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Street Life
Tuesday, April 14, 1998, 6:45 p.m.
Bingo! Another Record Close
By Bethany McLean
We broke 9100!!!!! Here's how it happened. Remember that
dark day back in March when Intel cautioned us about
first-quarter earnings? Estimates plummeted from 93 cents to
72 cents. After the close today, Intel announced earnings
of--ready?--72 cents. Bingo! And everyone is happy: Intel is
up in after-hours trading. Meanwhile, the Dow climbed 97.90
points to 9110.20, driven by better-than-expected-but-
not-good earnings from big boys like Kodak. See the lesson
here? Earnings expectations are low, so it takes only a
smidgen of positive news to please investors. It's human! So
when will the market figure out that if it's too easy, we're
going to stop appreciating it??? Here's what we've been
following:
PRETTY AS A PICTURE (NOT).... but that isn't stopping the
stock. Eastman Kodak, which closed up $3 13/16, to $70
13/16, helped haul the Dow higher, despite reporting
earnings that were 12 cents lower than a year ago and
revenues that were 7% lower. Prudential cut its 1998 and
1999 earnings estimates and reiterated its "hold rating."
Guess the Pru doesn't carry much weight on the Street. Maybe
it's the fact that EK is slashing some 20,000 jobs that has
everyone all excited. EEEEK, indeed.
A CHILLY WIND.... blows from the East, not that anyone
cares. And I'm not trying to be a grinch, really. But in
Japan's most recent fiscal year, which ended March 31, the
number of insolvency cases climbed 17.4%--to the highest
level since 1985. Last year also saw the second-highest
failure rate among companies listed on Japanese stock
exchanges since the war. Add to that the news that Enron is
shutting down its plans to build a $6 billion power plant in
Nepal, fearing a slowdown in China. These two immense
economies are running on empty. No problem, though, right?
KNOCKOUTS.... I thought I'd let Serwer and Schwartz duke it
out over the Internet stocks, but then I remembered my
boxing training (I'm serious). Mother Merrill made its move
into search-engine stocks today ('bout time), initiating
coverage of Lycos, Yahoo!, Infoseek, and Excite. Lycos gets
the most bullish rating: "near term accumulate, long term
buy." Guess that's because it trades at a discount--just 43
times revenues!! That is, compared to Yahoo!, which sells
for 74 times revenues!! So Yahoo!, Infoseek, and Excite all
rate "near-term neutral, long-term buy." OK, I get the first
part: If you're neutral, you don't accumulate. But how do
you accumulate without buying? Woe is me! I'm
ratings-challenged! Luckily, these stocks aren't: Yahoo! was
up 2%, Lycos up 5%, Excite up 10%. Laggard Infoseek gained
the most ground--up 19%. Who says you shouldn't buy a
fourth-rate company?
Loose Change
Speaking of Net stocks, remember the networkers? Only a
short time ago, they, too, were drooled over. But boy, did
they ever get dumped. PairGain Technologies alienated its
few remaining friends when it missed earnings (again) today.
The stock is now but a fraction of its former self--it's
$20, down from its high of around $40. Not that history
repeats itself or anything.... So J.P. Morgan announced
earnings of $1.80 per share, down 12% from a year ago
(excluding restructuring charges of 65 cents). CEO Sandy
Warner's goal is for revenue to grow faster than expenses
(sad to say, it's been the other way around for quite some
time). This quarter's scorecard: Revenues up 9%; expenses up
19%. Oops.... A new survey by Challenger, Gray & Christmas
says that 70% of U.S. employees experience stress-related
illnesses often. Do you feel stress? I NEVER feel stress
(right). I just live on coffee, chocolate, and red wine. CGC
also says the title "Director of Work-Life" will become
common. Can you imagine a worse job? Day in and day out,
listening to employees whine.... First lady of journalism
Katherine Graham won a Pulitzer for her biography "Personal
History." Now that's cool.
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