From Briefing.com: 6:34PM Wednesday After Hours : prices levels vs. 4 pm ET: Presently, the S&P futures, at 1077, are two points above fair value while the Nasdaq 100 futures, at 1329, are three points above fair value. The positive disposition in the futures market is a carry over from the late rebound effort in the regular session.
The table below lists some of the more notable after hours items/movers. For the full rundown of companies reporting their results, and the added detail surrounding those reports, be sure to visit our (Hourly) In Play, Earnings Calendar, and Earnings Guidance pages. Company Stock Move Reason for Move
Washington Group (WGII) 34.49 +2.28 (+7.1%) Co reports Q2 (Jun) earnings of $0.49, $0.09 better than Reuters consensus of $0.40; revenues rose 7.8% year/year to $684.5 mln vs the $612.5 mln consensus. For Y04 co raises its rev guidance to $2.8-3.0 bln (previously $2.4-2.7 bln); Reuters consensus is $2.83 bln... also raised its net income guidance to $45-50 mln (previously $35-45 mln).
Bob Evans (BOBE) 23.50 -2.58 (-9.9%) Just before the close of regular trading, BOBE was halted for news dissemination. What was disseminated turned out to be bad news as BOBE reported Q1 (Jul) earnings of $0.40 per share, $0.04 worse than the Reuters Estimates consensus estimate; revenues rose 8.5% year/year to $320.6 mln. A decline in net income was attributed to lower same-store sales and operating margins at Bob Evans Restaurants and increased raw material costs in co's food products segment. Historically high hog costs reduced its margin assumptions for the food products segment in fiscal 2005. As a result, BOBE lowered its consolidated earnings guidance range for fiscal 2005 to between $1.60 and $1.70 per share on a diluted basis; Reuters consensus for Y05 EPS is $1.88... BOBE, which is again open for trading, is getting hog-tied in the after hours session
Bottomline Technologies (00C0) 9.10 +1.03 (+12.8%) Thinly-traded stock is getting quite a boost in extended action after the provider of software solutions for financial resource management reported Q4 (Jun) earnings of $0.08 per share, ex-items, $0.03 better than the Reuters Estimates consensus of $0.05; revenues rose 20.5% year/year to $22.4 mln vs the $21.8 mln consensus... related companies include the likes of CKFR and SONE.
Plato Learning (TUTR) 7.50 -1.26 (-14.4%) Provider of K-Adult computer-based and e-learning solutions is getting hit hard after revising its Q3 FY04 guidance. For Q3 sees revs of $40-41 mln (consensus $43.4 mln); and for FY04 sees revs $143-147 mln (consensus $150.4 mln). Company added that, because of reduced revenue expectations, net earnings will also be less than anticipated. The Q3 shortfall was primarily driven by market conditions which in turn resulted in a product mix significantly different from that planned. Company said it remains optimistic about fourth quarter performance and should end the year with growth in excess of the overall market.
Mamma.com (MAMA) 6.33 +0.23 (+3.8%) Co reports Q2 net of $0.01 a share vs a yr-ago loss of $0.07. Revs rose 88% to $3.957 mln. No estimates available... Co ended qtr with more than $27 mln cash (following $16 mln financing during qtr), which "will enable us to execute on our aggressive acquisition strategy where we are looking to grow the Company by acquiring companies that will be highly synergetic with our existing offerings and that at the same time will significantly increase our revenues and be accretive to earnings."
Tomorrow, the retail sector will be in the spotlight. Not only will the market be digesting the retail sales report for July, but it will also be taking stock of the earnings reports from several retailers, namely American Eagle (AEOS), bebe stores (BEBE), Children's Place (PLCE), Payless Shoe (PSS), Pep Boys (PBY), Target (TGT), Tiffany & Co. (TIF), Urban Outfitters (URBN), and the biggest retailer of all - Wal-Mart (WMT). Each report will be released before the start of trading.
After Thursday's close, Dell (DELL) will take top billing among the companies checking in with their quarterly results. Patrick J. O'Hare, Briefing.com
5:18PM Daily Sector Wrap : Semiconductors, now the worst performing group within the S&P 500, suffered heavy selling pressure. Comments made by Cisco negatively impacted the Tech sector (-2.88%), igniting fears over future growth prospects. Weak results, cautious sales forecasts, and general nervousness surrounding Retail Sales number out Thurs hit stocks in the Discretionary sector (-0.84%). The Saudis tried to calm oil markets, but to no avail, as crude closed up 0.63% to $44.80. The futures market focused on lower weekly oil inventory reports and the Intl Energy Admin's raised demand projections for this year and next. Energy sector closed down -0.51%. HealthCare (+1.39%) was the top performer, thanks to strong upside moves in Biotechs and Pharma...cont.
Close Dow -6.35 at 9,938.32, S&P -3.25 at 1,075.79, Nasdaq -26.28 at 1,782.42: Stocks opened sharply lower across the board in response to a slightly disappointing revenue forecast from Cisco (CSCO 18.29 -2.17) in their earnings report last night...in addition, National Semiconductor (NSM 13.48 -2.22) warned that revenue this quarter would be less than Wall Street expected...technology stocks understandably took a dive right at the open, and ended sharply lower although well off their lows...the SOX semiconductor index ended down 5.2%...the broader market, however, bounced back solidly late in the day...
the Dow, which was down as much as 103 points in the early morning, even went positive in the final hour before finishing with just a small loss...the S&P 500 index ended with a loss of 0.3%, much less than the 1.5% hit the Nasdaq took...not that bad considering the big gain yesterday and the fact that oil prices closed up 28 cents today...biotech and drug stocks led the charge back, supported by beverages and a modest gain in financials...tech stocks continue to underperform the market as they adapt to the realization that growth will be extremely good, but not fantastic...the S&P is down 3.3% on the year, the Nasdaq 11.2%...volume was moderate...
tomorrow brings the July retail sales numbers and earnings from Wal-Mart and Dell after the close...NYSE Adv/Dec 1396/1872, Nasdaq Adv/Dec 1109/1963
1:04PM Sonic Solutions (SNIC) 13.90 -0.42: Sonic Solutions announced on Monday an agreement to acquire rival Roxio's (ROXI 3.85 -0.14) consumer software business for $70MM in cash and $10MM in stock. The purchase covers most of ROXI's patents and trademarks to the software business.
Management expects the acquisition to be highly accretive. Estimated that ROXI would have added approximately $65MM to revenue and $0.25 to fully diluted EPS had the deal been executed at the beginning of the year.
Combination allows SNIC to accelerate entry into the retail channel by 12-18 months, and creates the largest company in the retail space, with approximately $150MM in annual sales and a greater than 50% share of the market for CD and DVD creation software.
The following table shows price multiples and Y/Y growth rates for SNIC compared against peers within the software and programming group. Company *P/SG **P/OPG P/S Y/Y Rev Growth (%)
TTM 2004E 2005E TTM 2004E 2005E
Sonic Solutions (SNIC) 1.3 10.1 4.5 3.6 2.7 73.2 50.0 31.6
Adobe Systems (ADBE) 2.7 11.6 6.7 6.5 5.9 26.3 24.0 9.4
InterVideo (IVII) 1.0 6.9 2.1 0.8 0.7 31.0 30.2 13.4
Pinnacle Sys (PCLE) 0.4 (5.6) 0.7 0.7 0.7 11.9 0.3 (4.0)
Microsoft (MSFT) 3.8 24.2 8.0 7.6 7.1 14.4 5.6 7.6
Roxio (ROXI) 1.0 (8.1) 1.2 1.1 1.0 6.4 18.3 8.6
Software & Programming 2.5 29.6 4.5 n/a 6.6 n/a
*P/SG Ratio: Normalized Trailing 12 month (Price / Sales) / Growth ratio as of Aug 06, 2004.
**P/OPG Ratio: Normalized Trailing 12 month (Price / Operating Income) / Growth ratio as of Aug 06, 2004.
SNIC is down almost 26% from the Q4 review, Story Stocks, May 5, 2004, when we suggested investors hold off. Shares trade at a discount to peers and are at fair value assuming sustained lower teens revenue growth from F06 and 30% operating margin. Acquisition cements SNIC's position in CD and DVD publishing. Shipments of PC-based DVD recorders are expected to increase to over 35-45MM units in 2004, suggesting expectations priced into shares are reasonable with possible upside. The company is pursuing emerging opportunities in high-definition DVD and in the convergence living room, both of which are expected to drive sales of a new generation of tools for professional, OEM and consumer customers. We would buy.--Ping Yu, Briefing.com
10:39AM Cisco Systems (CSCO) 18.34 -2.12: Cisco Systems reported Q4 EPS of $0.20 on revenue of $5.926B (+26.0% Y/Y) vs. Reuters Research consensus at $0.20 on $6.057B. Gross margin declined 152 bps Y/Y to 68.4%, in-line with guidance of 67-69%. Operating margin improved 383 bps Y/Y to 32.4% as the company continued to improve productivity and cost efficiency.
Management commented the company's target growth areas (core technology, service provider and advanced technologies) achieved expectations, and the company experienced balance results across all five geographic markets, adjusted for normal seasonality. Noted that corporate executives have become a bit more cautious compared to prior quarters on the economy and business outlook but continue to expect modest growth.
U.S. accounted for 48% of sales, EMEA 30%, Asia/Pacific 11%, Japan 7% and Americas Int'l 4%. Bookings grew slightly less than revenue as the company shortened lead times.
The following table shows sales, gross margin and Y/Y change in gross margin by revenue segment. Segment Revenue Gross Margin
$ in B % of Sales Y/Y Growth in % Y/Y Variance (in bps)
Product 5.007 84 29.6 68.6 (223)
--Routers 1.4 24 n/a
--Switches 2.4 41
--Advance Technologies 0.9 16
--Other 0.2 3
Services 0.919 16 9.4 67.6 162
Total 5.926 100 26.0 68.4 (152)
Guided for Q1 revenue of $5.962-6.045B (+16.9-18.5% Y/Y) vs. consensus at $6.057B. Gross margin is expected to be 67-68%, and operating expenses are expected to increase 2-4% Q/Q due to additional headcount from new hires and acquistions.
The following table shows price multiples and Y/Y growth rates for CSCO compared against industry comps within the communications equipment, software & programming, and computer systems & peripherals groups. Company *P/SG **P/OPG P/S Y/Y Rev Growth (%)
TTM 2004E 2005E TTM 2004E 2005E
Cisco Systems (CSCO) 3.5 17.1 6.2 5.3 16.8 14.7
Communications Equipment 1.5 17.9 2.2 n/a 3.5 n/a
Computer Systems & Peripherals 0.9 15.1 1.4 9.3
Software & Programming 2.5 29.6 4.5 6.6
Blended 1.4 19.0 2.2 7.0
*P/SG Ratio: Normalized Trailing 12 month (Price / Sales) / Growth ratio as of Aug 06, 2004.
**P/OPG Ratio: Normalized Trailing 12 month (Price / Operating Income) / Growth ratio as of Aug 06, 2004.
Solid performance on the operating line. Management's more moderate outlook solidifies concerns that the company will be challenged to sustain, over the near-term, the lower 20% revenue growth necessary to propel shares higher. Shares are at fair value assuming sustained 20% revenue growth from F06 and 36-37% operating margin. Growth expectations priced into shares are in-line with the company's seven year compound annual growth rate of just under 20%, and margin expectations are in-line with management's stretch goals of improving operating expense as a percent of sales to materially below 35%. Shares are approaching attractive entry points. We would consider writing puts or wait for an additional 10-15% pullback.--Ping Yu, Briefing.com
9:10AM Ratings Briefing - UNFI : RBC upgrades United Natural Foods (UNFI 19.69) to Outperform from Sector Perform but lowers price target to $26 from $30. Firm says that company will at least meet 4Q04; and 30% decline from the highs in share price makes valuation more compelling. Firm notes potential catalysts to drive earnings and valuation, including: renewal of contract with Whole Foods by the end of the year, great benefits from Whole Foods' accelerated store opening schedule in FY05, and expectation that mgmt's FY05 guidance of $0.93 - $0.97 (an approximate 25% increase) to prove conservative, given mgmt's goal of reaching a 4.0% operating margin.
What It Means:
At RBC an Outperform rating means the stock is expected to materially outperform the sector average over 12 months
Why the Call Should Move the Stock
Cisco's outlook has cast a pall on the technology sector that will drive buying interest to other areas of the market that don't have close ties to technology... UNFI, being a distributor of natural and organic foods, fits the bill in that respect and should draw added attention thanks to the RBC upgrade
UNFI has dropped 34% from its June 17 high of $29.66... a below-consensus FY05 EPS outlook on July 6, worries about consumer spending, and relatively disappointing earnings commentary from WFMI and OATS have precipitated the sell-off... upgrade at this juncture will create sense that UNFI is oversold and due for a bounce
Market likely to see appeal in value-oriented propositions and lower beta stocks as the Cisco update lessens the appeal of higher beta stocks... beta for UNFI is 0.95 vs 1.0 for the S&P
Sidenote:
Whole Foods Market accounted for approx. 24% and 19% of net sales in FY03 and FY02, respectively.. loss of contract with WFMI would be material... separately, Wild Oats Markets (OATS) accounted for approx. 2% of net sales in FY03 and 14% in FY02
Current ratings distribution: 3 Buy; 2 Outperform; and 1 Hold [source: Reuters Estimates]
-- Patrick J. O'Hare, Briefing.com |
