ADP recently reported that job creation is slowing, which could spell a troubling trend for the largest payroll processor in the U.S. The number of jobs created dropped to 114,000 in July from 145,000 in June, ADP reported. In addition, employers cut more than 66,000 jobs in July, according to consulting firm Challenger, Gray & Christmas.

But recent moves to focus more on small businesses -- which are creating the bulk of the new jobs -- support a brighter outlook for the company.

We have recently revised our Trefis price estimate for ADP to $56.65 per share, which is approximately 15% above the market price, based on the company's fourth-quarter earnings and its reported forecasts for 2012.

Despite concerns in the job market, we are bullish on ADP for the following reasons:

1. ADP Focusing on Small Businesses as They Add Jobs

Small businesses have been increasing hiring for nearly two years now, according to the ADP report. Companies with fewer than 50 employees added 58,000 jobs nationwide in July, while businesses with 50 to 500 workers hired 47,000 people -- and only 9,000 new positions came from large firms with more than 500 staffers, according to the study. It's also worth noting that as many as 57% of July's layoffs came from just five companies, implying that the job scenario at small businesses is actually not bad.

Identifying the increasing importance of small business clients, ADP has been ramping up its service offerings to the segment. With small businesses leading the trend towards increasing mobility, ADP launched its popular payroll-management platform for small business on the iPhone and Android smartphones. (See ADP Targets Small Business Clients through Android Payroll Platform.)

As ADP continues to expand and refine its services to better cater to small businesses, its number of small-business clients can be expected to rise in the future.

2. Expanding Non-Payroll Services to Drive Revenue Growth

ADP expects high-single-digit revenue growth in the 2012 fiscal year, backed by its solid sales performance and investment in product innovation. Even more encouraging is the fact that the revenues are expected to increase across the segments. In particular, revenues from human-resources outsourcing and other professional-employer services are expected to grow by more than 15%. ADP's recent push beyond payroll services -- including human resources, recruiting and talent management, background checks and benefits administration -- could help drive that growth.

With more services to offer, the fee that ADP charges per worksite employee will likely rise in the future.

See our full analysis of ADP.

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Technology outsourcing and consulting giant Accenture (ACN) has seen its stock shoot up over 50% in the past year and now trades close to an all-time high of $63.66 per share. Accenture's stock performance has been on par with that of IBM (IBM), which recently surpassed Microsoft (MSFT) to become the second largest tech firm by market cap. (See Big Blue Heads for $200 on Double Digit Revenue Growth) Below we take a look at the new additions to Accenture's offerings in the insurance business.

We maintain a Trefis price estimate of $54.40 per share for Accenture's stock, which is roughly 5% below the current market price.

Insurance Market Opportunity

Over the past few weeks, Accenture has made significant new additions to its offerings. On July 14, the firm announced the agreement to acquire Duck Creek Technologies, a privately held company that specializes in software solutions for the property and casualty insurance industry, which will ramp up its offerings in the insurance sector.

Accenture has been serving the insurance sector for years. The firm has won a series of insurance deals in the past few months indicating the popularity of its services. In a recent survey on insurance customer satisfaction, Accenture identified a "significant gap between expectations and reality" and saw a potential business opportunity.

The Duck Creek acquisition is likely to give both Accenture's technology consulting, as well as its technology outsourcing, business divisions a boost. Together, those segments make up about 42% of our price estimate for Accenture.

See our complete analysis of Accenture.

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SAP's (SAP) business is humming along nicely with its core businesses consistently posting double-digit revenue growth. Revenues from the its two main revenue streams - software and support - increased by 26% and 10%, year over year, in the second quarter, while its total revenues were up 14%.

We look at how some of its new initiatives, such as HANA and Business ByDesign, are performing, below. We expect these to support future top-line growth and help fend off competition from the likes of Microsoft (MSFT), Oracle (ORCL) and Salesforce.com (CRM).

We have revised our Trefis price estimate for SAP to $62 per share, which is slightly ahead of the current market price.

Innovation to Drive SAP's Revenue Growth

SAP recently launched several new products that are seeing high adoption rates. We believe these new products will be integral in driving SAP's growth in the coming years.

1. HANA (High Performance Analytic Appliance)

HANA is an in-memory computing solution that speeds up data storage and retrieval significantly. HANA has seen some strong demand and had the fastest growing pipeline exceeding €400 million by the end of Q2. With the success of HANA, SAP should be able to maintain its lead in the Business Intelligence software market, which accounts for just under 15% of our price estimate. We expect SAP to have a 26% share of the BI market by the end of the forecast period.

2. Business ByDesign

SAP has traditionally been a leader in the enterprise-resource-planning software market, also known as ERP, but it has been losing market share slowly. It hopped on to the on-demand bandwagon rather late, compared to Oracle and Salesforce.com. However, it has been gaining some traction with its recently released Business ByDesign on-demand solution, and has already signed up 550 major customers. This should help stem the decline in SAP's ERP market share.

Resource-planning software and customer-relationship software account for 36% and 20% of our price estimate, respectively.

Other new products, including Sybase Unwired, a mobile enterprise architecture on which businesses can deploy their applications, also should help improve sales of existing core business solutions by augmenting them.

Check out our complete price analysis of SAP.

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Estee Lauder (EL) recently raised prices 8% to 10% in China. This move comes after the other leading global player in China, L'Oreal, increased prices by 5% to 10% on its Christian Dior, Lancome, Biotherm and Chanel brands of cosmetics. We believe that Estee Lauder's increased prices in China will have negligible impact on its China sales, given the robust demand for beauty and skin care products. The hikes will provide some much needed relief from margin pressures due to rising commodity prices.

We value Estee Lauder's stock with a Trefis price estimate of $91.22 per share, which is roughly 10% below its current market price.

Chinese Customers Will Spend on Brand Names

Estee Lauder has raised its prices primarily to absorb rising commodity prices, meaning that the gross spread should remain relatively flat. Hence the impact on cash flows shall, at best, be muted.

The risk associated with raising prices is that it could drive consumers away to competition. This is particularly evident in products such as laundry detergents and diapers, where there is not much product differentiation and consumers are price elastic (they buy less as prices go up). Estee Lauder makes premium cosmetics and consumers that are led by brand image and product quality rather than prices. As a result, we do not expect to see any noticeable loss in market share on account of the rising prices.

Strong Economic Outlook Will Lift Shares

The Chinese economy has been relatively resilient to the economic downturn and has been posting high single-digit growth rates. The status of employment and disposable income levels also hint at a promising industry outlook, and we don't believe Chinese consumers -- male or female -- will shirk away from spending on premium cosmetics because of moderately rising prices. See our recent note on China's impact on Estee Lauder: China, the Next Engine of Growth for Estee Lauder.

View our detailed analysis for Estee Lauder here.

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CVS Caremark has been aggressively trying to grow its pharmacy-benefits-management business after suffering from some major setbacks in 2009-2010. High-profile contracts from CalPERS, Medco Health and Aetna in the past year are helping boost CVS's outlook in this business, which processes and pays prescription-drug insurance claims.

CVS Caremark is a pharmacy and drugstore chain that competes with Walgreen, Wal-Mart and Rite-Aid in its prescription drugs, over-the-counter drugs and general merchandise segments. It also competes with Medco Health Solutions and Express Scripts in its Pharmacy Benefits Management segment.

However, the prospects for this business are improving for CVS after the company won a string of big contracts in the past year.

Among these, it won a 12-year agreement to provide health-insurance carrier Aetna with a broad range of PBM services in mid-2010. It will serve 9 million Aetna PBM members and administer approximately $9 billion in annual drug spending. Aetna began shifting to CVS Caremark PBM platforms starting 2011.

In May, CVS Caremark beat Medco Health Solutions for a $3 billion, three-year contract to provide pharmacy services for its Federal Employee Program, also known as FEP. Starting next year, CVS will provide pharmacy services to more than 5 million federal employees, retirees and dependents covered under the program.

And in June, CVS signed a half billion dollar annual contract with the California Public Employees' Retirement System to provide prescription drug benefits, previously held by Medco Health Solutions. These contracts have succeeded in giving CVS Caremark's PBM business a much-needed boost and easing concern that the company is losing business to its rivals.

PBM Growth to Continue in 2011-12

As claims from the Aetna contract have started to come in, CVS has grown revenue approximately 20%, year over year. The pharmacy network claims its volume has increased by 20%, while mail-choice claims have grown by 13%. With the new FEP contract, the PBM revenues should see further revenue growth in 2012, and this could increase our forecasts.

We currently estimate that the PBM business accounts for around 20% of CVS's stock value, while prescription drugs makes up more than 50%. However, if the PBM business grows more quickly than we forecast, that could change.

Drag the trend line above to see the PBM's impact on the share price.

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Coca-Cola (KO) reported strong second quarter results, with growth coming from emerging markets like China and Russia. China growth was led by 23% growth in sparkling beverages, and 36% growth in Minute Maid Pulpy. Minute Maid Pulpy emerged as a hit with the 'Burst of China Joy' integrated marketing campaign. Coca-Cola competes with companies like Pepsi (PEP) and Dr. Pepper Snapple Group (DPS).

Our price estimate for Coca-Cola near $72 implies roughly 5% upside to the market price.

Chinese Beverage Market

According to the market research company Euromonitor International, sales of soft drinks, including soda, juices and bottled water, almost doubled to $42 billion in China between 2006 and 2010. The same report indicated that China's juice market alone should more than double to roughly $24 billion by 2015.

According to Euromonitor, Coca-Cola held 17% of the Chinese market at the end of 2010. Tingyi, a well-known Chinese consumer company, claimed 13% market share with its leading drink, Master Kong, while the Hangzhou-based Wahaha Group had a 7% share. PepsiCo was fourth with 6% share.

Coca-Cola sees huge potential for its beverages in China, where per capita consumption is only 32 bottles of Coke products a year, compared to 150 in Hong Kong and more than 500 in the U.S.

Coca-Cola's China Thrust

Coca-Cola has been operating in China since 1979, and employs more than 30,000 workers and more than 40 bottling plants in the country. The company is optimistic about its expansion plans in China and expects the nation to contribute significantly in its '2020 vision' -- a plan to double its 2009 revenue of $100 billion by year 2020.

It is introducing a wider variety of package choices to promote both affordability and consumer experience. Coca-Cola is already ahead of its planned investment of $2 billion over the 3-year period starting with 2009 through 2011.

See our full analysis for Coca-Cola

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According to market research firm PhoCusWright's Global Online Travel Overview Second Edition report, by the end of 2012, one-third of the world's travel sales will be booked online. While leisure travel bookings on the Web are growing twice as fast as the travel industry in general, the majority of travel bookings still happen offline -- mostly through the traditional brick-and-mortar travel agents.

This is exactly what Expedia (EXPE) is targeting through its Travel Agent Affiliate Program, wherein travel agents get access to Expedia's database of hundreds of thousands of hotel destinations, air ticket bookings and car rentals across the globe and earn a commission on the bookings while helping Expedia liquidate its inventory of travel products. Expedia competes with other leading online travel agencies such as Priceline (PCLN), Travelocity and Orbitz (OWW). We value Expedia with a $30.60 Trefis price estimate of its stock, about a 5% premium to its current market price.

How Expedia Benefits

1. Expedia evolves from being another 'competitor' to a 'supplier' to travel agents.

Brick-and-mortar travel agents have always viewed online travel agencies as competitors. Partnering with them helps Expedia serve as a supplier to this traditional sales channel. Also, this helps Expedia improve customer service through these retail outlets, in addition to increasing its presence beyond the Internet.

2. Growth opportunity in markets with an already high Internet penetration.

Online travel has grown rapidly primarily on account of increasing Internet penetration. In 2010, the developed economies of the U.S. and Europe had 59% and 43% of the total travel booked online respectively. Compare this with the Asia-Pacific region, where online travel made up only 21% of the total travel sales.

Given the growth opportunity and increasing Internet penetration in the emerging economies of China (with only 18% travel booked online currently), India (at 25%) and Brazil (at 20%), it makes sense for Expedia to focus on selling online in these markets for the time being. However, as the increase in Internet penetration in the mature markets of the U.S. and Europe slows, the split between online and offline travel sales is stabilizing. Hence, targeting offline sales through partnerships with travel agents could add a new source of growth.

In the U.S., 1,840 travel agents have enrolled in TAAP during the first year alone. With 100 to 200 new agent affiliates signing up every week, there are no signs of the program is slowing down anytime in the near future.

View our detailed analysis for Expedia here.

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In order to avoid new federal rules and heightened scrutiny from the Federal Reserve and other regulators as a "systemically important financial institution," MetLife has decided to sell its banking unit. MetLife (MET) is the largest life insurer in the U.S., and joins competitors AIG (AIG), Hartford Financial Services Group (HIG) and Allstate Corporation in selling off banking operations to escape from added restrictions.

We have a price estimate of $49 on MetLife's stock, implying a premium of about 15% over the current market price.

MetLife's Banking Operations at a Glance

Through MetLife Bank, the company offers a variety of mortgage and deposit products. Mortgage products offered by MetLife Bank include forward and reverse residential mortgage loans, while deposit products include traditional savings accounts, money market savings accounts, certificates of deposit and individual retirement accounts. MetLife Bank accounted for about 2% of the company's first quarter operating earnings.

MetLife plans to continue offering mortgage products after the proposed sale of MetLife Bank on a state-by-state basis.

How This Affects MetLife

The sale of MetLife Bank and a restructuring is the wisest course of action for a company with the vast majority of its businesses in the insurance sector. It doesn't make sense for MetLife to allow itself to be governed by regulations written for banking institutions, rules which could make it less competitive in the insurance market. The sale will put MetLife on a level playing field with other insurance companies that don't have banking operations.

See our complete analysis of MetLife

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After a successful intervention in business processes and a restructuring of operations in Europe, Revlon (REV) now plans to implement similar changes across its operations globally. Revlon makes premium cosmetics, skin crèmes, deodorants and hair colors, and competes with the other leading players in beauty and personal care industry such as L'Oreal (LRLCY), Estee Lauder (EL) and Avon Products (AVP).

We value Revlon stock with a $17.66 price estimate, roughly a 5% premium to its current market price. Before we explore the possible implications on Revlon's stock of such changes to its worldwide business, let's take closer look at the results on European operations.

How did the restructuring impact the business in Europe?

1. Improvements in demand and supply forecasting: Integrating their processes closely enables better demand and supply forecasting. Not only did the company cut forecast errors in half, but Revlon can now also forecast eight quarters ahead. More accurate long-range forecasting has helped in sourcing supplies in optimal quantities and at appropriate times while scheduling production accordingly.

2. Improvements in inventory levels: The number of product SKUs was drastically reduced from 7,500 to 810. The percentage of stock which was slow moving or obsolete dropped from 35% to single digits, which has helped reduce inventory levels by almost 50%.

3. Improvements in service levels: Facilitated by better co-ordination between processes, Revlon could deliver the new products at the agreed-upon times and in the agreed-upon quantities to retailers, leading to its OTIF (On Time In Full) performance in Europe improving from 40% to 95% of orders. With that result, the service levels rose to 98.5%

The above measures have helped Revlon reduce its operating expenses and improve its EBITDA margins, which grew from just under 17% in 2007 to around 20% over 2009-10.

Potential Impact on Revlon's Stock

As Revlon gears up to make similar changes in its global operations, we can expect further improvements to its profit margin. We currently forecast Revlon's EBITDA margin to remain flat at current levels of close to 20%.

If, however, the EBITDA margins were to improve by another 2 percentage points over the course of our forecast horizon, we could expect more than 20% upside to our current $17.66 Trefis price estimate of Revlon's stock.

You can drag the trend-line in the chart above to see the impact on Revlon's stock price estimate.

View our detailed analysis for Revlon here.

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Walgreen (WAG), the leading retail pharmacy chain in the U.S., recently increased its quarterly dividend by 28.6%, the largest dividend increase in the company's 110-year history, from 17.5 cents a share to 22.5 cents a share. This, in addition to Walgreen's new $2 billion stock repurchase program, marks a strong commitment to rewarding its shareholders.

While we are generally fans of any company committed to returning cash to shareholders, we wonder if doling out cash at this juncture could jeopardize the company's growth opportunities -- and in turn, hurt shareholders in the long run.

We value Walgreen at $43.73 Trefis price estimate of its stock - about 9% ahead of its current market price.

Walgreen's Growth Strategy Requires Investment

Walgreen seems to have embarked on a more capital-intensive retail-focused growth strategy while liquidating its assets in pharmacy benefit management services. (See Walgreen's Rationale for Selling its Benefits Business and CVS Sees Value in Pharmacy Benefits Business While Walgreens Is Selling.)

Its recent acquisition of Drugstore.com further highlights its game plan of focusing on the retail pharmacy business through its 7,600 brick-and-mortar stores and online presence. To further grow in that arena, it will need to expand its product assortment within groceries and non-pharmacy products, as well as increase its number of retail stores, both of which require heavy investments.

Replacing Express Scripts Revenue via Acquisition or Expansion

Walgreen recently announced that it would stop filling prescriptions for customers covered by Express Scripts in January 2012 after its contract renewal negotiations failed on the grounds of uncompetitive reimbursement rates offered by the pharmacy benefits manager.

Walgreen expected to fill around 90 million prescriptions processed by Express Scripts in 2011, making up over $5 billion or over 7% of Walgreen's sales so clearly this move impacts Walgreen's business. (See Express Scripts' Split Could Weigh on Walgreen Shares.)

This further warrants increased investments in its retail business -- either opening new stores or acquiring other smaller regional players to compensate for the loss of revenues from Express Scripts. In either case, we believe it would help for Walgreen to have more cash on hand, making this larger dividend a questionable strategy.

View our detailed analysis for Walgreen here.

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Officials for some large U.S. cities are claiming that leading online travel agencies such as Expedia (EXPE), Priceline (PCLN), Travelocity and Orbitz (OWW) are collecting state and local hotel occupancy taxes from consumers and remitting only a fraction of the funds, resulting in large tax losses to the governments in question. This is an issue that has surfaced in the past and has received renewed attention given a recent ruling in Texas.

We have a price estimate of $30.60 for Expedia, which is slightly above the current market price.

Are OTAs Keeping Tax Revenues?

The hotels offer OTAs room bookings at a discounted, or "wholesale," price to the otherwise published retail price. While the OTAs earn a profit on every booking, the hotels are able to target higher occupancy levels by distributing hotel room-nights through third parties with access to a wider audience. This is a win-win situation, but here's the catch.

Assume that the OTA offers a room to a consumer for $100 per night. It levies a hotel occupancy tax, which varies among states and cities, at say 10%, amounting to a gross booking of $110 ($100 + $10 for the hotel tax). Let's say the hotel offers the OTA the room booking at a 25% discount; the OTA pays the hotel $75 ($100 minus 25% discount).

The city officials allege that the OTA pays the local government $7.50 (10% of the $75 paid to the hotel) instead of the $10 it collects as a tax from the consumer and claims the $2.50 difference as a processing fee. This differential is a tax loss to the government and appears in the form of higher commission to the OTA.

How this impacts OTAs

We forecast the commission on hotel room bookings to decline from around 24% in 2010 to almost 22% by 2017, the end of our forecast period.

However, current estimates are higher due to the aforementioned differential that exists between the hotel occupancy tax charged to the consumer and that is actually paid to the government. If OTAs are forced to pay a higher hotel occupancy taxes on the total retail amount, the OTAs could see a decline in the commission earned on hotel bookings.

Expedia draws about two-thirds of its bookings from the U.S., and its hotel bookings commissions account for close to 25% of our stock estimate. If we assume a hotel occupancy tax of 5.875% (the rate in New York City), the loss of that extra money it is collecting in "tax" but not currently passing on to the appropriate government would reduce the company's total commissions by around about 0.85%. That puts a 2% potential downside to our current $30.60 Trefis price estimate of Expedia's stock.

You can drag the graph below to see the impact on Expedia's stock price estimate.

View our detailed analysis for Expedia here

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Nike (NKE) witnessed a 23% increase in its direct-to-consumer business in the North American region in its last quarter. This jump was driven by an 18% improvement in same-store sales and 31% growth in online sales. Direct-to-consumer sales include those purchases made online and at company-operated stores. Nike is the largest global manufacturer of athletic footwear, apparel and equipment, and competes with Sketchers (SKX), Adidas AG (ADDYY), Steve Madden (SHOO) and K-Swiss (KSWS).

We currently have a price estimate of a near $85.30 for Nike's stock, which implies a small discount to the market price.

Direct to Consumer Business Driving Growth at Nike

With increasing Internet penetration in emerging markets like Brazil, India and China, which together contribute approximately 22% to Nike's overall revenues, we believe online sales are poised for impressive growth.

Nike plans to boost its direct-to-consumer presence by opening between 250 and 300 new Nike-branded stores worldwide in the next five years. It also plans to invest between $500 million and $600 million over the next five years to develop the direct-to-consumer business. Nike expects mid-teens growth in its direct to consumer business, which should contribute an additional $2.2 billion to 2.6 billion in revenues by 2015.

See our complete analysis for NIKE's stock here

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BP (BP), Chevron (CVX), Exxon Mobil (XOM), ConocoPhillips (COP) and Total S.A. (TOT) are some of the largest names in the vertically integrated oil industry. And all of them have faced criticism from environmental watchdogs at some point over the impact of their operations. However, the oil industry is taking note and embracing alternative technologies -- including biofuels, geothermal, wind and solar -- and hopes to make them an integral part of its future. While green technologies currently contribute only a small fraction of the revenues of these multibillion dollar energy businesses, they are expected to be major sources of growth over the future.

We have a $55.30 price estimate for BP, about 25% higher than its market value. Our target price for Chevron is at $104, roughly in line with the market price, and we have a $93 target price for Exxon Mobil, which implies a 12% premium over the current market price.

Placing Big Bets on Biofuels

According to BP, renewable sources will constitute the fastest growing sources of primary energy through 2030. It forecasts that renewables will contribute to 18% of the growth in the overall energy supply, and predicts biofuels will make a sizable contribution towards this growth. Biofuels' contribution to the world's oil supply is expected to increase from the present 3% (on an energy basis) to 9% by 2030.

In March, BP acquired a majority stake in Brazilian ethanol producer Companhia Nacional de Açúcar e Álcool, boosting its ethanol production in the country to 9 million barrels of ethanol equivalent production per annum. Exxon Mobil announced a collaboration with Synthetic Genomics to invest up to $600 million in research on algae-based biofuels. ConocoPhillips and Total also have similar research partnerships with industry and academic institutions to develop technology in the field.

Geothermal, Wind and Solar

With large projects in the Philippines and Indonesia, Chevron is currently the world's largest producer of geothermal energy, generating more than 1,200 megawatts. The company is also actively scouting for new projects in Indonesia to expand in the segment. BP arguably has the most extensive portfolio in renewables and is making sizable forays into solar, wind and hydrogen power, and aims to invest around $8 billion in alternative energy ventures by 2015.

Total, Europe's third largest oil producer announced in April that it would purchase a 60% stake in SunPower (SPWRA) to ramp up its efforts to gain traction in the solar industry. It's also looking to expand in nuclear energy to diversify its portfolio.

We expect renewable sources -- especially biofuels -- to become important sources of value for these companies in the long term.

Click here for our full analysis of BP | Exxon Mobil | Chevron | ConocoPhillips

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Walmart's (WMT) international operations segment continues to be the key growth driver for the company as its U.S. division has posted declining comparable-store sales for the eighth consecutive quarter. Wal-Mart competes with other big retailers like Target (TGT), Costco (COST), Amazon (AMZN) and Best Buy (BBY).

Our price estimate for Walmart is near $73, implying an approximately 37% upside to the market price.

International Expansion is Key for Growth

With the company recording sluggish results in developed markets, the developing world has become the growth driver for Walmart. This segment consists of retail operations in 14 countries generating 26.1% of net sales in 2011. Walmart's international segment has witnessed a substantial increase in its store count from 2,733 in 2007 to 4,557 in 2011 -- an addition of roughly 360 stores a year.

Geographically diversified operations also ensure a stable revenue stream for the company, as they tend to provide diversification benefits in terms of inflation or rising commodity costs in a particular region. The growing middle class in emerging economies such as India and China could provide substantial growth opportunities. Walmart could employ its well-known cost saving and technologically tested logistics systems in these nations.

Walmart has begun a series of acquisitions in order to build its presence in these countries. It recently entered into a minority stake of Yihaodian, a popular online retailer in China. The acquisition is aimed at further strengthening its presence in the region. In the African subcontinent, Walmart acquired a 51% stake in Massmart, a leading African retailer that runs nine wholesale and retail chains with approximately 288 stores in 14 countries in Africa.

See our complete analysis for Walmart stock here

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Starbucks (SBUX) has announced a 17% hike in the price of its packaged coffee to compensate for the steep increase in Arabica coffee prices. Its competitors in the broader market for specialty coffee include McDonald's (MCD), Caribou Coffee (CBOU) and Peet's Coffee (PEET). Our price estimate for Starbucks stands at near $40, which is in line with the market price.

Why Coffee Prices are Rising?

In May 2011, Arabica coffee futures hit their highest price in 14 years on concerns that upcoming harvests would be insufficient to supply the world's growing consumption of coffee. According to some analysts, a rush from coffee roasters such as Starbucks to hedge as much of their price exposure led to the increase in price of coffee futures. Many believe that Starbucks has typically hedged two to three months ahead of its needs due to the prospects of higher coffee prices in the near term. Increases in farming costs coupled with storms in Columbia also led to the substantial price increases.

Starbucks sells packaged coffee and tea globally through arrangements with grocery and warehouse club stores, such as Costco (COST). Currently, its packaged coffee and tea are available in close to 37,000 such stores worldwide.

The increased prices are likely to affect the company revenues. However, the customers who are habituated to Starbucks coffee might still splurge on their highly priced coffee products. Still, we believe the passing on of higher prices to customers will affect Starbucks' top line. Other sellers like Smuckers (SJM), Sara Lee (SLE) and Peet's have also raised prices on coffee products.

See our full analysis for Starbucks stock here

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Costco (COST) will soon start selling gasoline at its Lincoln Park location in Chicago -- just the latest among many of its warehouse stores to add gas pumps. As Costco looks for new ways to compete with warehouse club operators including BJ's Wholesale Club (BJ) and Sam's Club (WMT) in addition to large retailers like Walmart, Best Buy (BBY) and Target (TGT), Costco can gain new members and drive higher traffic to its stores by expanding its fuel sales.

We currently maintain a $67.36 price estimate for Costco's stock, around 25% higher than the current market price.

High Gasoline Prices Present an Opportunity

We believe that selling cheaper gas is a great way to bring in new members who will eventually spend in the stores. Since people can't buy Costco gas without a membership, and given that gas prices currently range from $3.75 to more than $4.40, drivers are very price sensitive and motivated to sign up.

To bring in customers, Costco typically prices gasoline at 6 cents to 12 cents below the market price. We believe Costco's move to sell more gas at very low margins could drive membership growth and lead to an increase in incremental sales at Costco stores. Costco operates on a warehouse club model under which it charges an annual membership fee to customers and, in turn, offers deep discounts on selected merchandise. Members pay annual fees of $50 to $100 to shop in its stores.

See our full analysis for Costco stock here

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Procter & Gamble (PG) recently added "Shop Now" buttons to the Facebook fan pages for its of several brands such as Gillette, Olay and Tide. This isn't the first time the consumer goods giant has taken a plunge into e-commerce. However, P&G, which competes with Unilever (UL), Colgate-Palmolive (CL) and Kimberly-Clark (KMB), had to scrap its earlier partnership with Amazon (AMZN) for the fulfillment of orders due to poor user experiences resulting from technical issues.

While P&G currently fulfills the items purchased on Facebook through its own e-store (See P&G's E-Commerce Play Should Help Operating Margins), it has plans to expand its retailer network for servicing orders to include the likes of Walmart (WMT) and even Amazon again. We value P&G's stock with a $68.40 Trefis price estimate, about a 5% premium to its current market price. Below we explore the implications of P&G's move to expand its Facebook commerce and the impact that may have on its stock.

Word-of-Mouth Publicity Over Internet

With more than half a billion users, Facebook is undoubtedly the most popular social networking platform. Users can become 'fans' of the products they like, which in turn can influence their friends' opinions and subsequently their future purchases. Facebook facilitates word-of-mouth publicity, a more credible form of advertising with no additional expenses incurred by the brand.

Benefiting from Retail Partnerships

Given the size of its audience and growing online retail business, Facebook has the potential to draw a significant share of sales volumes from brink-and-mortar retail outlets. P&G has always maintained friendly ties with its distributors and retail partners, and its partners now have the opportunity to service purchase orders via P&G's Facebook commerce.

Better Allocation of Advertising Budget

Facebook helps P&G target the most appropriate audience for each of its products. Hence, selling over Facebook provides a more efficient use of the advertising budget. Of late, P&G is trying to expand its focus on the digital channel for reaching out to its consumers. (See P&G CEO Ad Spend Moving Online to Reach Emerging Markets.)

Limited Upside to P&G's stock

While this may seem counterintuitive, we believe P&G's Facebook presence does not provide a significant upside to P&G's stock. Firstly, being present on Facebook is more of a necessity for P&G since all other leading brands have similar pages dedicated to them. Secondly, Facebook only moves volumes between trade channels and does not drive volumes. Users are unlikely to consume more laundry detergent just because it can be bought online. They can however be expected to substitute the purchase from the neighborhood store to the convenience of online shopping.

View our detailed analysis of Procter & Gamble.

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SunPower (SPWRA) is thinking big -- even more so after French oil giant Total S.A. (TOT) acquired 60% of the solar energy firm this spring. The company followed up its recent launch of the most efficient mass-produced solar cell in the world with an announcement that it will soon start construction of the biggest solar roof in North America. SunPower has entered into a contract for a 1.1 million square-foot solar installation atop the Gloucester Marine Terminal in Gloucester, N.J. The company's primary competitors include First Solar (FSLR), Suntech Power (STP), and China-based Yingli Green Energy Holding Company (YGE).

We currently hold a $16.22 price estimate for SunPower's stock, which is about 15% below the current market price.

Showcasing SunPower's Capabilities ...

The Gloucester Marine Terminal near the Walt Whitman Bridge on the Delaware River is owned by the Holt family. The installation will utilize 27,528 photovoltaic rooftop solar panels from SunPower, and will have a power generation capacity of 9 megawatts. The electricity generated -- sufficient to power 1,500 homes -- will account for as much as 80% of the power needs of the terminal, a shipping facility that boasts the largest refrigerated capacity of any terminal in the United States.

The $42 million privately funded project is already under way, and will be completed this fall.

... and Boosting Solar Component Sales

SunPower has significant expertise in manufacturing and installing residential and commercial solar systems. The company only recently began venturing into large-scale utility power projects with the acquisition of PowerLight Corporation.

This project will be another milestone for the solar industry , and will help draw more customers on the lookout for residential and commercial solar installations. The tax credits provided by the federal government, as well as the subsidies granted by various state governments across the country, will only fuel the demand for these systems in the years to come.

See our complete analysis for SunPower's stock

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CVS Caremark (CVS) and Walgreen (WAG) are the leading pharmacy chains in the U.S., each with a strong network of over 7,000 retail stores. While both have been aggressively expanding their retail footprints, there has been a gradual decrease in the average size of the newly opened stores.

This is particularly noteworthy given that general merchandise, which by nature demands more retail space, makes up a significant 33% of our $39.55 Trefis price estimate for CVS Caremark's stock and 41% of our $43.73 Trefis price estimate for Walgreen's stock.

'More Stores' Better Than 'Bigger Stores'

CVS Caremark and Walgreen earn in excess of two-thirds of their revenues from prescription drugs sales. From the consumer's perspective, the accessibility of those prescriptions is more important than the store size. Hence, pharmacy chains prefer to have more stores in closer proximity to more customers, as opposed to fewer but larger stores.

High Retail Rental Rates

CVS Caremark and Walgreen pharmacies are mostly present in the densely populated regions and urban areas where access to consumers is greater. Densely populated areas command higher rental rates compared to suburban and rural areas, where large retail chains such as Walmart (WMT) and Costco (COST) have a strong presence. The high rental rates help explain why the size of pharmacies is shrinking. But pharmacies also have to sell general merchandise to make up for those high rents, as well as shrinking margins on pharmaceutical drugs.

You can drag the graphs above to see the impact of store size on CVS Caremark's and Walgreen's stock price estimate.

Since non-pharmacy sales, which are dependent on the store size, contribute more to Walgreen's stock than CVS Caremark's stock, Walgreen is more sensitive to changes in its store size equation than CVS Caremark.

While pharmacies will continue to stock general merchandise, going forward we expect them to reduce their dependence on non-drug sales. Hence, the size of their stores is likely to continue decreasing in the future.

View our detailed analysis for CVS Caremark and Walgreen here.

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LDK Solar (LDK) recently announced the completion of the $240 million investment by China Development Bank International Holdings Limited (a wholly owned subsidiary of China Development Bank Corporation). Under the deal, the holding company purchased an 18.5% stake in LDK's polysilicon production unit, LDK Silicon & Chemical Technology Co., with LDK Solar retaining the rest. LDK is a leading vertically integrated manufacturer of photovoltaic products, and a leading manufacturer of solar wafers. It competes with other solar energy players like First Solar (FSLR), Suntech Power (STP) and Sunpower (SPWRA).

We continue to maintain a positive outlook on the company's stock value, which we estimate at just about $12.

Stimulus from the Chinese Government Remains Strong

Our price estimate for LDK Solar stands at a 73% premium over the current market price of $7. A possible reason for the market's pessimism over LDK is the recent postponement of LDK Solar's debt offering, which was originally planned to pay down the company's short-term debts. This may have raised concerns over the company's debt position and whether it can meet its near-term obligations.

The $240 million investment by China Development Bank is a strong indicator of China's commitment towards becoming a leader in solar and other green industries. Additionally, the China Development Bank agreed last year to lend 232 billion yuan ($35.4 billion) to Chinese wind and solar companies, including a more than $9 billion credit line to LDK over the next five years, which should significantly ease any debt pressures that might arise for the company.

LDK Solar has delivered on its fundamentals, and posted close to 4% growth in its gross margin in the first quarter of 2011 from the previous quarter, indicating solid execution of its long term strategy of vertically integrating its photo-voltaic businesses.

Given these factors, we believe that concerns over the company's short-term liquidity position are excessive.

See our full analysis for LDK Solar

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