From Briefing.com: 4:23PM Alcoa beats by $0.17 (AA) 32.83 +0.33 : Reports Q1 (Mar) earnings of $0.69 per share, $0.17 better than the Reuters Estimates consensus of $0.52; revenues rose 16.4% year/year to $7.24 bln vs the $7.12 bln consensus. After-tax operating income in co's Alumina segment was $242 mln, up 32% yr/yr. costs. Third party realized metal prices increased 16%, or $357 per ton, to $2,534 per ton.
4:20 pm : This morning, optimistic anticipation of the first quarter earnings season and (modest) improvements in the Treasury market had motivated buyers. Bond yields remained high, though, and their stunted recovery squelched the stock market's momentum. Investors shrugged off rising energy prices for a large part of the day, but crude's 2% afternoon spike helped to further dampen buying efforts.
With respect to the Treasury market, we continue to emphasize its effect on equity trade. Today's action reflects the attention that bond yields are receiving from the stock market. Friday's employment data roiled bonds, and that market's attempt to recover this morning appeared to relieve stock investors. Yields were still high, but the 10-year had edged away from the psychologically important 5.00% yield. A lack of a catalyst and lower than average holiday-week volume took the steam out of the advance, though, and as bond yields headed back towards unchanged territory, the major averages followed suit. Just before the closing bell, the 10-year's yield ticked slightly lower and prompted 0.2% advances in the rate-sensitive Financial and Utilities sectors.
The stock market appeared to follow the bond market today, but, all in all, stocks did still demonstrate some continued complacency to high yields. Over the course of the session, the yield on the 10-year remained at a four-year high and within very close proximity to 5.00%. The Dow and S&P both managed to finish the session with gains, albeit modest ones.
Aside from conditions within the Treasury market, rising energy prices continue to serve as another impediment for a more spirited, sustainable advance in the stock market. Investors did not appear very fazed by gains across the complex today, and the resulting 1.5% advance in the Energy sector was supportive. By the close of commodity trade, though, crude futures had gained 2% and were pushing $69 per barrel. That price action was fueled by increased anxiety over Iran, and speculation over potential U.S. military action, and did not help matters for the broader market today. UBS's downgrade on several semiconductor equipment stocks, due to a down cycle that the firm foresees in Q3, was a separate factor that weighed on equity trade.
With respect to the aforementioned Financial sector, there were some other factors behind its gain. First, banks were in focus following reports that J.P. Morgan Chase (JPM 41.93 +0.23) and Bank of New York (BK 35.04 -1.79) have agreed to a asset swap. Under the terms of the deal, the difference in premiums will result in J.P. Morgan's $150 million cash payment to the Bank of New York. For a Merger Monday, the M&A front was a quiet one. Still, brokers outperformed. An especially bright spot there was Goldman Sachs (GS 126.46 +1.44), which had been positively featured in a Barron's article.
Walt-Disney (DIS 27.79 +0.26) occupied much of the corporate spotlight today. The company, which is one of our suggested holdings for active investors, is planning on offering much of its television content for free on the internet. That stock helped limit the Discretionary sector's (-0.1%) decline, and it served as one of the Dow's best sources of support. Boeing (BA 80.79 +1.22), which is reportedly going to announce a $5 billion Chinese order tomorrow, also helped the blue chip average maintain its positive footing.
Fellow Dow component Alcoa (AA 32.83 +0.33) also garnered added attention. The company's earnings report, which is due out during today's after hours trading session, marks the commencement of the first quarter earnings season. Optimistic anticipation of what is expected to be another quarter of double-digit earnings growth helped deviate some degree of attention from the Treasury and energy markets today, and Alcoa's gain was supportive. It's our view, however, that rising bond yields and rising energy costs are apt to undermine what should be a solid quarter of earnings growth.DJ30 +21.29 NASDAQ -5.75 SP500 +1.12 NASDAQ Dec/Adv/Vol 1741/1311/1.88 bln NYSE Dec/Adv/Vol 1872/1393/1.35 bln
4:06PM Electroglas names Thomas Rohrs as C.E.O. (EGLS) 5.13 -0.12 : Co announces that Thomas M. Rohrs will beomce C.E.O. and Chairman of the Board, effective April 7. Mr. Rohrs replaces Keith L. Barnes, who is expected to join Verigy Pte, Agilent's (A) semiconductor test subsidiary.
4:06PM SanDisk CEO Harari appointed Chairman of the Board (SNDK) 59.16 -1.86 : Co announces that Dr. Eli Harari, will be appointed as Chairman of the Board of Directors. Dr. Harari will maintain his position as Chief Executive Officer. Sanjay Mehrotra, the co's Executive VP and COO, will assume the role of President while maintaining his position as COO. Irwin Federman, will be appointed as Vice Chairman of the Board of Directors and Lead Independent Director. These appointments will become effective June 1, 2006.
9:25AM Zoran announces it's SupraHD 660 integrated DTV processor and Cascade 2 demodulator are powering Sanyo's newest high def TV products (ZRAN) 21.88 :
09:55 am Applied Materials: Banc of America Sec reiterates Neutral. Target $21 to $17.85. Firm is saying they think the weaker demand for NAND flash in F1Q (Jan) and the sharp contraction in prices will lead to a slower ramp in NAND investment in C2H06. The firm also thinks the NAND accounted for 35-50% of the mix at most front-end semi-equipment makers over the last two quarters, and they think absolute spending on NAND will decline in C2H06.
09:54 am Under Armour: Banc of America Sec reiterates Buy. Target $32 to $36. Firm is saying UARM's powerful momentum in the Sporting Goods channel continues, according to SportScan data. They note that UARM has posted triple digit market share gains (albeit off a very small base) in the equipment channel each of the past three weeks, driven by multiple colors of its baseball and softball batting gloves. Year to date, firm says UARM's hardlines/equipment market share $ has increased by 76% to 60bps (and to over 1% for the week ending 03/19/06). They expect the stock to maintain a 35-plus P/E over the next several years given UARM's huge category (women's, footwear) and geographic expansion opportunities, likely resulting in revenue upside to expectations.
09:54 am Citrix Systems: Banc of America Sec reiterates Buy. Target $36 to $42. Firm ups target as 76% of the respondents in firms quarterly CTXS partner survey noted that the end of life for MetaFrame 1.8 led to "at least some demand" for new licenses in 1Q. In addition, in their view, interest around NetScaler has started to translate into adoption, as 35% of partners they surveyed have started to sell NetScaler solutions.
09:53 am Broadwing: Janco Partners downgrades Buy to Accumulate. Target $15. Firm is saying that they continue to like the stock longer term, but at current prices the stock seems to be already discounting profitability a few years into the future. Firm says there have been rumors recently that BWNG and Global Crossing (GLBC) may be in merger talks, but a recent direct stock purchase by Scott Widham suggests that there are no current discussions since he could not have bought stock if merger talks were ongoing. Also, the co's two recent private equity offerings have raised about $100 mln, suggesting that the co is improving their balance sheet so that they can fully fund their business plan and make opportunistic purchases of more local fiber assets.
09:53 am Diamondrock Hospitality: Robert W. Baird initiates Outperform. Target $15. Firm is saying they believe DiamondRock will generate growth in excess of its peers over the next several years as a result of its unique acquisition sourcing relationship with Marriott International (MAR) and the quality and location of its hotel assets. The firm says a further boost to growth over the next several years should come from major capital improvement projects underway at a number of its hotels this year.
09:52 am Medcath: Banc of America Sec reiterates Buy. Target $18 to $16. Firm ups price target to reflect a higher probability of a reimbursement cut than they thought last week when they reduced their tgt last Monday to $18 from $22.
09:51 am Concurrent: Ferris Baker Watts reiterates Buy. Target $3 to $4. Firm is saying that Time Warner Cable's (TWTC) disclosed plan to allow subscribers to replay television programs broadcast during the previous 24 to 48 hours bodes well for CCUR, the leading V.O.D. solution provider to the cable operator. Firm would expect the Look Back service to generate even higher usage levels than the Start Over service has. That said, firm believes it is wise to temper expectations regarding a potential launch date for the Look Back service. Firm also would not rule out the possibility that Time Warner could make adjustments to its server vendor allocations prior to the launch of Look Back.
09:51 am Penn Natl Gaming: Bear Stearns reiterates Outperform. Target $46 to $48. Firm also raises their 1Q06 ests due to better than previously estimated revenue/EBITDA margin trends at several of its properties - Charles Town (W.V.), its properties in Chicago-land, Baton Rouge (LA), Bangor (Maine) and Lawrenceburg (IN). They now forecast property level EBITDA of $172.7 mln (up ~4.0 mln). Firm's 1Q06 EPS est goes to $0.55 from $0.52 (consensus $0.50).
09:46 am Harrah's: Bear Stearns reiterates Outperform. Target $83 to $90. Firm also raises their HET ests given their expectations of stronger revenue growth/EBITDA margin trends from its casinos in A.C., Illinois, CPLV, and Louisiana (better ramp up at HET New Orleans, specifically). Their 1Q06 EPS goes to $0.92 from $0.84, $0.01 above Consensus. Theirr 2006 EPS goes to $3.74 from $3.50 (consensus $3.75). In general, they view HET as the pure play on strong regional/riverboat mkt/local consumer gaming trends, which should produce a strong 1Q for most gaming operators.
09:44 am Saifun Semi: WR Hambrecht initiates Buy. Target $38. The firm recommends the stock to investors for the following reasons: (1) The co competes in the flash memory market which they est will more than double in size in the next five years to over $49 bln; (2) A highly profitable I.P business model with expected 2006 GM north of 77% and OM of 44%; (3) A strong customer base that includes Spansion, Infineon, SMIC, and Macronix, among others, with a potential to sign additional licensees from the data flash market in the future; (4) the firm says NROM is a compelling technology with clear cost and scale advantage over floating gate at sub 45nanometers geometries; (5) Substantial earnings leverage potential in 2007 of 42% as the co begins to ramp up its royalty revenues from both Spansion and Infineon.
10:47 am Zale Corp. (ZLC)
25.66 -2.14: Investor zeal about owning shares of Zale has lost traction this morning after the jewelry giant said that the SEC has initiated a non-public investigation relating to accounting for extended service agreements, leases, and accrued payroll. The Irving, Texas-based company said subpoenas were issued in connection with the investigation, requesting materials relating to accounting matters as well as to executive compensation and severance, earnings guidance, stock trading, and the timing of certain vendor payments. Even though the company believes that its accounting complied with GAAP and is reviewing the matter, the news has sent shares into a tailspin, erasing nearly $100 mln in market cap and almost all of the 7.6% in share price appreciation during the month of March.
As a reminder, Zale is still searching for a new CEO following the abrupt resignation of Mary L. Forte on January 30th amidst the board's disappointment with financial results. Adding to the company's ongoing management struggles, John A. Zimmermann is still getting acclimated as President, Zale North America -- a newly created position following former President Paul Leonard's resignation in February. The company is also absent a chief operating officer following Sue E. Gove's unexpected departure on March 23rd.
In its most recent quarter, Zale said that Q2 earnings fell 12% due to store closing costs and a severance charge and issued downside Q3 EPS guidance amid expectations of flat to slightly positive comparable store sales growth for the third quarter. In contrast, competitor Tiffany & Co. (TIF), despite also grappling with higher raw material costs in gold, platinum and silver, posted better than expected Q4 earnings, a 180 basis point improvement in gross margins and backed its FY07 earnings outlook. Tiffany remains our favorite name in the space due to its consistent performance and superior brand image coupled with upside potential for the recently launched Frank Gehry collection and improvements in the Asia-Pacific region.
-- Brian Duhn, Briefing.com
09:28 am Taiwan Semiconductor (TSM)
10.43: Taiwan Semiconductor, the world's largest supplier of made-to-order chips, reported March sales reaccelerated in March to NT$17.61 bln or USD$838 mln. The Hsinchu, Taiwan-based foundry generated sales growth of 54% from last year and 13% sequentially demonstrating the continued positive growth trends in the semiconductor industry. The sales figures support our positive view on the fabless semiconductor names like Broadcom (BRCM), Marvell Technology (MRVL), NVIDIA (NVDA), and ATI Technologies (ATYT) - all of which do business with TSM.
Beginning with September, monthly sales accelerated into the holiday selling season. Sales peaked in December at USD$850.7 mln, then declined over the next two months to USD$742.2 mln in February. The March figure shows a reacceleration, which supports seasonal trends and continued industry order growth. TSM attributed the rise to an increase in wafer shipments. Expectations for the second quarter released on April 27th are rising based on bookings and utilization trends. Further, many analysts anticipate TSM should see the contribution from the move to sub 0.13 micron processes, generating over half of its total sales in the second quarter due to earlier than expected 65nm production. Its main rival, United Microelectronics (UMC) ,reported March sales rose 20.7% year/year and 12.4% month/month to NT$8.46 bln.
--Kimberly DuBord, Briefing.com
09:16 am J.P. Morgan Chase (JPM)
41.70: JP Morgan Chase & Co. on Saturday announced that it would swap its corporate trust operations for Bank of New York Co.'s (BK) consumer, small business, and middle-market banking units. The deal values Bank of New York's businesses at $3.1 billion, with a premium of $2.3 billion, and JP Morgan's unit at $2.8 billion, with a premium of $2.15 billion. Under the terms of the agreement, Bank of New York will also receive $150 million in cash, or the difference in premiums, and up to $50 million tied to certain new account openings at Chase.
Commenting on the deal, JP Morgan said the addition of Bank of New York's businesses, which includes 338 branches serving 600,000 households and 100,000 businesses, will bolster the company's core retail and small business banking operations in the attractive New York City/Tri-State region. In addition, the transaction will provide Chase with consumer, small business, and middle-market loan balances of about $8 billion, and about 2,000 Bank of New York middle-market clients.
JP Morgan said it expects the swap to result in an after tax gain of $600 to $700 million, but should add to earnings per share after 2007. Meanwhile, Bank of New York is expected to realize a gain of $1.3 billion, and the deal should be accretive for the company after 2009. The swap has already been approved by both companies' boards of directors, but is still subject to regulatory approvals. It is expected to close late in the third quarter or in the fourth quarter.
Briefing.com currently has a Market Weight rating on the Financial sector, but has maintained a favorable view of the investment banks due to their ability to benefit from the global M&A theme. Although rising interest rates have weighed on the banks, the swap should expand JP Morgan's presence in the attractive New York City market and allow it to leverage its scale and expertise amid increasing competition in retail banking.
--Richard Jahnke, Briefing.com
09:06 am Cablevision (CVC)
27.25: On December 18, 2005, Cablevision Systems canceled a previously adopted plan for a special $3 bln dividend upon learning of certain technical covenant violations that put the nation's No. 6 cable operator in violation of a credit agreement. Cablevision proposed the special dividend last October after the Dolan family, which holds a 20% stake in the company, withdrew plans to take the company private through a $7.9 bln transaction. Nonetheless, the Bethpage, New York-based company, which also controls Madison Square Garden, the New York Knicks, the New York Rangers and Radio City Music Hall, intended to promptly complete a comprehensive covenant compliance review.
Last Friday, three days after Cablevision said it had appointed a special group of independent directors to recommend whether the company should pay the dividend, now that it has reached a potential settlement tied to a number of class-action lawsuits filed against defendants related to making such a move, said its Board of Directors has authorized payment of a special cash dividend of $10.00 per share. The dividend, which will be paid from the proceeds of a $3 bln distribution from its CSC Holdings subsidiary, will be payable on April 24 to shareholders of record as of April 18 as a tax-free capital return to shareholders.
Even though the cloud regarding on-again, off-again talks about the "special dividend" has now been lifted and has been applauded by Wall Street, our favorite names in the media space continue to be Walt Disney (DIS) and News Corp (NWS.A) based on their premier assets and a focus on content over distribution. Both are currently suggested holdings in our Active Portfolio.
-- Brian Duhn, Briefing.com
08:53 am Walt Disney (DIS)
27.53: In a bold move, Disney, which is a suggested holding in our Active Portfolio, plans to make much of its television programming available for free on the Internet, according to The Wall Street Journal. The second largest media company is well ahead of the pack when it comes to evolution and convergence of digital media. Disney, led by Robert Iger, plans on April 30th to introduce a new Web site that will include a function that allows broadband users to watch free episodes of hits like Lost, Desperate Housewives, and Grey's Anatomy, according to the article.
The new web site will include a virtual theater where viewers can watch shows on their PCs. Programs will be available the morning after their airing and will be archived so that consumers can eventually watch an entire season. Disney is planning to launch a Disney Channel, ABC Family, and Soapnet cable channels as well. Disney will offer chat rooms wherein viewers can watch and comment with other fans, which will offer a customized commercials. The online versions offer viewers the ability to pause, skip, rewind, and fast forward shows --- unfortunately viewers can't skip the commercials, which gives Disney the ability to generate an entirely new revenue stream. Disney has already signed up ten advertisers, including Procter & Gamble (PG) and Ford (F).
Notwithstanding the almost 15% rise in DIS shares to date, we retain our positive view on the company. In just a few short months, Bob Iger has aggressively reignited this sleeping giant into a leading digital media company.
To be sure, there is a sweeping trend taking place across the media sector as the traditional media companies look for ways to expand content distribution and to increase advertising. This is a watershed event in media, marking the first time a broadcast company is offering prime time TV shows for free online without restriction. The move virtually (no pun intended) challenges the business model of traditional media, which in turn will have implications for advertisers, affiliates, cable/satelitte providers, retailers, communication and equipment companies, and even consumer electronic device manufactures. CBS (CBS) currently offers hit show "rentals" for 99 cents, while NewsCorp (NWS/A) looks into a way to disseminate content on the Internet in a matter that shares revenues with affiliates, according to the article.
--Kimberly DuBord, Briefing.com |
