Market Minute: Apple Readies New 'iProduct'; Pharma's Latest Big Deal

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Apple readies a new i-product, and a big deal in the drug industry could be in the making. Those and more are what's making business news Monday.

The Dow industrials (^DJI) rose seven-tenths of a percent last week, but still ended down for all of June, snapping a streak of six monthly gains in a row. It was a similar story for the S&P 500 (^GSPC) and the Nasdaq (^IXIC).

For the first half of the year, the S&P is up nearly 13 percent, its best gain since 1998.

This is a holiday-shortened week with a half day of trading Wednesday ahead of the Fourth of July holiday. And the big monthly jobs report comes out Friday morning, which could increase volatility throughout the week.

apple iwatch mobile technology japan
Josep Lago, AFP/Getty Images
Apple (AAPL) has filed an application in Japan to get a trademark on the name "iWatch." That's fueling rumors that the company is getting ready to roll out a new device.

Defense contractor Lockheed Martin (LMT) could feel the brunt of mandatory budget cuts imposed on the Pentagon. The Wall Street Journal reports (subscription required) the company's F-35 stealth fighter plane contract could be delayed by several years, possibly saving as much as $2.5 billion dollars. The F-35 is the Pentagon's largest weapons project.

Onyx Pharmaceuticals (ONXX) has rejected an $8.7 billion takeover bid from Amgen (AMGN), and is now looking for a buyer willing to pay more. Other big drug makers are apparently interested in Onyx and its drug to treat blood cancer.

A number of news reports says telecom mogul John Malone is looking for a big deal in the cable business. He's said to be interested in buying Time Warner Cable (TWC). That could have a big impact on other players in the industry, including Comcast (CMCSA) and Cablevision (CVC).

And Barrick Gold (ABX) says it may take a write-down as much as $5.5 billion on a project in South America, partly due to environmental issues that have forced the company to halt production. The move comes as the price of gold has slumped to its lowest level in nearly three years.

-Produced by Drew Trachtenberg

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Market Minute: Apple Readies New 'iProduct'; Pharma's Latest Big Deal
Operating margin: 15%
 Revenue: $1.2 billion
 Market share: Greater than 50%
 Industry: Consumer electronics

Garmin is a navigation device company, focusing on GPS technology. By far, the most profitable of the company's five divisions on a dollar basis (though other divisions have better margins) is the automotive/mobile group, which makes and sells Garmin's GPS units. This segment accounted for 55% of the company's sales in 2012 -- $221 million in operating profit on $1.5 billion in revenue. 

Much of the segment's success was due to Garmin's nüvi product line, which accounted for 43% of the company's total revenue in 2012. Garmin is by far the largest participant in the GPS market, with over a 50% market share, according to Consumer Reports.
Operating margin: 23.6%
 Revenue: $2.3 billion
 Market share: 11.8% (U.S.)
 Industry: Packaged foods and meats

Folgers is owned by the J.M. Smucker Company, which reported sales of $5.5 billion in 2012. Of those sales, $2.3 billion came from coffee. The company's U.S. retail coffee unit, of which Folger's is the top-selling brand, reported an operating margin of 23.6%, which is down from 27.8% in 2011 and 28.5% in 2010. We estimate that Folgers has an operating margin of at least that. The brand is the market leader for instant coffee in the U.S., commanding an 11.8% market share as of 2012. However, this is down from 13.2% in 2011. J.M. Smucker cut the price of coffee by 6% in 2012, which will affect the bottom line for both its Folgers brand and Dunkin' Donuts-licensed coffee.

That high profitability is even more impressive given that it was earned in a highly competitive market niche, vying against brands like Maxwell House and Starbucks.
Operating margin: 24%
 Revenue: $2.3 billion
 Market share: 15.1%
 Industry: Packaged foods and meats

The Mead Johnson Nutrition Company primarily sells infant formula and nutritional products for children, and formula accounted for 59% of its total sales in 2012. The vast majority of that came from Enfamil, one of the best-selling infant formula brands in the U.S. The product comes in several varieties designed for babies with different types of feeding problems, intolerances and nutritional needs.

According to Crain's Chicago Business, Mead Johnson had the second largest market share in infant formula as of mid-2012: 15.1%. The company was also the leader in the rapidly growing Chinese formula market. The company's operating margin in fiscal 2012 was 22.3%. We estimate Enfamil has a margin of at least 24%, thanks to the higher retail prices it can command due to its strong brand, as well as lower production costs due to economies of scale.
Operating margin: 25%
 Revenue: $14.3 billion
 Market share: 41.9%
 Industry: Soft drinks

Coca-Cola and Diet Coke were the two most popular sodas in the world as of 2011, Diet Coke having recently surpassed Pepsi to become the second-most popular soft drink in the U.S. Overall, trademark Coca-Cola products accounted for approximately 48% of all case sales of finished products sold by the company in fiscal 2012.

Given that Coke's finished products unit, which includes the Coca-Cola brand, accounted for 62% of total revenue for the company, Coca-Cola trademark drinks accounted for roughly 30% of the company's total revenue. Overall, the Coca-Cola Company reported 2012 sales of $48 billion and an operating profit of 22.4%. We estimate that the tremendous sales of the company's flagship brand push its operating margin to 25%. BrandZ reports that Coke is the world's sixth most valuable brand name, with an estimated value of $74.3 billion.
Operating margin: 26.7%
 Revenue: $1.9 billion
 Market share: 37.2%
 Industry: Soft drinks

Monster Beverage Corporation had net sales of roughly $2.1 billion in fiscal 2012, with an operating income of $551 million. According to market research company Symphony IRI, in the 52 weeks ending February 24, Monster-branded energy drinks accounted for 37.2% of the market, just behind rival Red Bull. In that period, the company sold approximately 1.2 billion cans of its Monster-branded products, including almost 776 million cans of its original Monster beverage. Because Monster-branded drinks accounted for 92.3% of total company revenue, we have treated the company's 26.7% operating margin as a proxy for the energy beverage.

However, business isn't entirely a fairy tale at Monster. The company has recently faced criticism and legal troubles, including a wrongful death suit and a Food and Drug Administration report that linked several deaths to Monster Energy beverages.
Operating margin: 30%
 Revenue: $19.0 billion
 Market share: 42.6%
 Industry: Tobacco

Marlboro cigarettes are sold by Altria Group in the U.S., and elsewhere by Philip Morris International -- which Altria spun off roughly five years ago. Marlboro branded cigarettes have made both companies extremely profitable. Altria's sales of smokeable products totaled roughly $22.8 billion in its most recent full year. That figure accounted for 90% of total company revenues, and 85% of units sold were Marlboros. Altria's smokeable products unit has an operating profit of 28%. Because Marlboro is the company's strongest and best-selling brand, it is 24/7's estimate that costs to produce those cigarettes are lower than the company's discount cigarette lines. As a result, we estimate that Marlboro has an operating margin of at least 30%. BrandZ calculates that Marlboro is the world's seventh most valuable brand at $73.6 billion.
Operating margin: 40%
 Revenue: $80.5 billion
 Market share: 20.9%
 Industry: Computer hardware

The iPhone is by far the most successful product Apple sells. Of the company's $156.5 billion in 2012 worldwide sales, $80.5 billion came from iPhones. Apple sold more than 125 million units last year, a 73% increase over 2011. In contrast, Apple sold 58.3 million iPads that year, generating just $32.4 billion in gross revenue. Each iPhone is far more profitable than each iPad, the company's second best-selling product. According to documents released as a result of the patent lawsuit between Apple and Samsung, Apple's gross margins on the iPhone were between 49% and 58% from April 2010 to April 2012, nearly double those of the iPad. This is partly because wireless carriers subsidize the iPhone heavily -- an average of $425 apiece, according to a recent Stifel Nicholaus analysis. Based on the available data, we calculate the iPhone's profit margin is 40% -- even higher than Apple's overall 35.3% margin.
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