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Business Mayor
24-05-2025
- Business
- Business Mayor
Apple: Latest Tariff Threat Creates Uncertainty, but We See It Primarily as a Negotiating Tactic
Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research. President Donald Trump continued tariff threats on Apple AAPL on May 23. On his Truth Social platform, Trump indicated his desire for iPhone production to shift to the United States and claimed Apple would face a blanket 25% tariff for iPhones imported from India and other countries. Why it matters: We don't view US iPhone production as feasible in the medium term. To us, this is a negotiating tactic aimed at driving greater US investment from Apple, likely in the form of domestic chip investment and potentially production of lower-volume devices than the flagship iPhone. We had viewed China production at the highest tariff risk for Apple, but Trump is now targeting India, where more than half of US-bound iPhones are produced. Still, we believe paying the blanket 25% tariff would be more economical than mass-producing iPhones domestically. Apple has already announced $500 billion in US investment, which we think is aimed to placate the Trump administration and earn an exemption to tariffs. We believe the administration knows it has leverage over Apple via tariffs and is using this to gain greater commitments from the company. The bottom line: We maintain our USD 200 per share fair value estimate for wide-moat Apple. We continue to model a tariff exemption in our base case. Despite short-term bluster from the administration, we expect an investment deal to be reached that avoids blanket iPhone tariffs. If Apple were to face a blanket 25% tariff on US iPhones, we'd expect a 5%-15% impact to earnings and the firm's intrinsic valuation, depending on Apple's decision to offset the cost via pricing (which could negatively impact unit sales). Shares look fairly valued to us, even after trading down 3% intraday on May 23 on the news. We believe tariff concerns are being adequately valued into the stock, along with concerns over Apple's ability to use artificial intelligence to improve future growth, which we factor into our valuation. The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies. SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk READ SOURCE
Business Mayor
21-05-2025
- Business
- Business Mayor
Raising Our Fair Value Estimate for Wide-Moat Unilever
Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research. We are transferring coverage of Unilever ULVR, a leading global player in home and personal care, and packaged foods, with significant exposure to emerging markets, accounting for 58% of revenue in 2024. The bottom line: We raise our fair value estimate by around 3% to EUR 59/GBX 4,940/USD 66. We maintain our wide economic moat, standard capital allocation, and Low Morningstar Uncertainty ratings. At current levels, shares offer a modest upside of around 6%. Over the past 18 months, Unilever's shares have risen about 25%, driven by a strategic reset focused on driving productivity savings and stepping up brand and marketing investment and innovation efforts to rekindle volume growth. The wide moat rating reflects Unilever's strong retailer relationships, brand strength across some key categories, particularly in personal care, and cost advantage stemming from its scale and operational efficiency. Big picture: Under new CEO Fernando Fernandez, the company is embarking on the next stage of its transformation. Fernandez's agenda focuses on sharper market execution and more impactful, scaled innovations to improve brand appeal in an increasingly fragmented competitive landscape. Management targets consistent volume growth of at least 2%, supplemented by premiumization efforts to drive mid-single digit organic sales growth, alongside modest operating margin accretion led by gross margin gains. This is supported by continued portfolio rotation toward higher growth categories like beauty and wellbeing, as well as the company's strong presence in emerging markets where population growth, urbanization, and rising incomes should support long-term demand. Read More Nvidia GTC 2025: Winners & Losers Key stats: We model 3.8% organic sales growth, including 2.2% from volume. Our 2029 operating margin forecast is 18.9%, 50 basis points ahead of 2024, reflecting a 100-basis-point contribution from gross margin and overhead reduction, partly offset by brand and marketing reinvestment. The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies. SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk READ SOURCE
Straits Times
13-05-2025
- Business
- Straits Times
Singapore stock market rises in cautious Asia relief rally after US-China tariff reprieve
In Singapore, the Straits Times Index (STI) jumped 1.89 per cent, or 73 points, to 3,949.29 when the market opened. ST PHOTO: LIM YAOHUI SINGAPORE - Stock markets in Asia on May 13 rose in a cautious relief rally on hopes a 90-day tariff truce will lead to the end of an all-out trade war between the United States and China. In Singapore, the Straits Times Index (STI) jumped 1.89 per cent, or 73 points, to 3,949.29 when the market opened. It pared two-thirds of its gains and was up 0.6 per cent, or 22 points, at 3,897.84 as at 10.44am. Most Asian markets joined with Japan's Nikkei Index index rising 1.7 per cent, South Korea's Kospi advancing 0.4 per cent and Australia's ASX200 up 0.7 per cent. The Hang Seng Index, which has jumped the previous day, fell 1.3 per cent, while the Shanghai Composite Index edged up 0.2 per cent. Overnight on Wall Street, the blue-chip Dow Jones Industrial Average rallied 1,160 points or 2.8 per cent, while the broader S&P 500 surged 3.3 per cent and the tech-heavy Nasdaq 100 Index soared 4.35 per cent back into a bull market. The US dollar meanwhile jumped over 1 per cent for its best one-day move since Nov 6, in the immediate aftermath of Donald Trump's victory in the US presidential election. Under the surprise deal, which will last for 90 days, US exports to China will see tariffs reduced to 10 per cent from 125 per cent. Meanwhile, tariffs on Chinese exports to the US will be lowered t o 30 per cent from 145 per cent. Morningstar Equity Research analysts Kai Wang and Kathy Chan said the tariff reductions were greater than expected, and should benefit certain sectors. 'We do think a recovery should be imminent based on the progress made. Certain sectors should see higher appreciation during the market upswing, with the technology, communication services, and consumer cyclical sectors benefiting the most during the recovery period,' they said. However, they also cautioned that although the worst may be over, 'the road to full recovery may still be bumpy, as US President Donald Trump has a history of changing course and making maximalist proposals,' they added. JP Morgan Asset Management chief market strategist for the Asia Pacific Tai Hui said the immediate market reaction has been positive, noting that Hong Kong stock indices and US equities futures both rose. 'Overall, we expect the market to get back on to a risk-on sentiment in the near term. Pressure on the Fed to cut rates may also ease for the time being,' he said. OCBC bank chief economist Selena Ling added that the deal 'buys some time' where the tariffs are brought back from 'sky-high levels to more manageable levels', leading to market relief. 'However the caveat is that it is not a permanent agreement. As such, there are still inherent uncertainties,' she said. She also pointed out that there are no specific purchasing commitments unlike in the 2020 trade deal that Mr Trump signed with Beijing that required China to increase purchases of US exports by US$200 billion (S$261 billion) over two years. 'There is a permanent dialogue channel but no dispute resolution panel; and the sectoral tariffs (for semiconductors and pharmaceuticals, for instance) are still pending,' Ms Ling added. 'So it is a positive start to de-escalation but still a long road ahead for negotiations,' she said. Bank of Singapore chief investment strategist Eli Lee added that the US-China trade de-escalation is deeper and faster than widely expected, and will serve as a positive near-term catalyst for risk assets, especially for sectors and companies most exposed to the US-China tariff war. He noted that after the announcement, the US 10-year Treasury yield moved higher, US equities rallied, and the US dollar strengthened, in-line with what analysts expected to see with firmer US growth expectations. 'Our base case remains that the US Federal Reserve will take a wait-and-see approach and cut rates only once in 2025,' he said. He also said this bodes well for what can be expected from US trade talks with other countries. Sue-Ann Tan is a business correspondent at The Straits Times covering capital markets and sustainable finance. Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Mayor
03-05-2025
- Business
- Business Mayor
Amazon Earnings: Good Quarter Overall With AWS Decent; Guidance Light on Operating Income
Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research. What We Thought of Earnings Amazon AMZN reported first-quarter results that beat the high end of guidance on both the top and bottom lines. Revenue grew by 10% year over year in constant currency to $155.7 billion, while operating margin was 11.8% versus 10.7% a year ago. Currency hurt sales growth by $1.4 billion. Why it matters: Results were generally good, with upside broadly on the top and bottom lines, which we think is positive in the face of looming tariffs. We see some prebuying behavior ahead of tariffs, which is worth monitoring if the tariff situation persists beyond the second quarter. Amazon produced upside to revenue in each of segments relative to our model except for third-party sellers, which was slightly light. Consumer buying behavior has not really changed in the face of tariffs, even through April. Advertising was impressive and helped buoy overall results. While there could be some mild disappointment around solid AWS results given Azure's very strong results on April 30, we note AWS faces the same capacity constraints and still produced upside to our estimate in the first quarter. Artificial intelligence workloads are growing in excess of 100% year over year on AWS. The bottom line: We maintain our fair value estimate of $240 per share as we see good results in conjunction with mixed guidance and we see shares as attractive. Coming up: Overall guidance is mixed, with revenue solid and profitability light relative to our model. Satellite launch costs for Project Kuiper will likely pressure margins for a couple quarters, while new AWS capacity coming online later this year will have a similar impact. We do not think these will have a major impact on Amazon's long-term profitability, but we have already been modeling relatively flat margins for 2025, so have not made meaningful changes. Considering the tariff situation, we see guidance as solid. Second-quarter guidance includes revenue of $159 billion-$164 billion, with operating income of $13.0 billion-$17.5 billion. The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies. SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk READ SOURCE
Business Mayor
25-04-2025
- Business
- Business Mayor
Air Liquide Earnings: Well-Positioned to Navigate Tariff Turbulence
Editor's Note: This analysis was originally published as a stock note by Morningstar Equity Research. Despite a challenging macroeconomic environment, wide-moat-rated Air Liquide AIL delivered a 1.7% year-over-year comparable sales increase in the first quarter, with solid performance across most regions and business lines. We are maintaining our EUR 187 per share fair value estimate, as our slightly more conservative near-term projections amid tariff-related uncertainty were offset by time value of money. On a comparable basis, first-quarter industrial merchant sales grew by 1% from the same period last year, as 2.5% higher pricing was partially offset by lower volumes. Industrial sales stayed flat, as contribution from new project startups was offset by softer demand. Electronics posted a 4% comparable sales increase, fueled by 10% growth in carrier gases and strong advanced materials sales. Lastly, healthcare maintained its strong momentum, delivering 5% growth driven by both home healthcare and medical gases. Air Liquide generated roughly EUR 131 million in efficiencies in the first quarter, and we believe the industrial gas firm remains on pace to deliver its long-term target of expanding its operating margin by 460 basis points from 2022 levels by 2026. We believe that Air Liquide faces a minimal direct impact from tariffs, as the nature of the business is very local. Furthermore, we believe that Air Liquide's business model makes it well positioned to withstand tariff-related uncertainty thanks to long-term customer agreements in the large industries and electronics business lines, ability to pass through cost inflation in the industrial merchant business, and resilient sales in the healthcare business. Lastly, we expect Air Liquide's record EUR 4.5 billion backlog, up from EUR 4.2 billion at the end of 2024, to translate into solid revenue growth over the next few years. The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies. SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk READ SOURCE
