From Briefing.com: 6:33PM Thursday After Hours prices levels vs. 4 pm ET: A quiet after hours session in which the tech sector has begun to recover from today's drubbing - despite a May semiconductor equipment book-to-bill ratio that fell to 1.11 (below CIBC's estimate of 1.13). Presently, the S&P futures, at 1131, are 1 point above fair value, and the Nasdaq 100 futures, at 1469, are 2 points above fair value.
The below table lists the most influential earnings reports of the evening - with the standout being Adobe (ADBE).
Company Stock Move Reason for Move
Adobe Systems (ADBE) 43.61 -1.00 (-2.2%) Software maker delivers Q2 (May) EPS of $0.44, a penny ahead of the Street, on revenues that rose 28% to $410.1 mln (consensus of $401.9 mln); Adobe had actually raised its Q2 forecast in May, saying that EPS should be $0.30-0.44 and revenues should be $390-410 mln; In today's release, management guided Q3 (Aug) EPS to $0.31-0.36 (consensus of $0.32) and revenues to $360-380 mln (consensus of $359.1 mln); CSFB predicted a lack of strong upside to Q3 guidance in its downgrade yesterday
American Healthways (00C0) 22.50 +2.25 (+11.1%) Small-cap health service provider announces Q3 (May) EPS of $0.22, 57% better than last year's result; Revenues surged 56% to $65.4 mln (consensus of $64.3 mln) and the company reaffirmed its Q4 (Aug) EPS outlook of $0.26-0.27 (consensus of $0.26); AMHC had given back 25% over the past 6 weeks, creating an attractive entry point
Isle of Capri (ISLE) 18.37 -0.18 (-1.0%) Casino operator reports a 45% decline in Q4 (Apr) EPS to $0.35, $0.02 worse than the consensus expectation that had already been revised lower following the company's warning on Apr 27; Management said that its weakness in Louisiana, Mississippi, and Colorado would continue into Q1 (July), which Isle plans to offset with more aggressive promotions; The company recently had its license to build a Chicago casino revoked
Red Hat (RHAT) 20.23 -2.16 (-9.7%) Leading distributor of Linux software matches the Q1 (May) consensus EPS estimate of $0.05, but falls short on revenues; Sales climbed 53% to $41.6 mln, shy of the market expectation of $43.1 mln; Average enterprise subscriptions were $430 per year, lower than the average of $455 last quarter; RHAT has been under pressure this week - giving back 12% Monday night following management's announcement that the CFO was stepping down and there was no immediate replacement
Solectron (SLR) 5.17 +0.09 (+1.8%) Electronic manufacturing service provider reports Q3 (May) EPS of $0.01 (consensus of breakeven) - its first profit in 9 quarters; Management then issues better than expected top and bottom-line guidance for Q4 (Aug); Tonight's advance re-claims all of SLR's losses today off last night's Q4 (Aug) warning from JBL; Company described an 'inventory adjustment at some of its customers;' In a note today, Banc of America wondered if this could trickle down the supply chain, ultimately affecting semiconductors
Tomorrow is shaping up to be a fairly quiet day, with just the Q1 current account deficit slated for release. A quadruple witching options expiration, however, is on the calendar, and should lead to volatility in trading.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
4:09PM Red Hat reports, light on revs (RHAT) 21.50 -1.25: Reports Q1 (May) earnings of $0.05 per share in line with pre-announcement the co issued on Tuesday; revenues rose 53.1% year/year to $41.6 mln vs the $43.1 mln Reuters consensus and the $43.0 mln First Call consensus.
4:07PM California Micro reaffirms Q1 guidance (CAMD) 11.08 -0.13: Co states that they expect Q1 (Jun) EPS of $0.07-0.09 and revs is expected to be between $16.4-16.7 mln, Reuters consensus is $0.09 and $16.5 mln, respectively. Co states, "We expect to see strong sequential growth in revenue from our products for the Mobile market while revenue from our products for the Computing and Digital Consumer markets is now expected to be flat to up modestly compared to Q4. The reduced outlook for the latter is largely due to a weaker than expected demand for both notebook and desktop computers".
4:06PM Solectron beats by $0.01, ex items, light on revs, guides Q4 EPS above consensus (SLR) 5.21 +0.12: Reports Q3 (May) pro forma earnings of $0.01 per share, excluding charges, $0.01 better than the Reuters consensus of $0; revenues rose 5.3% year/year to $3.04 bln vs the $3.06 bln consensus. Co also guides, sees Q4 EPS of $0.03-0.05 (ex items), vs the Reuters consensus of $0.02, and revenues of $3.05-3.20 bln, vs the Reuters consensus of $3.18 bln.
Close Dow -2.06 at 10377.52, S&P -1.53 at 1132.03, Nasdaq -14.56 at 1983.67: The cash market opened lower on the higher than expected core PPI data, despite a drop in unemployment claims...Weakness came early in the session from Jabil Circuit (JBL, -13.1%) following last night's poor guidance announcement and weighed heavily on semiconductors and the Nasdaq all session...The effects of JBL's guidance were widespread in technology stocks with big names like Hewlett Packard (HPQ, -2.0%), one of JBL's largest customers, easing on the news as investors voiced concerns over demand issues...
The SOX Index finished the session -3.6%, led lower by Xilinx (XLNX, -7.3%) and Linear Technologies (LLTC, -3.7%), as weakness associated with JBL's guidance forced speculation that overall demand for semiconductors would wane...Several downgrades in radio stocks, including Westwood One (WON, -0.8%) and Cox Radio (CXR, -0.12%), added to the day's declines as both set new 52-week lows following the downgrades...The Dow found strength in Caterpillar (CAT, +0.9%) and Microsoft (MSFT, +2.1%) as it outperformed the broader market all session...
Crude prices closed +3.0% today after shrugging off supply concerns all week, as analysts anticipate continued violence in Iraq will eventually lead to longer term output shortages and higher prices...Tomorrow's quadruple witching option expirations could add some well needed depth to the market...The only economic release slated for tomorrow is the current account balance at 8:30 ET, but the release lacks significant market moving impact...The broader averages closed modestly lower with the Nasdaq underperforming the blue chip averages...NYSE Adv/Dec 1872/1391, Nasdaq Adv/Dec 1267/1823
3:14PM Note from Thomas Weisel Conference - SIMG
Silicon Image (SIMG 10.15 -0.47) CFO Bob Gargus discussed company's high-bandwidth digital content delivery solutions for the PC, storage and consumer electronics markets.
Management expects fibre channel business to be flat; market to shift to quad solutions with revenue per port lower than single port solutions.
Just beginning to see ramp of licensing and royalty streams.
Management views blended gross margin as sustainable; company expects manufacturing cost improvements to offset pricing pressures.
No update to guidance. Reuters Research pegs Q2 consensus EPS at $0.06 on $39.83MM (+63.7% Y/Y); C04 EPS at $0.31 on $164.98MM (+59.4% Y/Y).
Shares are down over 18% since the company raised its Q1 & Q2 guidance, Story Stocks, April 2, 2004. We commented that SIMG was enjoying strong revenue momentum from a number of recent design wins and the company was expanding its sales team. But suggested investors wait for at least a 15-20% pullback given valuation. Shares are currently priced for upper 20% revenue growth from C06 assuming 24-25% operating margin. Goal is 20% operating margin near-term; management believes improvement possible. We would continue to hold off.--Ping Yu, Briefing.com
12:45PM Progress Software (PRGS) 19.30 +0.67: Progress Software reported Q2 results before the open. Pro-forma EPS was $0.24 on revenue of $90.777MM (+17.1% Y/Y) vs. Reuters Research consensus at $0.22 on $89.0MM.
The following table shows sales, gross margin and Y/Y variance by revenue segment. Segment Revenue ($ in MM) % Sales Y/Y Growth Gross Margin Y/Y Variance in bps
License 36.905 41% 36.3% 93.8% 205
Maintenance & Service 53.872 59% 6.7% 74.1% (57)
Total 90.777 100% 17.1% 82.1% 147
Favorable currency contributed approximately 6 points of total growth; license revenue increased approximately 30% on a constant currency basis, and services 1%.
Application Development and Deployment revenue, which includes Progress, ObjectStore, PeerDirect and PSC Labs, accounted for 87% of revenue. Enterprise Application Integration revenue, which includes Sonic Software, accounted for 7% of revenue. DataDirect accounted for 9% of sales.
EMEA contributed 46% of sales; North America 44%; Asia-Pacific 6%; and Latin America 4%.
Gross margin increased 147 bps Y/Y to 82.1%. Operating margin, excluding amortization, increased 245 bps Y/Y to 31.5%.
Guided for Q3 pro-forma EPS of $0.23-0.24 on revenue of $88-90MM (+13.3-15.8% Y/Y) vs. consensus at $0.24 on $90.25MM. Operating income is expected to be $13-14MM, excluding $1.8MM for amortization of purchased intangibles. GAAP EPS is expected to be $0.20-0.21.
Raised F04 guidance: Pro-forma EPS from $0.90-0.93 on $360-365MM to $0.94-0.97 on $360-365MM (+16.5-18.1% Y/Y); GAAP EPS from $0.73-0.76 to $0.77-0.80. Operating income is expected to be $53-55MM, excluding $7.0MM for amortization of purchased intangibles and $2.6MM for in-process research and development.
The following table shows price multiples and Y/Y growth rates for PRGS compared against industry comps. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Rev Growth (%)
TTM 2004E 2005E TTM 2004E 2005E
Progress Software (PRGS) 1.0 13.5 2.0 1.9 1.7 16.0 16.2 9.4
BEA Systems (BEAS) 1.8 15.4 3.3 3.1 2.8 9.6 10.5 10.3
Microsoft (MSFT) 3.9 28.1 8.3 8.1 7.7 13.5 13.5 5.6
Oracle Corp (ORCL) 3.3 11.3 6.0 5.6 5.1 7.2 15.0 10.4
Tibco Software (TIBX) 3.4 87.9 6.0 5.3 4.7 4.8 19.3 11.6
Vitria (VITR) 1.2 (11.3) 1.4 n/a (23.9) n/a
Software & Programming 2.8 34.8 4.9 n/a 7.7 n/a
*P/SG Ratio: Normalized trailing 12 month (Price / Sales) / Growth ratio as of June 10, 2004.
**P/OPG Ratio: Normalized trailing 12 month (Price / Operating Income) / Growth ratio as of June 10, 2004.
Shares are down over 10% since the Q1 review, Story Stocks, March 16, 2004, when we suggested waiting for a 20-30% pullback or until management delivers on sustained organic growth in the upper single digits to lower teens range. The company is building business momentum; organic growth is beginning to accelerate; RFID (radio frequency identification) is gaining momentum in the marketplace and is expected to drive Objectstore revenue in 2005. Shares are attractively priced; implied growth is upper single digits from F06 assuming static operating margin; lower teens growth assuming 25% operating margin.--Ping Yu, Briefing.com
12:17PM Note from Thomas Weisel Conference - SLAB
Silicon Labs (SLAB 45.86 -1.24) President and CEO Dan Artusi profiled company.
Set-top box and VoIP solutions, and new power amplifiers for handsets driving growth.
Management expects to continue to penetrate notebook market; notebook market to continue to grow.
Believes company can sustain 25% operating margin.
No update to guidance. Reuters Research prints Q2 consensus EPS at $0.38 on $121.55MM (+75.9% Y/Y); C04 EPS at $1.60 on $501.95MM (+54.3% Y/Y).
SLAB shares are down over 14% since the Q1 review, Story Stocks, April 27, 2004. We commented then that SLAB, like other providers of analog and mixed-signal solutions, is benefiting from strong demand for digital electronics, which is expected to drive consumption of analog and mixed-signal components and fuel Y/Y market growth of almost 30% to over $35-36B in 2004. We noted that SLAB traded at a discount to peers, is a relatively small player, and has opportunities to gain market share, allowing the company to post above-industry average growth. But we suggested waiting for a 20-30% pullback given that shares were priced at a premium to the semiconductor group, and were fairly valued on a discounted cash flow basis.
Shares are priced for sustained lower 20% revenue growth from C06 assuming 30% operating margin. Implied growth rises to upper 20% range assuming 25% operating margin. We would continue to hold off.--Ping Yu, Briefing.com
9:47AM Note from Thomas Weisel Conference - SNDK
SanDisk (SNDK 20.15 -0.46) President and CEO Eli Harari said company is well positioned to capitalize on the $12B market opportunity (2004E) for portable, secure storage as the market moves to mobile devices.
NAND memory is gaining share on NOR.
Strong IP position; generating royalty income and extending leadership position.
Markets are highly price elastic. Technology drives cost reductions and stimulates demand. Believes cost reductions of 30-40% are sustainable.
New leading edge manufacturing line with Toshiba to begin production in about 15 months; 300mm fab on 70nm technology going to 65nm.
4gb chip to ramp production in Q3; transition from 0.13µ to 90nm will take about three quarters. Provides company with unmatched cost structure/performance for next 12-15 months.
Company is in quiet period. No update to guidance. Reuters Research pegs Q2 consensus EPS at $0.31 on $415.54MM (+77.1% Y/Y); C04 EPS at $1.36 on $1.775B (+67.3% Y/Y).
Aggressive 20-40% price reductions to stimulate demand and transition to higher density products creates cloud of uncertainty around financial performance. Management believes product cost reductions of 30-40% are sustainable. Substantial upside provided management successfully stimulates demand and reduces costs to more than offset impact of price reductions. The market for NAND is expected to grow in excess of 25% over the next three to five years. SNDK shares are priced for sustained upper teens revenue growth from C06 assuming 15% operating margin.--Ping Yu, Briefing.com
9:25AM Jabil Circuit (JBL) 25.50 -2.55: Jabil Circuit reported Q3 results after the close on Wednesday. Pro-forma EPS was $0.26 on revenue of $1.626B (+33.3% Y/Y) vs. Reuters Research consensus at $0.26 on $1.610B.
Pricing environment is stable but the consumer business was softer than expected. Management indicated the Olympics is not creating demand as anticipated for home entertainment and mobile telephony products.
Gross margin declined 88 bps Y/Y to 8.4%. Operating margin, excluding amortization and extraordinary items, increased 18 bps Y/Y to 4.1% on overall scale efficiencies.
Company continues to reduce customer concentration; had three 10% customers in Q3; top 10 customers contributed less than 65% of sales.
The following table shows performance by industry sector and sequential revenue guidance for Q1. Sector % of Sales Q/Q Rev Growth (%)
Q4 Q1
Automotive 8 23 (10)
Computing and Storage 13 3 (8)
Consumer 22 15 10
Instrumentation and Medical 12 12 10
Networking 21 - (5)
Peripherals 7 9 5
Telecom 12 6 (5)
Guided below consensus: Q4 pro forma EPS of $0.25-0.27 on revenue of $1.60-1.65B (+23.5-27.3% Y/Y) vs. consensus at $0.28 on $1.686B; F04 EPS of $1.00-1.02 on $6.2-6.3B (+31.1-33.2% Y/Y) vs. consensus at $1.03 on $6.294B; and Q1:05 EPS of $0.30-0.32 on $1.75-1.85B (+16.0-22.6% Y/Y). GAAP EPS is projected to be $0.21-0.23, $0.80-0.82 and $0.26-0.28 for Q4, F04 and Q1:05 respectively. Operating margin is forecast to be 4.1-4.3% for Q1 and 4.2-4.6% for F05. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Rev Growth (%)
TTM 2004E 2005E TTM 2004E 2005E
Jabil Circuit (JBL) 0.7 30.7 1.0 0.9 0.8 34.0 33.1 17.4
Celestica (CLS) 0.6 (18.1) 0.5 0.5 0.4 (7.0) 35.7 12.6
Flextronics (FLEX) 0.5 (21.2) 0.4 0.4 0.4 8.6 23.2 12.3
Solectron (SLR) 0.4 (3.7) 0.4 0.4 0.3 (7.1) 7.1 15.1
Electronic Instruments & Controls 0.9 n/a 1.0 n/a 5.0 n/a
*P/SG Ratio: Normalized trailing 12 month (Price / Sales) / Growth ratio as of June 10, 2004.
**P/OPG Ratio: Normalized trailing 12 month (Price / Operating Income) / Growth ratio as of June 10, 2004.
Guidance is marginally below consensus but will weigh on shares until company demonstrates better growth and operating momentum given that shares are priced for sustained lower 20% revenue growth assuming 7-8% operating margin.--Ping Yu, Briefing.com
finance.yahoo.com
Bob, it's not all that unlikely that October 2004 will be very much like October 1998 sentiment wise when discussing the volatility indices and investors intelligence bull to bear poll of the newsletter writers. I read yesterday that as an investor it's not important to be right but rather it's important when you are right.
I have grown far more cautious over the last few years. Right now I have only a small percentage of my net worth invested in the stock market. We are simply too far from what I can objectively measure as a bottom in the market. As I said before I am neither a bull, nor a bear, so I expect to make money long by buying stocks in this sector for counter trend rallies but the trend is down for now.
Institutional investors are counting the money they already cashed out of this sector. They will be back in droves again and when they are I hope to have a little extra cash to invest. Maybe October of this year will be a great time to get back in but it could be a couple more years if normal post election cycles have anything to do with how the market reacts after the election.
Best of luck with your investments.
RtS |
