From Briefing.com: 4:59PM Market Internals: The Dow increased 0.34%, closing at 11439, the Nasdaq was 0.87% higher to finish at 2324, and the S&P was up 0.34% to finish at 1312. Leading sectors included: diversified metals and mining +3.9%, tires and rubber +3.3%, food retail +2.9%, auto parts and equip +2.8%, resident reits +2.6%. Lagging sectors included: home entertainment software -10.9%, agriculture prod -7.7%, health care supp -6.3%, photo prod -2.2%, oil and gas exp -1.2%. Today's movement came from above average volume (NYSE 1736, vs. closing avg of 1608; Nasdaq 2103, vs. 2089), with higher advance/decline ratios (NYSE 2013/1215; Nasdaq 1887/1129), and with new high's outpacing new low's (NYSE 243/104, Nasdaq 245/31).
4:44PM Diodes beats by a penny; guides revenue above consensus (DIOD) 43.62 +2.12 : Reports Q1 (Mar) earnings of $0.38 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.37; revenues rose 51.4% year/year to $73.6 mln vs the $72.9 mln consensus. Co issues upside guidance for Q2, sees Q2 rev growth of 3-6% sequentially or roughly $75.8-78.0 mln vs. $75.04 mln consensus. Co expects second quarter gross margin percentage to be comparable to the first quarter and they expect to see gradual expansion in gross margin over the balance of 2006 and beyond.
4:39PM California Micro beats by $0.03, revs in line (CAMD) 8.08 -0.02 : Reports Q4 (Mar) earnings of $0.10 per share, $0.03 better than the Reuters Estimates consensus of $0.07; revenues rose 20.0% year/year to $17.4 mln vs the $17 mln consensus.
4:38PM PMC-Sierra announces 18.1 mln share offering by selling stockholders (PMCS) 11.79 +0.34 :
4:25PM Axcelis Tech reports in-line; guides above consensus (ACLS) 6.04 +0.26 : Reports Q1 (Mar) earnings of $0.01 per share, in line with the Reuters Estimates consensus of $0.01; revenues fell 2.1% year/year to $97.9 mln vs the $96.3 mln consensus. Co issues upside guidance for Q2, sees EPS of 0.10-0.14 vs. $0.04 consensus; sees Q2 revs of $112-122 mln vs. $103.18 mln consensus.
4:20 pm : The major averages bounced back nicely in the wake of Wednesday's modest consolidation efforts, this time embracing a sell-off in oil prices and getting some validation about the strength of the consumer amid solid April same-store sales growth across the board.
Yesterday gasoline futures lost 4.0% while crude oil futures lost 3.0% after the EIA showed that demand for gasoline was flat last week as inventories rose for the first time in more than two months; but the market failed to take advantage. Today, however, follow-through selling sparked by yesterday's unexpected build in gas supplies continued to weigh on prices across the energy complex, alleviating some worries about higher energy bills crimping discretionary spending.
Speaking of consumption, even in the face of a 13% surge in prices at the pump last month, retailers in April posted a 6.5% increase in same-store sales as Easter came later, incomes were higher and the weather was warmer. That was the strongest showing since May 2004 according to Lazard. Notable names included Costco (COST 55.53 +1.57), which topped forecasts with a 7% rise in April comps, teen retailers American Eagle (AEOS 33.61 +1.08) and Abercrombie & Fitch (ANF 63.26 +2.92), which posted gains of 19.0% and 17.0%, respectively, and Gymboree (GYMB 32.87 +1.80), a suggested Active Portfolio holding which blew away forecasts again with 19% year/year comps growth. Coupled with plummeting oil prices, investors lifted virtually every industry into positive territory as the Dow Industrials enjoyed its best close in six years and came within 280 points away from an all-time high.
The Dow Transports fared even better, recording their biggest one-day rally since July 2005 and closing at historic levels. Plunging energy prices and a 70% rise in Q1 profits at Expeditors International (EXPD 103.80 +16.04) were contributing factors that also helped the Industrials sector turn in the day's best performance. A fivefold surge in Q2 profits at Tyco International (TYC 27.92 +0.98) provided additional sector support and helped keep the S&P 500 on pace for an 11th straight quarter of double-digit profit growth.
Among the other eight economic sectors posting gains, Materials extended its 12% year-to-date performance as a weaker dollar and concerns about inadequate supplies helped copper futures hit another record high and lifted gold prices back to their best levels since 1980. Technology also provided some notable leadership to the upside, fueled by follow-through buying in semiconductor and a rebound in Microsoft (MSFT 23.44 +0.27) spurred by reports of a new targeted advertising offensive against Google (GOOG 394.75 +0.58). Chip stocks got a boost from a 2.7% surge in Applied Materials (AMAT 18.55 +0.49) Wall Street believes its agreement to acquire Applied Films (AFCO 28.03 +5.06) complements AMAT's existing business and presents new growth opportunities.
Financial also showed relative strength, benefiting from multiple upgrades on Franklin Resources (BEN 90.40 +1.73) as the Treasury market sat firmly in a holding pattern, temporarily stalling continued interest-rate worries that have been at the heart of the market's inability to sustain a convincing advance. Even though evidence that accelerating wage growth, supported by a 2.5% rise in labor costs in this morning's preliminary read on Q1 productivity, may raise concerns that Fed tightening has further to go than expected, bond traders waited for tomorrow's employment data to dictate whether or not the economy is growing too fast.
Consumer Staples eked out a small gain as Whole Foods Market (WFMI 70.42 +8.27) boosting its 2006 sales guidance after posting strong earnings, Costco's strong comps, and record results from CVS Corp. (CVS 30.32 +0.32) helped offset an analyst downgrade on Archer Daniels Midland (ADM 40.00 -3.32) which prompted investors to lock in some of the stock's 69% year-to-date gain as one of this year's biggest winners. Energy, however, extended yesterday's consolidation efforts amid further deterioration in the price of crude and was the only sector that didn't participate in Thursday's recovery effort. BTK +1.2% DJ30 +38.58 DJTA +3.3% DOT +0.4% NASDAQ +19.93 NQ100 +0.9% R2K +0.9% SOX +1.3% SP400 +0.6% SP500 +4.40 XOI -0.8% NASDAQ Dec/Adv/Vol 1129/1887/2.09 bln NYSE Dec/Adv/Vol 1215/2014/1.74 bln
10:22 am Hercules Tech: AG Edwards initiates Buy. Firm believes the co has an opportunity to capture a large share of a growing market for VC debt due to the small amount of focused providers of debt capital to VC companies.
10:21 am Electronic Arts: Kaufman Bros downgrades Buy to Hold. Target $63 to $58. Firm removes their $58 tgt after the co reported a strong March qtr, but guided below consensus; firm cites added costs, increased risks associated with R&D, potential mkt shr losses, and valuation.
10:20 am Green Mtn Coffee: Janney Mntgmy Scott upgrades Neutral to Buy. Firm is saying the acquisition of the remaining shares of Keurig is a positive strategic and financial maneuver that significantly enhances the longer-term prospects for the stock.
10:19 am Direct General: Sun Trust Rbsn Humphrey downgrades Buy to Neutral. Firm believes higher advertising costs will drive improved top-line and bottom-line growth; however, the existing increase it causes in the company's expense ratio, on top of the competitive pressures, does not make the near-term outlook look compelling.
10:08 am FEI Company: Needham & Co upgrades Hold to Buy. Target $32. Firm is saying they believe the bold steps mgmt has taken over the last year should finally start to bear fruit. The firm says improving gross margins and operating cost containment appear to be combining to drive earnings growth of 30% over the next few years. They also look favorably on the increasing diversity of FEIC's end markets and believe the co continue to be less reliant on the highly cyclical semiconductor industry.
09:59 am CIGNA: JP Morgan downgrades Overweight to Neutral. Firm downgrades based on the co's Q1 results, which lead to concerns of potential aggressive pricing, the lack of any anticipated positive catalyst that would drive near-term multiple expansion following the recent stock sell-off, and the lack of visibility into actual pricing behavior going forward. Though firm has been bullish on CI in recent quarters, there is evidence for the first time in several years of a possible shift in co fundamentals: recent evidence of an increase in medical loss ratio (MLR) possibly caused by aggressive pricing has resulted in an unfavorable price-cost spread.
1:09 pm Priceline.com (PCLN)
27.98 +2.68: Priceline.com reported a loss for the first quarter, hurt by stock option expensing, but offered strong guidance for the current quarter and full fiscal year on increased travel bookings. Specifically for the period, Priceline lost $1 million, or ($0.02) per share, compared with a profit of $5 million, or $0.10 per share, a year earlier. Excluding stock-based compensation, the company earned $7.9 million, or $0.19 per share - in line with the Reuters Estimates consensus.
Revenues at the online travel agency grew 3.8% year/year to $241.9 million, as agency revenues surged to $30.4 million from $14.9 million a year ago. Gross travel bookings in the quarter, or the total value of all travel services purchased, including taxes and fees, rose 47% to $746.8 million. Priceline said it saw accelerating bookings growth in the U.S. and in Europe, with domestic organic bookings growth increasing to approximately 10% and European organic bookings growth increasing to over 100%. As expected, the majority of the growth came from sales of retail hotel rooms supported by an increase in online marketing spending, the company said.
As revenue for the hotel bookings will be recognized at the time of stay, with a significant portion occurring in subsequent quarters and contributing to future growth, the company offered a positive outlook for the second quarter and full year. Specifically, Priceline said it expects second quarter earnings of $0.48 to $0.53 per share on revenue growth of 8% to 12%, or roughly $287.98 to $298.54 million. That compares with analysts' expectations for earnings of $0.47 per share and revenue of $288.8 million, according to Reuters Estimates. For the full year, the company forecasted earnings between $1.60 and $1.70 per share, compared with the consensus estimate of $1.58 per share.
Despite the mixed results for the latest quarter, investors remained focused on Priceline's strong guidance, lifting shares more than 11% during the regular trading session. At the current price level, shares of the company are trading at roughly 17.7x forward earnings, compared with 15.8x for Expedia (EXPE) and 14.6x for Cendant Corp. (CD).
--Richard Jahnke, Briefing.com
12:47 pm Gymboree (GYMB)
32.72 +1.65: It wasn't that long ago that specialty retailer Gymboree was on the outside looking in at other top-performing retail stocks. That is no longer the case as a series of successful turnaround initiatives have it back in the "in crowd" among retail issues. The company's same-stores sales update for April was just the latest reminder why that is.
For the four-week period ended April 29, Gymboree reported a 19.0% increase in same-store sales. That was comfortably above the Briefing.com consensus estimate that called for an increase of 11.0% and was well ahead of the 3.0% decrease reported in the year-ago period. The strength was attributed to compelling product and ongoing attention to its merchandising, marketing and costing initiatives.
The fruit of the company's efforts has been on display in a number of upward revisions to earnings estimates in recent months. Recall that Gymboree raised its first quarter and full-year outlook in early-April after reporting a 5.0% increase in March same-store sales. With the leverage gained from its sales success in April, Gymboree is back doing the same today. Before the impact of stock-based compensation, earnings are now expected to be in the range of $0.48-0.50 per share for the first quarter and $1.37-1.40 per share for the full fiscal year. On the same basis, Gymboree previously expected earnings in the range of $0.35-0.38 and $1.24-1.28, respectively.
According to Reuters Estimates, analysts were expecting earnings of $0.35 per share and $1.28 per share for the aforementioned periods, but their estimates will surely be moving higher in the days ahead. The upward revision to earnings estimates has been a driving force behind the stock, which is up 40% year-to-date and up 146% since being added to our Active Portfolio last June. While comparisons will be getting more difficult, Gymboree's execution remains enviable and a driving factor for our continued support of the stock as a suggested holding for active investors.
--Patrick J. O'Hare, Briefing.com
11:46 am Career Education Corp. (CECO)
32.81 -3.78: Shares of Career Education Corp. traded lower on Thursday, falling more than 10%, after the for-profit education company reported lower first quarter earnings, weighed down by an impairment charge and weak enrollment growth. Specifically, net income for the period fell to $52.7 million, or $0.53 per share, from $55.9 million, or $0.53 per share, a year earlier. Excluding a goodwill impairment charge of $10.4 million, but including a non-cash share-based compensation expense of $4 million, earnings were $0.60 per share - matching the Reuters Estimates consensus.
First quarter revenue increased 3.6% year/year to $528.6 million versus the consensus estimate of $540.47 million. Enrollment growth was disappointing, as total student population increased a modest 0.4% year/year on a 23.5% increase in online students and a 7.9% decline in on-ground students. Total enrollment in the company's Gibbs segment fell 20% to 6,500 during the quarter from 8,100 a year ago. Furthermore, new student starts, an indicator of future enrollment growth, fell 13% to approximately 28,300, compared to about 32,500 last year.
Career Education noted that, since July 2005, its board of directors has authorized the use of approximately $500 million for the repurchase of shares. Under that program, the company repurchased 700,000 shares in the first quarter for about $24.9 million, at an average price of $36.16 per share.
Shares of the company have traded in a 52-week range of $28.73 to $42.59, and are down about 8% over the same period. With weak enrollment growth and outside pressures, including outstanding legal and governance issues, continuing to weigh on the stock, current prospects remain uncertain and its stock remains unappealing..
--Richard Jahnke, Briefing.com
11:39 am Barrick Gold (ABX)
33.15 +2.12: After a glowing report from Barrick Gold, shares are materially higher in early trading as the world's biggest gold producer reported first quarter profits more than tripled on surging prices and increased production. Barrick, which bought its rival Placer Dome last year for $10 bln, reported net income of $224 mln, or $0.29 per share - exceeding forecasts by a nickel. Sales more than doubled in the quarter to $1.26 bln on realized prices of $537 per troy ounce.
Gold output in the quarter grew 71% to 1.956 mln ounces at cash costs of $283 per ounce. The production and cash costs, which declined from $241 last year, include results from Placer Dome, but excludes mines to be sold to Goldcorp. Cash flows rose sharply to $378 mln. Production forecasts were left unchanged at 8.6-8.9 mln ounces at $275-$290/oz. Barrick aggressively reduced its hedge book in the quarter reflecting its long-term bullish outlook for gold prices. Historically, mining companies have sold gold before it's even mined to lock in prices, but now they are reducing forward sales as precious metal prices have soared over the last four years. Its combined hedge position was reduced by a total of 5.7 mln ounces at a cost of $1.2 bln, of which $814 mln was incurred in the first quarter.
Barrick's shares have underperformed other base metals stocks due to uncertainty regarding the Placer merger, and have been further pressured by its hedge book. The aggressive reduction, which, combined with its earnings performance in the quarter, isdriving shares higher. We remain bullish on the base metals stocks and recently raised our rating on the Materials sector to Overweight, reflecting strong underlying fundamentals. ABX trades at a P/CF multiple of 13x versus Goldcorp (GG) at 21x and Kinross Gold (KGC) at 15.5x.
--Kimberly DuBord, Briefing.com
10:53 am International Paper (IP)
37.21 +0.15: International Paper Co. said Thursday it saw a loss of $1.2 billion in the latest quarter, thanks to charges related to its business transformation plan. The company reported a net loss of $2.52 per share for the January to March period, compared with earnings of $77 million, or $0.16 per share, for the same period a year ago. Excluding charges of $2.66 per share for discontinued operations and $0.05 per share for special items, the company reported earnings of $0.19 per share. That was $0.05 better than a Reuters Estimates consensus of $0.14 per share.
The Stamford-based company said quarterly net sales were $5.7 billion, on par with fourth-quarter 2005 net sales of $5.7 billion and first-quarter 2005 net sales of $5.6 billion. Operating profits of $456 million for first quarter 2006 were higher than fourth-quarter 2005 operating profits of $371 million because of higher price realizations, stronger volumes, lower manufacturing costs, sales mix improvements, and a drop in some raw material costs - primarily energy and wood.
Higher price realizations in containerboard, boxes and uncoated papers, in addition to strong mill performance and cost control, were the biggest drivers of earnings improvement from the previous quarter, said company Chairman and Chief Executive Officer John Faraci. He said the company experienced far less market downtime in the latest quarter. Energy and raw material costs declined somewhat, but are still about $0.13 per share higher than at this time last year, he noted.
Faraci said he was also pleased with the progress of the company's transformation strategy. The company recently announced sale agreements for 5.7 million acres of U.S. forestland for approximately $6.6 billion. International Paper estimates that total after-tax transformation proceeds could exceed $11 billion. The company said Thursday that it expects the second quarter to be stronger than the first quarter, with average prices improving.
The company said it anticipates continued progress in operations as it continues with its strategy. Input costs remain high, especially for oil and transportation, Faraci noted.
--Christine Marie Nielsen, Briefing.com
10:35 am Royal Dutch Shell
69.18 +0.52: With Latin America seeking a greater portion of oil profits and crude oil prices hovering near the $75 range on heightened tensions with Iran over its nuclear ambitions, the oil and gas super majors remain in the spotlight, or some would say, hot seat. Europe's two largest oil companies, Royal Dutch Shell and Total SA, both reported better than expected first quarter profits on soaring energy prices despite declining production rates.
Royal Dutch Shell grew net income by 3% to $6.89 bln, or $1.05 per share. Excluding the impact of price changes on inventory values, profits rose 12% to $6.09 bln - exceeding the median forecast of $5.67 bln, according to Bloomberg. Due to Nigerian shut-ins and deferred Gulf of Mexico production, the Hague-based oil producer reported production fell to 3.75 mln barrels of oil equivalent per day. Excluding hurricane and pricing effects, production would have risen 1% for the year. However, RD said its GOM Mars platform will return to pre-Katrina production levels by the end of June ahead of expectations. The upside in the quarter was driven by its gas and power units, including record sales of LNG.
According to Bloomberg, the world's five largest oil companies earned about $29 bln in the quarter, or almost $5 for every person on earth. Soaring energy prices created windfall profits this quarter for the super majors. Here are the grand totals for the top five global oil and gas producers: Exxon Mobil (XOM) $8.4 bln, Royal Dutch $6.89 bln, British Petroleum (BP) $5.62 bln, Total (TOT) $4.27 bln, and Chevron (CVX) at $4 bln.
--Kimberly DuBord, Briefing.com
10:17 am Eastman Kodak (EK)
26.65 -0.70: Eastman Kodak on Thursday reported a wider loss in the first quarter, as restructuring charges and rising silver and oil costs weighed on results, and said it was exploring strategic alternatives for its health group, including a sale. While the Rochester, New York-based photography company continues to expand its digital footprint, weak demand for traditional film and high restructuring costs continues to dampen earnings prospects and underscores our bearish outlook on the stock.
For the latest quarter, Kodak posted a net loss of $298 million, or ($1.04) per share, compared with a year ago loss of $146 million, or ($0.51) per share. That marked the sixth consecutive quarterly loss amid a strategic shift toward digital products and services and away from its traditional film business. Excluding restructuring charges and other one-time items, the company's loss was ($0.34) per share, well below the Reuters Estimates consensus of a profit of $0.05 per share.
Revenue at Kodak rose 2% to $2.89 billion, versus the consensus estimate of $3.11 billion. Growth in the quarter was led by a 29% increase to $1.62 billion in the sale of digital products and services, while traditional sales, which still accounts for approximately 44% of total revenue, fell 20% to $1.26 billion. New technologies contributed an additional $16 million in the quarter, compared with $9 million last year.
Sales at Kodak's health group slipped 7% to $585 million, accounting for approximately 20% of total sales in the quarter. Earnings from operations for the segment were $46 million, down from $78 million a year earlier. The company said the decline is primarily the result of lower earnings from traditional radiography film and digital output and higher silver costs, which affects the health group more than any other segment because of the higher silver content of its products.
Meanwhile, Kodak said it has retained Goldman Sachs as its advisor considering options for its health group. "While the health group is enjoying strong organic growth in elements of its digital portfolio, such as digital capture solutions and healthcare information solutions, we have been observing for some time consolidation in the industry. Given our valuable assets and the changing market landscape, we feel that now is the time to investigate strategic alternatives," the company said.
--Richard Jahnke, Briefing.com
09:55 am Prudential Financial (PRU)
78.58: Prudential Financial Inc. said income declines from its investment division resulted in a first-quarter profit slip of 11.9% from a year ago. The report of earnings of $1.38 per share, excluding non-recurring items in the period ended in March, was $0.04 better than the Reuters Estimates consensus of $1.34. Total quarterly revenue rose 9.5% to $6.13 billion from $5.6 billion a year earlier.
After-tax adjusted operating income for the first quarter of 2006 was $669 million, including pre-tax expenses of $176 million related to obligations and costs retained in connection with a retail securities brokerage joint venture with Wachovia Corp. (WB). After-tax adjusted operating income was $601 million, or $1.18 per common share.
While the earnings beat expectations, guidance provided with the report raised concern for those who are bullish on the stock. The life insurance and investment company late Wednesday issued downside guidance for 2006, seeing earnings per share of $5.40 to $5.60 versus $5.66, assuming the S&P 500 index rises 2% per quarter for the balance of the year.
Chairman and CEO Arthur Ryan said in a press release that the company's annuity business is continuing to benefit from "attractive product offerings and expanded distribution." He said the company will be further strengthened by the acquisition of variable annuity business from Allstate Corp. (ALL), a deal which is expected to close by the end of the second quarter. The company said the integration of retirement business acquired from CIGNA Corp. (CI) is now complete, and the company is investing in the expansion of capabilities in full service retirement, where it sees "attractive long-term market prospects."
Prudential's domestic protection businesses - Individual Life and Group Insurance - is performing well, Ryan said. He added that the company's asset management business and greater asset management fees contributed to earnings growth this quarter, with results continuing to benefit from a strong commercial real estate market. The company's international businesses are benefiting from business growth, he said.
The Newark-based company said assets under management amounted to $547 billion on March 31, compared with $496 billion a year earlier.
--Christine Marie Nielsen, Briefing.com
09:15 am Transocean (RIG)
84.90: A 24% increase in average dayrates and a rig utilization level of 82% are evidence of the robust demand environment occurring within the offshore drilling industry. Those figures, incidentally, belong to the premier offshore driller in the world and Active Portfolio holding, Transocean, which reported that first quarter profits more than doubled driven by ramping global exploration, as soaring energy prices increase drilling demand globally.
Revenues in the quarter grew nearly 30% year/year and 6% quarter/quarter to $817.3 mln led by activity levels and rising dayrates across its entire fleet, offsetting rig out-of-service time. Its High-Specification Floaters, which are capable of drilling in water depths of 4,500 feet, or greater, secured long-term contracts at attractive dayrates, creating an unprecedented level of visibility. Demand for deepwater rigs over the next 24-30 months continues to exceed supply, with only 21% of its fleet uncommitted in 2008.
There was little to argue with in the quarter given RIG's strong operational and financial performance. Costs, while on the rise, declined as a percentage of revenues and cash flow remained robust. The market will be looking for insight on the company's free cash flow distribution plans. RIG ended the quarter with a total contract backlog of $17 bln. Gross margins gained over 260 basis points to 41%. Excluding asset sales, operating margins expanded 110 basis points to 27%. Per share earnings of $0.49, excluding non-recurring items, drilled past estimates by a penny. The stock trades at a forward multiple of 10.4x FY07 estimates, which is a premium to its peers, but is still below prior cycle averages.
--Kimberly DuBord, Briefing.com
09:02 am Whole Foods Market (WFMI)
62.15: Shares in Whole Foods Market Inc. are poised to open higher after the company said its profit grew by a healthy 27% in the latest quarter. Profit for the quarter ending Apr. 9 rose to $51.8 million, or $0.36 per share, compared with $40.7 million, or $0.30 per share, last year. The latest-quarter figure was $0.01 better than the Reuters Estimates consensus of $0.35.
Revenues rose 20.9% year-over-year to $1.31 billion. Operating cash flow per share was $0.88, and Economic Value Added improved $8.8 million to $19.2 million. The results include approximately $2 million in pre-tax share-based compensation expense.
The Austin, Texas-based company continues to expect weighted average square footage growth in line with its 14% average, but now expects comparable store sales growth of 10% to 12% compared to a previous guidance range of 8% to 11%. Based on strong sales trends over the last few years and its 4.4 million square feet under development, the company's goal is to reach $12 billion in sales in 2010.
Whole Foods said a significant acceleration in leases tendered and new store openings could lead to materially higher pre-opening and relocation costs year-over-year. The company, which has a market cap of about $8.63 billion, ended the latest quarter with 183 stores. During a post-earnings call with analysts, executives said the company is planning to open a total of 78 new stores over the next few years.
In the latest period, the company relocated one store in Alexandria, VA, opened two new stores in Woburn, MA, and Henderson, NV, re-opened its two New Orleans stores, and acquired one small store in Portland, ME, which the company plans to relocate to a larger store currently in development. The company has opened one new store in Greenville, SC in the third quarter and plans to open up to four additional stores during the fourth quarter.
--Christine Marie Nielsen, Briefing.com
08:46 am Electronic Arts (ERTS)
54.50: Videogame publisher Electronic Arts on Wednesday reported a fourth quarter loss, hurt by restructuring and acquisition-related charges, and guided lower for the current quarter and fiscal year as it continues to suffer amid the industry's transition to the next generation of consoles. Investors, in turn, forced shares of the company significantly lower in pre-market trading.
Electronic Arts' net loss for the quarter was $16 million, or ($0.05) per share, compared with a profit of $8 million, or $0.02 per share, a year earlier. Excluding approximately $59 million of acquisition-related charges, the repatriation of $375 million in foreign earnings, and restructuring costs, the company would have earned $0.14 per share. On that basis, analysts were looking for $0.09 per share.
Although demand for older-console games has weakened, fourth quarter revenue rose 16% year/year to $641 million, beating the consensus estimate of $583.3 million. Sales for the full fiscal year, however, were down 6% to $2.95 billion as consumers delayed game purchases while awaiting for next-generation gaming hardware. Electronic Arts said sales for the latest quarter were driven by demand for EA Sports Fight Night Round 3, The Godfather: The Game, Black, Need for Speed Most Wanted, FIFA Street 2, and The Sims. Each of those six titles sold over one million copies in the quarter. Meanwhile, operating margin for the quarter fell to 11%, compared to 21% a year ago, as the company continues to invest ahead of revenues into the console transition.
Extending its recent string of disappointing forecasts, Electronic Arts said it expects to lose between ($0.22) and ($0.28) per share in the first quarter, excluding non-recurring items, on revenue of $300 to $340 million. Analysts were looking for a narrower loss of ($0.19) per share and revenue of $421.76 million, according to Reuters Estimates. For the full year, the company projected earnings in the range of $0.35 to $0.65 per share, ex-items, on revenue between $2.7 and $2.95 billion. That compares with analysts' forecast for earnings of $1.04 per share and revenue of $3.17 billion.
With Electronic Arts investing heavily in developing new products as the transition to a new generation of hardware continues to dampen sales, the near-term outlook remains challenging. In the longer term, however, the company, which lays claim to some of the most notable game titles in the industry, is well positioned for growth. Accordingly, we wouldn't be committing new money to the stock at this juncture, but find reason for investors to continue to hold the stock given the company's long-term growth potential.
--Richard Jahnke, Briefing.com
08:08 am Starbucks (SBUX)
37.35: It was another tasty, yet fulfilling quarter from Starbucks. The world's largest coffee chain brewed up 27% profit growth in the second quarter, propelled by new drink offerings, operating leverage and new store openings as the company continues to expand its global footprint. Broad-based growth generated a 24% increase in revenues to $1.9 bln, including 6% same-store sales growth - at the high end of its 3-7% target range. Robust revenue growth, coupled with continued margin expansion yielded net income of $127.3 mln, or $0.16 per share - exceeding expectations by two cents.
Starbucks raised the bar for its full year earnings, once again, following another frothy quarter of strong growth. It now forecasts earnings of $0.71-$0.72 per share, up from $0.68-$0.70 and versus the consensus estimate of $0.70 per share. In the quarter, cost of sales improved to 40.3% of total net revenues - a 110 basis point gain over the prior period. Operating margins increased to 10.7%, up 40 basis points year/year, led by the US operations which showed a 150 basis point improvement. Overall, it was another outstanding quarter, supporting our view that Starbucks' cup remains half full.
--Kimberly DuBord, Briefing.com |
