus more on gaming.
Microsoft shares carry a Zacks Rank #3 (Hold).
Can Domino's (DPZ) Keep the Earnings Streak Alive?
We expect Domino's Pizza, Inc. (NYSE:DPZ-Free Report) to beat expectations when it reports second-quarter 2014 results on Jul 22, 2014.
Why a Likely Positive Surprise?
Our proven model shows that Domino's Pizza is likely to beat earnings because it has the right combination of two key components.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.54%. This is very meaningful and a leading indicator of a likely positive earnings surprise for the company.
Zacks Rank: Domino's Pizza has a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) and 3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Domino's Pizza Zacks Rank #2 and ESP of +1.54% makes us confident of an earnings beat on Jul 22.
What is Driving the Better-Than-Expected Earnings?
Domino's Pizza has delivered positive earnings surprises in three out of the four trailing quarters. In fact, the company's first-quarter earnings grew 15.3% year over year driven by higher revenues, margin expansion and lower share count. Domino's Pizza has undertaken several brand revitalization initiatives such as menu innovation, store expansion and re-imaging of existing stores to significantly drive its revenues.
Moreover, the company has been posting strong domestic as well international comps over the past few quarters. The company has witnessed 81 consecutive quarters of positive same-store sales in its international business. Apart from established markets such as Canada, the UK and South Korea, emerging markets like Brazil and Indonesia have been posting strong growth. The company is also investing heavily in markets like India, Japan, Africa, and Australia that have immense potential.
Domino's is investing heavily in technology-driven initiatives like digital ordering in order to capitalize on the digital wave that has hit the U.S. fast casual restaurant sector. As a matter of fact, the company's mobile ordering system together with traditional online ordering now accounts for more than 40% of its revenues in the domestic market.
Also, the company has regularly innovated its menu to cater to changing consumer preferences. The company recently launched a new item, Specialty Chicken, a boneless chicken item with a pizza twist to cater to the growing demand for boneless chicken. Demand for boneless chicken has increased 11.0% over the past three years.
We believe such efforts will contribute significantly to Domino's growth in the near as well as the long term.
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