From Briefing.com: Updated: 16-Apr-03 - General Commentary - It's only day two, but based on the limited reports received to date earnings season is shaping up pretty much as expected. Companies are generally besting consensus estimates, but issuing conservative guidance.
Microsoft (MSFT) is a perfect example of the above. Company beat the bottom line estimate by two cents in reporting a quarterly gain of $0.26. Revenues of $7.84 bln were also slightly ahead of projections. But that's where the good news ended and the "bad" news began.
MSFT sees Q403 earnings of $0.23-$0.24 on sales of $7.8-$7.9 bln. Street had been looking for gain of $0.24 on sales of $7.96 bln. Company also put FY04 in a range of $1.04 to $1.06 versus consensus estimate of $1.08.
In another quarter, one might dismiss MSFT's lowered guidance as Microsoft just being Microsoft (company famous for conservative outlooks). But when one company after another lowers future estimates given economic uncertainties, it starts to look like a trend. With the war having just concluded, this is a trend that won't catch many investors by surprise. Nevertheless, the lack of visibility does make it tough for investors to fully embrace the stock and/or the sector.
Intel's story wasn't considerably different. Company posted a quarterly gain of $0.14 on revenues of $6.75 bln. While both figures represented declines from the year-ago period ($0.15/$6.78 bln), earnings came in two cents above consensus estimate and sales were in line with range $6.6-$6.8 bln) provided by company last month.
Looking ahead, company noted that continued uncertainty in global economic conditions makes it particularly "difficult to predict product demand and other related matters." That caveat aside, firm sees Q2 revenues of between $6.4 to $7.0 bln with gross margins approximating 50% (+/- 2%). Gross margins were 52% in first quarter. Again, nothing here to get excited about.
While early guidance has been cautious, it hasn't been overly bearish -- at least not yet. Considering that war is just coming to a close, most investors expected nothing more. As we've argued for days now, as long as news isn't overly negative, stocks are likely to edge higher amid increased optimism for the economy and earnings in the second half of the year.
Robert Walberg, Briefing.com
After Hours Indications The late session tone is decidedly positive. S&P futures at 899, trade nine points above fair value while the Nasdaq 100 after hours indicator is higher by 21.4 points.
MOT Motorola matches estimates; updates guidance (7.94 -0.04) Reports Q1 (Mar) earnings of $0.01 per share, in line with the Multex consensus of $0.01; revenues fell 2.2% year/year to $6.04 bln vs the $6.06 bln consensus; sees Q2 EPS ex-items of $.03 to $.05 per share vs the Multex consensus of $0.07; sees Q2 revs of $6.4 to $6.6 bln vs the Multex consensus of $6.53 bln.
4:34PM Emulex and Intel to develop storage processors (ELX) 22.92 +0.97: Co and Intel plan to develop next-generation storage processors that for the first time integrate Serial ATA, Serial Attached SCSI and Fibre Channel interfaces within a single architecture. Under the agreement, Emulex will market the resulting Fibre Channel products, and Intel will market the Serial ATA and SAS products
4:32PM Dupont Photomask reports (DPMI) 19.28 -0.21: Reports Q3 (Mar) loss of $0.92 per share, Multex consensus is ($0.97); revenues fell 8.8% year/year to $76.1 mln vs the $76.1 mln consensus. Actual excludes charge of $9.2 mln. Company sees Q4 revenues of $80-84 mln vs Multex consensus of $82 mln, issues EPS guidance which includes charges and is not comparable to estimates.
4:29PM Intel Q2 guidance (INTC) 17.13 -0.03: -- Update -- Co. says Q2 revs are expected to be between $6.4 bln and $7.0 bln vs the Multex consensus estimate of $6.62 bln; capital spending for 2003 is expected to be between $3.5 bln and $3.9 bln -- co's prior guidance was for capex to be $3.76 bln, plus or minus $200 mln.
4:25PM Intel reports Q1 results (INTC) 17.13 -0.03: -- Update -- Co. reports Q1 earnings of $0.14 per share, this includes a tax benefit of approximately $75 mln related to divestitures, "which increased earnings per share by $0.01". Looks like $0.13 per share may be the comparable number to the Multex consensus of $0.12 per share. Regardless, company edged topline ests as revenues fell 0.4% year/year to $6.75 bln vs the $6.72 bln consensus. Details to follow...
2:54PM Intel Earnings Preview (INTC) 17.07 -0.09: Intel reports its Q1 quarterly announcement after the close with Multex consensus estimates of $0.12 per share and revs of $6.7 bln. The general consensus by analysts seems to be the co performing in line with expectations. A Thinkequity analyst is looking for the co to perform in line with the midpoint of its previous guidance, which is approximately $6.75 bln. In addition, most analysts believe Intel's guidance will be cautious yet optimistic with a JMP analyst attributing this stance to "sluggish corporate spending on PCs, servers and continuing pricing pressures in consumer PC processors and flash memory." Co expects 2003 gross margins to be about 51%, plus or minus a few points, and capex to be $3.76 bln, plus or minus $200 mln. During the co's last three earnings announcements, the stock has had mixed reactions with -2.5%, -18.0% and 5.9% for its Q4 (beat by $0.02), Q3 (missed by $0.02) and Q2 results (in-line), respectively.
4:22PM CDW Computer beats by a penny, revs light (CDWC) 40.41 -0.30: Reports Q1 (Mar) earnings of $0.49 per share, $0.01 better than the Multex consensus of $0.48; revenues rose 1.5% year/year to $1.02 bln vs the $1.03 bln consensus.
4:19PM Photon Dynamics misses by $0.01, guides (PHTN) 18.50 +0.75: Reports Q2 (Mar) loss of $0.50 per share, $0.01 worse than the Multex consensus of ($0.49); revenues fell 27.3% year/year to $10.1 mln vs the $9.2 mln consensus. For Q3, company sees loss of between $0.24-0.16 on revenue of $16-18 mln; Multex consensus estimates are ($0.18) and $15.5 mln, respectively.
MSFT Microsoft says PC demand still sluggish (24.60 -0.15) -- Update -- On call, says total PC unit shipments worldwide grew in low single digits in fiscal Q3, which was at low end of its expectations; said Japan was worse than expected with high single digit declines... notes that overall PC demand seems to remain sluggish as IT spending continues to be impacted by uncertain geopolitical climate
4:12PM Microsoft beats by $0.02, guides (MSFT) 24.53 -0.22: Reports Q3 (Mar) earnings of $0.26 per share, $0.02 better than the Multex consensus of $0.24; revenues rose 8.1% year/year to $7.84 bln vs the $7.73 bln consensus. Company Q4 sees EPS of $0.23-0.24 vs Multex consensus of $0.24, revs of $7.8-7.9 vs consensus of $7.96 bln; Y04 EPS of $1.04-1.06, consensus of $1.08, revenues of $33.1-33.8 bln vs consensus of $34.9 bln
4:11PM MSFT adds $0.25 in after hours on upside earnings, mixed guidance :
4:09PM Texas Instruments guides for Q2 Y03. (TXN) 17.20 +0.26: Company issues guidance for Q2 (Jun), company sees EPS of $0.08 "plus or minus a few cents", vs. Multex consensus of $0.09.
4:03PM Texas Instruments beats by $0.01 (TXN) 17.21 +0.27: Reports Q1 (Mar) earnings of $0.07 per share, $0.01 better than the Multex consensus of $0.06; revenues rose 20.0% year/year to $2.19 bln vs the $2.15 bln consensus.
3:33PM Linear Technology Earnings Preview (LLTC) 32.06 +0.63: Linear reports its Q3 after the close today with Multex consensus estimates for EPS of $0.19 and revs of $151.9 mln. The general consensus of analysts appears to be the co performing in line with expectations. In terms of guidance, the street believes its forecasts will continue to be cautious given its exposure to a diversity of product segments, which include industrial, cell phones and power management. The company has historically exhibited impressive gross margins and execution given its role as an analog semiconductor company. In a Fulcrum preview, the analyst states earnings estimates for semi co's, which include LLTC should remain "stable" and believes "broad customer base of analog companies provide stability in order patterns and backlogs likely trended higher". During the co's last three earnings announcements, the stock has had mixed reactions with -2.2%, 0.3%, and 4.8% for its Q2 (beat by $0.01), Q1 (in-line), and Q4 (in-line) results, respectively.
10:48AM Technical Levels: So it finally happened. On a somewhat inconspicuous Monday session, both the S&P 500 and the Dow Industrials managed to edge out their 200-day simple moving averages (sma). While we touched on this prospect yesterday, the manner in which these breaks occurred was somewhat unconventional. Total volume traded was unusually light Monday with less than 1.2 billion shares on the Nasdaq, and about 1.1 billion shares traded on the NYSE.
Now breaks of major technical levels conventionally occur in one of two ways: 1) behind a significant fundamental development -- say for instance, the end of a war, or 2) behind a technically driven session marked by unusually strong volume, and extreme readings on the market internals.
That Monday session matched with neither of the scenarios above. Total volume on the Nasdaq rivaled the year's lowest levels, and a major fundamental trigger was absent as well. The potential implications of this development will be addressed at the tail end of today's review.
In the chart above, you can see a few of the levels we were looking towards yesterday. This is an intraday chart of Monday's trade activity in which each bar on the chart represents the opening and closing levels for each five-minute time frame.
Note the index found support in the vicinity of 1360 early on, before reversing as much as 27 points off that level. Recall yesterday we had suggested the immediate bias will improve to the extent the index can edge above this pivot point in the range of 1360 to 1367. After that pivot point, we were looking for additional resistance at 1378. So this first chart illustrates when and where each of these levels was observed.
To read the remainder of this review -- which gets back to that 'light-volume' break above those 200-day moving averages -- please click here to visit Briefing.com's Stock Brief page. -- Mike Ashbaugh, Briefing.com
9:45AM Ahead of the Curve: IBM (IBM) 80.44 0.37 (+0.4%) IBM was a penny short, but had stronger than expected revenue. Does IBM support the thesis discussed in today's Stock Brief, that the enterprise information technology market began its maturation phase two years ago? We think this earnings season is the perfect time to look for more confirmation of this. What better place to start than IBM? Here are the items we listed
Mature Market Characteristic Indicator IBM Data Point
Pricing Pressure Declining Gross Margins Yes, in most segments, on a sequential basis.
Flattening growth Sequential revenue declines Yes, on sequential basis.
No new customers
(Most visible
at software companies) License/maintenance revenue mix shifting towards maintenance Not enough data provided by IBM to tell. But the continuing increased mix of services over sale of new products (hw and sw) points to the same conclusion.
Consolidation Acquisitions are reason for revenue growth Rational Software acquisition will add approximately $160 - $180 million
Here is a comparison of gross margins in this release on a sequential basis.Line Item Q1 2003 Q4 2002 (Sequential Comp) Q1 2002 (Year Prior Comp)
Global Services Gross Margin 24.9 % 26.3 % 26.0 %
Hardware Gross Margin 26.4 31.2 24.5
Software Gross Margin 84.6 87.0 81.1
Total Revenue $20,065 $23,684 $18,030
Admittedly, IBM has traditionally shown some seasonality in Q4 - we have made no adjustment for this. However, any discussion of seasonality supports a mature market thesis; true growth markets do not show seasonality.
IBM made a major shift towards services - helping customers build their IT systems - and away from pure product sales years ago. It was the single greatest contribution from ex-CEO Lou Gerstner. Services are now 50% of all revenues. With gross margins just over 25%, you could even make an argument that IBM is not really a technology company at all anymore; they just happen to own some of the suppliers to the services business. This view would not be an unreasonable viewpoint for an investor.
We think IBM results over the past three years are a major validator of the maturing technology market thesis. However, unlike most tech stocks, IBM no longer shows extremely high growth stock valuations. With a trailing PE of 25 and a price/sales of 1.7, it looks a lot like many major American public corporations. Other tech stock holders should take notice - most tech stocks are headed towards valuations closer to what IBM has now.
IBM was displaced as the bellwether of all technology in the 1980s, when that position was taken by WinTel (Microsoft and Intel). Today, however, it is still a major player in the enterprise IT market. There used to be a saying in corporations that "no one ever got fired by choosing IBM." It was considered the core reputable player in the market. That saying is still true - and IBM 's reputation is still strong. IBM, because it is closer to the ultimate end-customer, the enterprise, might even be a better bellwether of the state of the tech market today than it ever was. Holders of other tech stocks should pay heed, as there is a latent risk in many tech stocks, described in the Ahead of the Curve column of March 25, 2003, Tech Stocks As Mature Companies. - Robert V. Green, Briefing.com
finance.yahoo.com^SOXX+ALTR+AMAT+AMD+BRCM+CDWC+DPMI+ELX+IBM+INTC+KLAC+LLTC+LSCC+LSI+MOT+MSFT+MU+MXIM+NSM+NVLS+PHTN+TER+TXN+XLNX+^IXIC+^NDX+^SPX+^VIX+^VXN+^STI.N+^STI.O+SMH&d=t
Go market go. Looks like a big gap up tomorrow!
RtS |
