From Briefing.com: 4:40PM Zarlink Semi beats by $0.02 (ZL) 2.14 -0.02 : Co reports Q3 EPS of $0.01 vs ($0.01) Reuters consensus; revs of $37.4 mln vs $36.71 mln Reuters consensus. Co sees Q4 EPS guidance of $0.00 - 0.01 vs $0.00 consensus.
4:31PM Amkor reports filing of purported class action lawsuit (AMKR) 5.26 +0.15 : Co announces that a purported securities class action lawsuit was filed on Jan 23, 2006 in the United States District Court for the Eastern District of Pennsylvania against Amkor and certain of its current and former officers. The plaintiff claims to represent purchasers of Amkor securities during the period from Oct 27, 2003 through July 1, 2004. The complaint alleges that defendants made materially false statements regarding the co's financial condition and seeks unspecified damages. The co believes the claims are without merit and will defend against them vigorously.
4:08PM UTStarcom signs expansion contract to supply NetRing Optical Transport solution to Chunghwa Telecom in Taiwan (UTSI) 7.02 : Co today announced an agreement to supply its NetRing 10000 multiservice optical transport products to Chunghwa Telecom Co., Ltd., a leading telecom service provider in Taiwan. Chunghwa Telecom intends to utilize UTStarcom's NetRing solution to deliver high-density, high-speed broadband services, including voice, data, and video, to subscribers throughout Taiwan in support of its MultiMedia on Demand service. "This announcement represents an expansion on a contract the two companies announced in May 2004, bringing the total dollar amount in contracts with Chunghwa Telecom to approximately $40 million in just over one year," said Joe Ye, general manager of UTStarcom Taiwan.
4:07PM UTStarcom to supply NetRing Multiservice Optical Transport solutions to RailTel in India (UTSI) 7.02 -0.26 : Co announces that it will supply its industry-leading NetRing 600 and 2500 optical transport solutions to RailTel of India Corporation, a wholly owned subsidiary of the Indian Railways. RailTel oversees a nationwide Indian railway network of more than 10,000 kilometers of track and approximately 11,000 trains per day.
4:05PM Corning reports Q4 in line, issues in-line Q1 guidance (GLW) 24.25 : Reports Q4 (Dec) earnings of $0.22 per share, in line with the Reuters Estimates consensus of $0.22; revenues rose 16.2% year/year to $1.2 bln vs the $1.21 bln consensus. Co issues in-line guidance for Q1, sees EPS of 0.21-0.23 vs. $0.22 consensus; sees Q1 revs of $1.20-$1.25 bln vs. $1.23 bln consensus.
4:20 pm : Follow-through bargain hunting after Friday's excessive decline, exacerbated late in the day by further deterioration in crude futures, helped investors grapple with a mixed batch of earnings reports. Eight out of ten economic sectors closed higher as above-average volume provided some reassurance behind the session's broad-based moved to the upside.
Of the five Dow components that posted quarterly results today, DuPont (DD 39.26 -0.29) was the only one to report better than expected earnings. However, copper prices hitting record highs helped Phelps Dodge (PD 148.91 +5.56) -- a suggested holding in Briefing.com's portfolio for active investors -- lead Materials to the session's best performance, offsetting DuPont's ensuing downside FY06 guidance.
McDonald's (MCD 35.85 +0.14), another suggested holding, merely matched analysts' forecasts, but investors took into account that MCD raised guidance a week ago, sending shares to an intraday 52-week high and helping Consumer Discretionary turn in the day's second best performance. Strength in retail, after Target (TGT 54.25 +1.50) implied Jan. comps will hit the high end of guidance, as well as media, amid reports that Disney (DIS 25.99 +0.47), another holding, is very close to a deal to buy Pixar (PIXR 57.57 -0.70), provided additional sources of sector support.
Industrials were also in focus following in-line reports from 3M Co. (MMM 74.20 -1.50) and United Technologies (UTX 56.45 +1.98), but 3M's uninspiring outlook was no match for an revenue growth across all of UTX's divisions. Strength in railroads, following strong Q4 earnings from Burlington Northern Santa Fe (BNI 74.80 +3.17), a suggested holding, and aerospace, following Northrop Grumman's (NOC 62.08 +1.32) solid Q4 report.
Financial also provided some upside leadership, following upbeat analyst remarks regarding American Express' (AXP 52.82 +1.38) Q4 report (yesterday) while Consumer Staples benefited from analyst upgrades on Wal-Mart (WMT 45.72 +0.47) and Coca-Cola (KO 40.90 +0.40). Even though Texas Instruments (TXN 30.69 -1.01) missed overly optimistic revenue forecasts, strength in semiconductor coupled with gains in storage and hardware, following strong Q4 earnings from EMC Corp (EMC 13.65 +0.39) and Lexmark (LXK 51.08 +5.18), respectively, helped Technology close higher.
Health Care, however, nearly erased what little gains the sector has made in 2006, as Johnson & Johnson (JNJ 59.36 -1.83) hit a 52-week low following lighter than expected Q4 sales and downside Q1 guidance. Energy also lost ground, failing to recover from a late-day sell-off in crude oil (-1.5%) which removed leadership from this year's best performing sector but in turn sidelined a key inflation concern for 2006, given the commodity's effect on the duration of Fed policy tightening. BTK +0.4% DJ30 +23.45 DJTA +2.4% DJUA +0.8% DOT -0.1% NASDAQ +16.78 NQ100 +0.6% R2K +1.4% SOX +1.0% SP400 +0.9% SP500 +3.04 XOI -0.2% NASDAQ Dec/Adv/Vol 1017/2003/2.12 bln NYSE Dec/Adv/Vol 1095/2204/1.86 bln
10:05AM Interphase SlotOptimizer selected by Fujitsu for PRIMEPOWER servers (INPH) 5.20 +0.54 : Co announces that Fujitsu Limited has selected the new Interphase SlotOptimizer 554GB PCI/PCI-X Quad-Port Gigabit Ethernet Adapter for its PRIMEPOWER family of Solaris O.S. and S.P.A.R.C-based servers. The combination of PRIMEPOWER and the Interphase SlotOptimizer Quad-Port Gigabit Ethernet cards matches the performance and high availability requirements of a wide range of applications, from the enterprise to the workgroup.
10:01AM Dell announces next-generation notebooks can be customized to connect with Vodafone in select European countries (DELL) 30.53 +0.31 : Co announces it will bring Vodafone's third generation wireless broadband technology to DELL's notebook customers in the UK, France and Germany. With its build-to-order capability, DELL aims to expand customers' wireless connectivity options by delivering built-in access to Vodafone's high-speed wireless data network in these countries. This new service will mean users will have readily available access to email, Internet and servers through the Vodafone mobile broadband data network.
3:11 pm Brinker Intl. (EAT)
39.80 +1.22: Checking in a penny ahead of analysts' expectations, Brinker International delivered $0.56 in profit per share for its fiscal second quarter. The figure, which excludes a dime in stock-based compensation expenses and a penny in one-time restructuring charges, reflects 21% year-over-year EPS growth.
In-line with projections and primarily driven by a 2.2% increase in total same-restaurant sales, Brinker's total revenue rose approximately 11% during the quarter. On a relative basis, the restaurant operator's Chilli's and Maggiano's concepts performed best. Versus the year-ago period, Macaroni Grill demonstrated the most improvement. At 71.5%, the company's gross margin held steady over the year-ago period. Its operating margin, meanwhile, expanded 86 basis points to 6.52%.
Assuming comparative restaurant sales growth of 3-4%, Brinker foresees a profit of $0.63-0.65 per share in its fiscal third quarter. That range excludes six cents in stock-based compensation expenses. According to Reuters Estimates, Wall Street's current Q3 earnings expectation is pegged a penny below the low end of Brinker's forecast. Bracketing the consensus estimate of $2.39, the company estimates EPS of $2.36-2.41 for the full-year (June). That projection similarly excludes the effect of stock-based compensation charges, which, if included, would be dilutive by about $0.27-0.29. Brinker's guidance translates to year-over-year EPS growth of approximately 8.5% for Q3 and 10% for FY06.
At 16.9x estimated full-year earnings, EAT shares trade at a discount to the peer group average multiple of 19.1x. At the same time, McDonald's (MCD) shares are priced at a similar discount. Within the restaurant space, Briefing.com continues to favor McDonald's, as we believe it possesses the characteristics that will enable it to exhibit relative strength against a backdrop of decelerating consumer spending. MCD similarly delivered solid earnings results today, and has been a member of our recommended portfolio for active investors since December 2005.
--Lisa Beilfuss, Briefing.com
2:43 pm Kimberly-Clark (KMB)
58.82 -0.89: The parent of Kleenex, Huggies, and Scott, to name a few brands, delivered fourth quarter EPS of $0.95. Kimberly-Clark's result, which excludes $0.16 in charges related to competitive improvement initiatives, the repatriation of overseas earnings, and an accounting change, matched analysts' forecast. On a year-over-year basis, earnings rose about 3%. Including the aforementioned items, diluted net income declined 14% versus last year.
Net sales rose 2.8% to $4.01 bln. The company's personal care and consumer tissue segments, each of which account for about 40% of sales, are Kimberly-Clark's core businesses. With respect to the former, a modest increase in net selling prices across most regions caused a 2.4% rise. However, in North America, sales across the division were essentially flat, as some of the price increases, which were implemented during Q3, were reversed in response to a competitor's move. In addition, the decline in sales of Kotex feminine care products worked to offset volume gains in other brands. Sales across the consumer tissue segment rose 4.8%, with higher volume driving a 10% increase in the North American region.
European markets continue to pose a particular challenge for the company. Before the effect of currency, European personal care sales slid 10%, while consumer tissue sales declined 1%. The company noted that pricing did not improve in Europe, and that it continues to respond to competitive activity.
Discussing the "tough environment" it faces, management indicated the the company absorbed cost inflation of about $400 million over the course of 2005, more than double the level that had been expected.
For the current quarter, Kimberly-Clark expects to report a profit of $0.90-0.93 per share, the high end of which falls two cents short of Wall Street's average estimate. The company's 2006 outlook calls for EPS of $3.85-3.95 (consensus $3.96), on 3-5% volume-driven revenue growth. Separately, the company expects a dividend increase in the high single, low-double digit percentage range that will be effective in April. Its share buyback efforts continued during Q4, bringing the total amount repurchased in FY05 to 24.3 million shares at a cost of $1.5 billion. The company plans to repurchase $750 million more in 2006.
KMB shares currently trade at 15.5x trailing twelve month earnings - a slight discount to their 17.7x five-year average.
--Lisa Beilfuss, Briefing.com
1:35 pm McDonald's (MCD)
35.90 +0.19: Managing Wall Street's expectations isn't an easy thing to do, but few companies do it as well as McDonald's. That wasn't always the case, but under the stewardship of former CEO Jim Cantalupo, now deceased, McDonald's effectively re-set the market's growth expectations for the company. If you think that isn't important, consider that shares of MCD, a suggested holding in Briefing.com's Active Portfolio, have tripled since hitting a low of $12.12 on March 12, 2003.
An improved operating performance has been the catalyst for McDonald's, which now seems to be making a habit of exceeding expectations. The fourth quarter was no exception. Granted it will be reported today that the company's profit of $0.48 per share was in line with the consensus EPS estimate, but bear in mind that McDonald's raised that guidance on January 17. We took the occasion then to reiterate our positive view of the stock, and with the actual result out today, we see no reason to alter the opinion.
For the full year, McDonald's net income increased 14% to $2.04 per share while total revenues increased 7.0% to $20.46 billion. Global comparable sales, meanwhile, rose 3.9% with the company's U.S. business setting the pace. Importantly, though, its European operations continue to show progress, having registered a 2.6% increase in comparable sales on top of a 2.4% increase in the prior year.
Management reiterated its long-term growth targets that include an expectation for systemwide sales and revenue growth of 3-5%, annual operating income growth of 6-7%, and annual returns on incremental invested capital in the high teens. Reflecting its solid performance and focus on bolstering shareholder returns, McDonald's added that it plans to repurchase $1.0 billion worth of stock in the first quarter. Some activist shareholders, like William Ackman of Pershing Capital, think McDonald's can do even more to unlock value. That may be true, but overall, it is fair to say that investors have been able to feast on McDonald's solid operating performance for the last three years.
--Patrick J. O'Hare, Briefing.com
12:56 pm Lucent (LU)
2.49 -0.01: Early Tuesday, Lucent Technologies reported a quarterly loss due to declining sales and the effect of a large litigation charge. For the first quarter, the communications equipment maker posted a net loss of $104 million, or ($0.02) per share, compared with a year ago profit of $174 million, or $0.04 per share. However, backing out charges for a bankruptcy court judgment related to litigation with Winstar Communications, the company earned $0.06 per share - four cents better than the Reuters Estimates consensus of $0.02.
On the top line, revenues fell 12% from the year ago period to $2.05 billion, due primarily to lower sales in the U.S. and China. On a year/year basis, networking revenue decreased 15.7%, while worldwide services fell 1.5%. Despite the decline in revenue, the company maintained reasonable gross margin performance. Specifically, gross margin for the quarter was 42%, as compared to 42% a year earlier and 46% in the previous period. Operating expenses, meanwhile, increased to $940 million, up from $665 million last year and $810 million in the fourth quarter.
As previously announced, Murray Hill, New Jersey-based Lucent anticipates annual revenues will be essentially flat or increase in the low single-digits for 2006, down from its previous forecast of an increase in the mid-single digits. The company did note, though, that it expects revenue performance to improve in the second half of the year as its continues to strengthen its position in next-generation networks.
While Lucent's optimistic revenue outlook represents a potential catalyst for shares, the company's ongoing struggles to generate strong top line growth and improve operations continue to cloud prospects. Though it remains focused on improving productivity and building new market opportunities, namely in its mobility segment, its efforts have not translated into meaningful results. At the current price level, Lucent shares, which have been dead money for some time, are trading at 16.6x forward earnings, compared with 18.3x for rival Cisco Systems (CSCO).
--Richard Jahnke, Briefing.com
11:36 am United Technologies (UTX)
55.75 +1.28: United Technologies, headquartered in Hartford, Connecticut, on Tuesday reported higher fourth quarter earnings that matched Wall Street's estimates, as sales increased across all business segments. The Dow component, which manufactures Otis elevators, Pratt & Whitney aircraft engines, and Carrier air conditioners, said it earned $721 million, or $0.71 per share, excluding the effect of an accounting change. That represented an 18% and 16% year/year increase, respectively.
Revenue for the period grew 14.5% to $11.3 billion, reflecting 9% organic growth and contributions from recent acquisitions, namely Kiddle and Rocketdyne. The results topped analysts' expectations for revenue of $11.17 billion. By segment, sales increased 55.6% in Fire & Security, 32.6% in Sikorsky, 20% in Pratt & Whitney, 12.8% in Carrier, 6.5% in Hamilton Sundstrand, and 2.6% in Otis.
During the latest quarter, the company repurchased $421 million of its common stock, bringing its fiscal year total to $1.18 billion. As it remains focused on enhancing shareholder value, the company expects to continue the current share repurchase rate into the current year taking the total to about $1.5 billion.
On the back of the strong quarterly results, UTX maintained its fiscal 2006 earnings guidance of $3.20 to $3.55 per share. According to Reuters Estimates, analysts are currently forecasting earnings of $3.52 per share. With an exceptional year behind it, the company has a lot of momentum heading into the current year. As such, investors should continue to look for solid performance as business conditions remain favorable.
--Richard Jahnke, Briefing.com
10:44 am DuPont (DD)
38.96 -0.59: Lower fourth quarter profits, coupled with warnings for the first quarter, have sent the Dow Industrial lower in early trading. DuPont closed out 2005 with net income of $153 mln, or $0.16 per share, compared to $0.28 per share earned in the prior year. Per share figures actually topped consensus estimates by three cents, but what the market couldn't get passed was the downside guidance for Q1 and FY06 that indicates anemic growth, once again, for DuPont.
The Gulf hurricanes had a greater than expected impact, disrupting operations and ramping commodity costs. Worldwide volumes declined 4%. Excluding the effects from the hurricanes, volumes were flat. It's unclear at this point whether price increases DuPont is putting through to offset commodity prices is having an effect on volumes. DuPont would argue they are not.
For the first quarter, DuPont guided earnings to $0.70 per share, well south of the consensus estimate of a dollar. The company cited agricultural segment sales declines due to lower volumes in crop pesticides, competitive pressures, and seasonal declines. Performance Materials & Coatings will continue to be impacted by the effects of the Hurricanes, with its DeLisle titanium dioxide plant, damaged by Hurricane Rita, not expected to resume full operations unit April 2006.
DD completed the first round of share repurchases, reducing its shares outstanding by 8% - assisting per share results this quarter. DuPont's investors have been patient with its stock price languishing for a year. At this point, there are few catalysts for shares with the exception of lower natural gas prices - a key feedstock for DD. The second half of the year may be brighter, but at this point it's just too early to tell. For the full year, DD sees EPS of $2.60, well below consensus of $2.83. Management indicated its guidance was based on expectations of higher cost inventories coming through and less favorable currency, despite earnings accretion achieved through continued buybacks. The stock trades at 13.7x.
--Kimberly DuBord, Briefing.com
10:30 am Johnson & Johnson (JNJ)
59.70 -1.49: In the midst of a fight with Boston Scientific (BSX) over medical device maker Guidant Corp. (GDT), Johnson & Johnson posted higher fourth quarter profits as strong demand in its Medical Devices and Diagnostics business offset slowing growth in Pharmaceutical sales. Excluding special items, the diversified health care company earned $2.2 billion, or $0.73 per share, compared with $2.0 billion, or $0.67 per share, in the fourth quarter last year - in line with Wall Street's estimate.
On the top line, sales were crimped by increased generic competition for its prescription drugs, as well as safety concerns over its anemia treatment Procrit and heart failure drug Natrecor. Worldwide sales for the fourth quarter fell 1.1% from the year ago period, despite a 3.7% increase in medical device sales to $4.67 billion. Domestic sales declined 4.2%, while international sales increased 3.1%, reflecting operational growth of 7.5% and a negative currency impact of 4.4%.
In the Medical Devices and Diagnostics segment, sales growth was led by strong demand for Cordis' circulatory disease management products and Cypher's drug-eluting stents. Growth in DePuy's orthopedic joint reconstruction and spinal products also contributed to the strong performance of the segment. Conversely, worldwide pharmaceutical sales of $5.84 billion reflected a decline of 6.1% year/year. Although international sales increased 2.6% during the quarter, domestic sales fell about 10.2% as results for several key drugs were negatively impacted by generic competition. Strong demand for such notable drugs as Risperdal and Topamax helped to ease the financial pain, but JNJ continues to be pressured by a host of patent expirations. Sales of skin care products, which include Neutrogena, Aveeno, and Clean & clear, as well as nutritional supplements, drove a 2% increase in Consumer product sales.
IJNJ expects first quarter earnings of $1.00 to $1.02 per share on sales growth of 3% to 4%. Analysts, according to Reuters Estimates, had projected EPS of $1.04. For the full year, the company said it is comfortable with the consensus EPS estimate of $3.79 and targeted earnings toward the bottom of its $3.78 to $3.85 range. Sales growth for the year is expected to be between 6% to 8%.
JNJ continues to face a number of forthcoming patent expirations and the increasing threat of generic competition. Furthermore, the ongoing bidding war to acquire Guidant Corp. has clouded near-term prospects, as prices have reached extraordinary levels, despite the safety and legal concerns surrounding Guidant's products.
--Richard Jahnke, Briefing.com
10:18 am Coach (COH)
34.15 +2.08: For its second fiscal quarter, luxury retailer Coach delivered a profit of $0.45 per share. The result, which excludes two cents per share in stock options expenses, matched analysts' estimate and reflects 37.0% year-over-year EPS growth. In its four and a half year history, Coach has not failed yet to either meet or exceed the consensus estimate.
Chief Executive Lew Franfort noted that last quarter's performance continues to reflect the franchise's strength, the vibrancy of the U.S. handbag and accessory market, as well as Coach's position as a gift authority. Versus the year-ago period, the company's top line grew 22% to $650 million. On a comparable store basis, sales rose 20% in the U.S. Management pointed out that Q2 marked the fifteenth consecutive quarter of double-digit comparable store growth in the U.S. In its Coach Japan segment, comparable store sales also jumped 20% in constant currency. Indirect sales, which now exclude the Japan division, increased 26% over the quarter. The company credited handbags and women's accessories for driving its solid results, with specialty collections generating over 60% of its holiday sales.
Aided by sourcing cost benefits and product mix shifts, its gross margin rose 182 basis points to 77.6% over the second quarter. Due to a contraction of selling, general, and administrative expenses as a percentage of sales, Coach's operating margin expanded 235 basis points to 42.1%.
For the second half of the year, the retailer projects earnings growth (before options expenses) of at least 25% - or EPS of at least $0.60. Sales for the back half of the year are estimated to check in around $1 billion. Coach forecasts FY06 (June) profit growth of at least 33% on revenue growth of at least 23%; those rates translate to approximately $1.33 and $2.1 billion, respectively. According to Reuters Estimates, analysts expect the company to book $1.28 in EPS and $2.1 billion in revenues for the full year.
As we noted following its fiscal first quarter report, Coach continues to post results that are characteristic of a growth company and shows no signs of being hurt by a slowdown in consumer spending. Although we maintain an underweight rating on the Discretionary sector, we continue to view Coach as a bright spot that enjoys a more resilient core customer. At 28.7x trailing twelve month earnings, COH shares currently trade at a sharp discount to their five-year historical average of 35.0x, and remain reasonably priced for the growth-oriented investor.
--Lisa Beilfuss, Briefing.com
09:43 am Burlington Northern Santa Fe (BNI)
71.63: The second largest US railroad rolled over estimates with fourth quarter profits rising 24% due to increased freight shipments. Net income grew to $430 mln, or $1.13 per share - an all time quarterly record - compared to $347 mln, or $0.91 per share last year. Shares are rising in the pre-market as comparable earnings came in a dime above consensus. Revenues grew 19.2% year/year to $3.55 bln, as freight revenues soared 18%. BNI put through more than 10% in price increases throughout the year as shipment demand outpaced supply.
The rails have been on a roll as the economy continues to do well. For the first time in years, the rails are garnering pricing power, which is flowing through to higher profits. Just last week, Union Pacific's (UNP) profits nearly tripled, sending shares to a new multi-year high. For the first time, BNI moved more than 10 mln units in 2005, achieving record results by all measures. Fourth quarter freight revenues were comprised of 3% in terms of volumes, 6% pricing, and 9% in fuel surcharges. Return on invested capital has improved considerably, rising to 10.1% from 7.9% last year.
BNSF sees first quarter earnings of $1.00 per share versus consensus of $0.95, indicating a growth rate of 20% from last year. For the full year, it anticipates revenue growth in the 10-13% range, half of which is coming from volume, with the balance from pricing and fuel charges. It sees earnings growth in the mid-teens, despite energy price headwinds with the strongest areas remaining coal and intermodal. BNI has returned over 40% since last June when we added the stock to our Active Portfolio. Our investment premise continues to play out as expected. We remain onboard with BNI.
--Kimberly DuBord, Briefing.com
09:40 am BJ Services (BJS)
41.75 -1.00: The sixth largest oilfield service company reported that first quarter profits skyrocketed 68%, as record energy prices sparked global demand for services that help maximize well output. Net income climbed to $159.7 mln, or $0.48 per share - two cents above consensus. Increased spending by global oil and gas producers has resulted in a windfall for the oil services companies like BJS, along with Schlumberger (SLB) and Baker Hughes (BHI). Rising activity rates and price increases in the US and Canada resulted in, yet again, another record quarter of revenue and earnings for BJ Services.
First quarter revenues swelled 30% to $956.2 mln. The strength in the top line flowed through to the operating line, as expenses declined as a percentage of sales. Operating margins expanded 360 basis points sequentially to 24%, up from 17% in last year's quarter. BJS issued guidance for FY06 of $2.00-$2.10, versus consensus of $2.02, with revenues growing 20-25% year/year to $3.89-$4.05 bln. CEO Bill Stewart stated that demand for pressure pumping and other oilfield work will remain strong "for the foreseeable future."
The quarter further supports our bullish view on the stock and the entire industry, which underscores our selections of BJS, Transocean (RIG), and Grant Prideco (GRP) for the Active Portfolio. The oilfield services stocks have done exceptionally well, rising over 20% to date. With earnings estimates rising, coupled with attractive valuations, our bullish outlook for BJS remains intact. We continue to suggest investors add to positions on any pullbacks.
--Kimberly DuBord, Briefing.com
09:38 am E*Trade Financial (ET)
22.40 +0.28: E*Trade Financial turned in its second consecutive record quarter, beating Wall Street's forecasts for the ninth time in 10 tries. Excluding a one-time benefit of $0.08 from the sale of E*Trade Consumer Finance and one-time acquisition costs of $0.06, the online broker reported Q4 (Dec) earnings of $0.30 per share; the Reuters Estimates consensus was $0.29.
Total net revenues rose 19% year/year to a record $478.9 mln, slightly below the $483.5 mln consensus, as the average commission on a trade fell to $12.95 from $15.75 last year. Despite continued declines in commissions, a trend throughout the online brokerage space for years, it is worth noting that only 20% of E*Trade's total top line now comes from trading. The bulk of of total revenues in Q4 (over 50%) was derived from net interest income, which surged 19% sequentially and 43% year/year to $242.2 mln, as the opening of new banking products helped attract $1.0 bln of new cash. Average margin balances in Q4 grew 94% sequentially and 113% year/year to $4.4 bln while total client assets rose to $178.5 bln in the period.
Following the earlier than anticipated integration of one-time rivals HarrisDirect and BrownCo., management now expects to add about $0.19 a share to fiscal 2006 earnings versus previously forecasted earnings accretion of $0.15. E*Trade's acquisitive nature plays into our Market Weight rating on the Financial sector, in which we favor investment banks like Goldman Sachs (GS) and Morgan Stanley (MS) that stand to benefit from another strong year of M&A activity.
Even though the economy is expected to slow in 2006, E*Trade also presents a favorable risk-reward proposition as ongoing improvements to its business model should help the company hedge against market uncertainty. The company expects to earn between $1.25 and $1.40 per share for 2006 (consensus $1.35) on revenue between $2.2 bln and $2.4 bln (consensus $2.32 bln).
(Disclosure: Briefing.com has a business relationship with E*Trade)
-- Brian Duhn, Briefing.com
09:14 am 3M (MMM)
75.70: Dow Jones Industrial component 3M Co. on Tuesday reported higher profits for the fourth quarter on strong demand in its industrial and electronics-related businesses. For the latest quarter, net income grew to $796 million, or $1.04 per share, excluding the effect of an accounting change, from last year's profit of $720 million, or $0.91 per share. That matched the consensus EPS estimate, according to Reuters Estimates.
Worldwide sales increased 4.6% to $5.3 billion, led by organic growth of 5.1% and particular strength in the Industrial and Electro and Communications segments. On a constant currency basis, sales increased 7.3%, including 2.1% from the acquisition of Cuno Inc. By segment, local currency sales increased 18.2% in Industrial, 10.9% in Electro and Communications, 10.2% in Display and Graphics, 9.7% in Safety, Security, and Protection Services, 3.3% in Transportation, and 0.5% in Consumer and Office. In contrast, Health Care sales, the company's largest segment, were unchanged from the year ago period.
Despite the headwind of raw material price inflation, operating margin expanded to 22.8% during the quarter, from 21.4% a year earlier. Margin improvement was driven by a 4.3 percentage point increase in Electro and Communications and a 2.4 percentage point increase in Display and Graphics.
The diversified technology company issued in-line guidance for the current quarter and fiscal year 2006. For the first quarter, 3M said it expects earnings in the range of $1.12 to $1.16 per share, excluding stock based compensation expense of $0.02. In addition, the company sees fiscal year earnings of $4.61 to $4.76 per share, excluding stock based compensation expense of $0.16. Analysts, according to Reuters Estimates, had forecast EPS of $1.15 and $4.71, respectively. Catalysts for the company continue to be further retooling its business towards higher growth areas. With shares down nearly 6% year-to-date, investors are looking for 3M to better leverage its strong history of product innovation, global manufacturing capabilities, and diverse portfolio to drive long term organic growth.
--Richard Jahnke, Briefing.com
09:07 am Texas Instruments (TXN)
31.70: Texas Instruments, the world's largest maker of mobile phone chips, reported a 34% rise in fourth quarter profits, but its top line came in shy of analysts' expectations. Net income rose to $655 mln, or $0.43, ex-items, which was a penny ahead of consensus. Revenues grew 14% from last year to $3.59 bln, but that was $50 mln short of what the street was anticipating. Shares traded lower in the after-hours, following comments by TI that revenues in the current quarter may miss estimates.
TI, which dominants the wireless and analog semiconductor market, reported flat sequential sales that were slightly below the mid-point of revised guidance due to assembly and testing constraints. Semiconductor sales rose 3% quarter/quarter, with wireless revenues up 4% and DSP up 2% quarter/quarter. TI demonstrated seasonal strength in the handset market led by WCDMA (2/2.5G baseband), GSM chipsets, and OMAP shipments. Analog sales rose 2% quarter/quarter, while the semiconductor category sales rose 7% quarter/quarter.
With bookings up 2% quarter/quarter and a book to bill of 1.05, management forecasts semiconductor revenues are likely to be down in the first quarter by 1.6% at the mid-point of its guidance range of $3.05-3.30 bln and total revenues to be down 9.5% at the midpoint of its guidance range of $3.11-3.38 billion. Expectations have been running high for TI due to the strength of the handset market. TI, like several other tech names, has fallen short of these heightened expectations, but considering its solid bookings and in-line guidance, TI's prospects remain strong, supported by demand for GSM and DLPs used in high-def TV. TI's largest competitor, Qualcomm (QCOM), trades at a premium at 31.4x versus 18.4x for TI due in part to the outperformance of the 3G market worldwide over GSM.
Separately, TI also announced that its Board of Directors has authorized the company to repurchase an additional $5 billion of common stock.
--Kimberly DuBord, Briefing.com
09:56 am Clear Channel Outdoor: Soleil initiates Buy. Target $23. The firm thinks that the co is benefiting from focus on large markets, which derive a relatively high proportion of rev from national advertising where they expect the transition from TV, radio and print more quickly than local advertising, as well as strong operating leverage from transit and street furniture contracts.
09:55 am SI International: BB&T Capital Mkts downgrades Buy to Hold. Firm says the downgrade reflects the stock's current valuation, coupled with their belief that SINT's recent declines in total and funded backlog will make navigating the choppy waters of a continuing resolution even more difficult. SINT's current P/E of 18.4x their 2006 EPS estimate is slightly below the group average of 18.9x.
09:52 am Target: Lazard Captial upgrades Sell to Hold. Firm ups price target based on valuation and their belief that there is limited downside. While they are impressed with many of Target's recent initiatives (such as Thomas O'Brien home, TruTech, Choxie), they think stock is still vulnerable to a slowing fashion cycle and rising gas prices.
09:51 am PetMed Express: Avondale Partners reiterates Mkt Outperform. Target $15 to $15. Firm believes PETS is now benefiting from word-of-mouth referrals which effectively lowers customer acquisition cost. The firm notes that this new characteristic, the holy grail for etailers, should allow PETS to grow faster on the same level of marketing expenditures.They are raising their tgt to $22 on increased EPS outlook through lower C.A.C. With shares up 18% yesterday investors should use likely profit taking to start or add to their positions.
09:50 am Mine Safety: Morgan Keegan downgrades Mkt Perform to Underperform . The firm believes that shares of MSA are more than fully valued at this time due to unrealistic expectations of benefits for the co primarily from potential mining safety legislation. In addition, they believe 2006 consensus estimates are too aggressive and will come down after the co reports in early March.
09:48 am XM Satellite: Janco Partners initiates Accumulate. Target $36. Firm believes that current levels are an attractive entry point for longer-term investors as they expect that the ramp in factory install programs in 2007/2008 will stem market share declines and could provide upside to subscriber expectations. While their DCF analysis suggests a $45 value, they do not see any near-term catalysts which would cause investors to increase subscriber estimates and or ascribe higher multiples to the stock.
09:47 am Affymetrix: UBS reiterates Neutral. Target $45 to $45. The firm says that AFFX dominates the microarrray arena, but execution problems have undercut investors confidence, calling into question the co's competitive position and the mkt outlook. In the firms view, the microarray opportunity is real, but smaller than some prior ests. |
