After posting solid first quarter earnings Thursday, Chines
computer manufacturer Lenovo ( LNVGY
, quote ) is our emerging market stock of the day.
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caption="Lenovo is a leading brand in personal computers"]
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Although Hong Kong's Hang Seng benchmark index fell almost half
a percent on Thursday, Lenovo was able to buck the trend, finishing
significantly higher. The Chinese computer firm finished Thursday
trading more than six percent higher, thanks to impressive
earnings.
Lenovo reported a 30% increase year-over-year profit increase
for its fiscal year first quarter, in spite of macroeconomic
headwinds that have adversely affected the Chinese economy ( FXI ,
quote ). Not only did Lenovo announce a substantial rise
in profit, the company handily beat analyst expectations. Thus,
it's hardly surprising that the company traded much higher in
Thursday trading in Hong Kong.
According to MarketWatch , "(n)et profit for
the three months ended June 30 was $141.4 million, or $1.33 a
share, up from $108.8 million, or $1.08 a share, a year earlier,
and better than the average $133.77 million forecast of nine
analysts polled by Thomson Reuters... Revenue rose 35% to US$8.01
billion from $5.92 billion, worse than the average $8.13 billion
forecast in the poll."
Lenovo, which jumped into the global business limelight in 2005
after the company purchased the personal computer business division
of IBM (quote), is now one of the largest computer manufacturers in
the world.
With a 14.9% market share , the company is
second to only Hewlett-Packard ( HPQ , quote ) in
terms of volume. Given that HP's market share is only 15.5% and
that Lenovo's piece of the pie continues to grow larger, it's not
unreasonable to think that the Chinese firm will overtake HP in the
near future.
Further, the company appears to be well-positioned to take
advantage of extant mobile trends. With its mobile business growing
173% year-over-year, investors can expect this segment to become
increasingly lucrative.
Finally, the company is poised to be the preeminent computer
distributor to emerging markets; the company sees 44% of its
business coming from China and is rapidly expanding its Brazilian
and Russian operations.
