Almost 600 Don! Briefing.com News Below - Some interesting stuff happening next week:
16:57 ET
Weekly Wrap : Market downshifted into neutral this week, as weaker than expected Retail Sales data and some negative preannouncements from the tech (NOK & LU in particular) took the drive out of the advance... Despite these obstacles market managed to hold its own, thanks in part to today's jump in the Michigan Consumer Sentiment reading and to generally bullish underpinnings... With regard to the latter, Briefing.com points to the steady expansion in market breadth (as evidenced by the steady rise in the number of net new 52-wk highs), as well as to the fact that support at long-term moving averages held.
With tech sector coming under pressure due to earnings warnings and industry downgrades, money rotated back into some of the safer areas such as the Health Care and Retail-Drug industries... Other winners included Oil & Gas Drillers, Forest Products, Footwear and Household Products... Predictably, losers led by Chip Equipment, Network/Telecom Equipment, Wireless Services, Semiconductors and Systems Software groups.
Looking ahead to next week, Briefing.com expects market to continue spinning its wheels as we move into heart of warnings season... Also a number of high-profile brokerage firms scheduled to release their quarterly results (GS, LEH and MWD)... Given soft market conditions, numbers/guidance could be short-term trouble... Note that Briefing.com maintained its Market Perform rating on the sector this week (see Sector Ratings page)... On the economic front, not much there to divert attention... Lack of inflationary pressures makes the CPI report less meaningful as a market mover, while the LEI are expected to slip back a bit in February (0.0 v. +0.3 in Jan)... Finally, Fed expected to leave rates and bias unchanged.
During warning season, leadership should continue to come from the more defensive sectors as well as from the gold, defense and oil-related industries... Wireless group could get a boost from the CTIA conference as well.
Close Dow +90.09 at 10607.23, S&P +13.10 at 1166.14, Nasdaq +14.16 at 1868.30: The major averages finished Friday higher behind several economic reports with bullish implications. Among the notable reports, the University of Michigan consumer sentiment index rose to 95.0 in early March from 90.7 in February. The March number represents a 15-month high as the index has now reached its best level since December 2000. The number for March more than offsets the decline from 93.0 in January and should serve to allay concerns over the weak retail sales data released earlier this week...
Bullish data was also released on Industrial Production. Specifically, Industrial Production for February rose 0.4%, its strongest increase since June 2000. February's number also marks the first back to back increases since August and September of 2000. The relative strength follows on a pair of 0.3% gains in manufacturing output in the first two months of 2002. While the manufacturing gain was larger in durable goods, nondurable goods also showed a pair of increases. This suggests the recent strength is likely more than a simple bounce but rather represents building strength helped by lean inventories...
Finally, the Producer Price Index or PPI rose 0.2% in February which was in line with consensus expectations. At the same time, the core rate -- which excludes food and energy prices -- was unchanged versus consensus expectations for a 0.1% rise. Although investors are less focused on inflation in the current climate, the benign inflation trend should mean less pressure on the Fed to lift interest rates...
Stepping back from the month-to-month PPI numbers, the annual data provides a relatively clear picture. PPI "growth" is now at a 50+ year low at -2.6% while the core rate has risen 0.5%. A 20% drop in energy prices underpins both the direction and severity. Also note that capital goods prices are flat from a year ago as computer prices have declined 28%...
Next week, investors will be looking towards potential catalysts from economic reports as well as corporate earnings releases. On the economic front, look for Housing Starts to be reported on Wednesday while the Consumer Price Index or CPI is due out next Thursday. On the corporate earnings calendar, several of the brokers are set to report their results -- notable names include Goldman Sachs (GS), Bear Stearns (BSC), Lehman Brothers (LEH) and Morgan Stanley (MWD). Outside of the brokers, notable reports include FedEx (FDX), Micron Technology (MU) and Solectron (SLR). For a complete list of what to expect on the earnings front, please visit Briefing.com's Earnings Calendar. DJTA +0.1%, DJUA +0.4%, Nasdaq 100 +1.2%, Russell 2000 +0.3%, SOX +2.6%, S&P Midcap 400 +0.8%, XOI +0.7%, NYSE Adv/Dec 186/1277, Nasdaq Adv/Dec 1924/1545
2:39PM Motorola (MOT) 13.80 -0.14: Stock opened higher following MOT's Semiconductor division Analyst day yesterday but has retreated to $13-14 range intraday. Shares down 6% since Mon. close around $14.75, trading in sympathy with NOK's revenue warning Tue. Analysts retain their cautious stance towards shares despite meeting. Deutsche Banc Alex. Brown remains concerned about the timeframe for a return to profitability for the division; believes mgmt guidance for operating profits in H2 2002 is aggressive; recommends investors stay on the sidelines. CSFB is cautious regarding a H2 2002 recovery and expects the semi division to exit the year with $1.4 bln in Q4 2002 sales and -3.6% operating margins.
15:06 ET The Week Ahead Tuesday: FOMC meets; FDA discusses VPHM's Picovir cold remedy; HWP special meeting on CPQ merger... Thursday: AMAT analyst meeting; MU, SLR, COMS, NKE report earnings.
14:15 ET NEWP Newport Corp and Flextronics unit enter manufacturing pact (22.73 -2.03) Announces signing of an agreement with a Flextronics unit whereby Flextronics will transfer certain elements of its optical component manufacturing technology to Newport, and Newport will develop next-generation assembly automation systems to commercialize this proven process technology. Additionally, Newport will become the exclusive provider for all fiber optic alignment and attachment systems for Flextronics Photonics on a global basis.
07:39 ET MU Micron Tech estimates cut at Solly (32.02)
Salomon Smith Barney lowers Q2 rev est to $647 mln from $742 mln, lowers Q3 EPS est to $0.08 from $0.11, and cuts FY02 EPS est to a loss of $0.09 from a loss of $0.06.
07:18 ET NVDA NVIDIA: nForce unit estimates reduced by 19% at Pru (50.63)
Prudential reduces nForce unit estimate after a meeting with co confirmed firm's findings last week in Taiwan that NVDA'a original strategy of targeting the high growth integrated graphics/core logic market has encountered adoption issues given the nForce family positioning and its initial high pricing. Firm reduces 2003 estimate for total nForce product family units to 3.0 mln from 3.7 mln which assumes a blended ASP of around $33 (down from est. of $46). Although this is a reduction in revenues by around $64 mln for fiscal '03, believes co's other products (Apple, mobile, workstation and Xbox) will offset shortfall.
07:11 ET JBL Jabil Circuit upped at Lehman (21.51)
Lehman upgrades to STRONG BUY from Buy based on the belief that the co has won enough new biz that even in flat sequential end mkts operating leverage will help drive EPS faster then revs. Raises FY02 est to $0.43 from $0.35 (slightly below consensus) and raises price target to $30 from $25.
15:35 ET
Zoran Corp (ZRAN) 39.15 +0.83: Sticking with our theme of profiling strong stocks within groups that are outperforming, Briefing.com turns its attention this afternoon to Zoran... ZRAN is in the sweet spot of the chip industry, as it develops integrated circuits, integrated circuit cores and embedded software used by original equipment manufacturers in digital audio and video products for commercial and consumer markets...With demand for digital cameras and DVD players expected to continue to grow over the next couple of years, company should have little trouble sustaining above market top/bottom-line growth... As a matter of fact, street looking for ZRAN to deliver sales and EPS growth in FY02 of 33% and 124%, respectively... Growth is expected to remain robust in FY03, with earnings jumping by 51% on a 25% rise in revenues... Not surprisingly, stock's value reflects market's generous assumptions, as ZRAN trading at 46x and 30x projected FY02/FY03 earnings... While that's a hefty premium to competitors like ESS Technology (ESST 20.70 -2.21), ZRAN has also easily outperformed ESST year-to-date (+19.9% to +0.2%)... One reason for the performance disparity is speculation that ZRAN is taking share from ESST... ZRAN's superior growth rates also help to explain the stock's premium... As long as ZRAN can continue to exceed expectations (company has beaten consensus estimates for 11 straight quarters), and deliver on its promise of strong double/triple digit growth, the stock is likely to outperform... Major resistance is at 42.52 (52-wk high)... Penetration of this ceiling will position stock for near- to intermediate-term assault on the 48-50 area... If ZRAN's valuations make you uncomfortable, consider looking at ESST... Despite anxiety over potential market share loss, ESST is expected to post strong earnings/sales growth this year... It also trades at steep discounts to its peers and the market as a whole. -- Robert Walberg, Briefing.com
12:16 ET
DSP Group (DSPG) 20.43 -0.33: This talk about a possible Parthus Technologies (PRTH 6.05 +0.41) and DSP Group combination prompted us to take a closer look at DSPG as it has a great balance sheet. DSP Group sells high-performance, licensable digital signal processing cores which provide solutions for low-power, cost-driven applications, such as cellular, broadband communication, VoIP, multimedia, advanced telecom systems, disk drive controllers and many other types of embedded control applications. Dow Jones is reporting that the two companies have confirmed that they are in preliminary discussions regarding a potential combination of Parthus' business and DSP Group's intellectual property licensing business. Regardless of whether a deal is consummated, DSPG has quite a balance sheet. Its $250 mln in cash/investments translates into $9.33 per share. Also, the company has zero debt. The logical next step would be to examine the cash burn rate, but this company is profitable. In essence, you're buying the ongoing operations at about $11 per share with the company slated to earn $0.80 per share this year. This is impressive given the weak semiconductor and telecom environments. Granted, sales were up only 5% in FY01, but Multex consensus calls for 14% top line growth this year as the outlook for semiconductors is likely to improve. -- Robert J. Reid, Briefing.com
10:05 ET
Jabil Circuit (JBL) 21.88 +0.37: So are you afraid the cyclical rally has passed you by? Well, Lehman thinks that Jabil Circuit, which is an electronic manufacturer of circuit board assemblies (commonly called EMS), is worthy of an upgrade ahead of its earnings release on March 19. The firm now rates the stock a Strong Buy, up from a Buy, based on the belief that the company has won enough new business that even in flat sequential end markets operating leverage will help drive EPS faster then revenue. The firm raised FY02 est to $0.43 from $0.35 (slightly below consensus) and raised the price target to $30 from $25. This call is going against the grain as many analysts believe it's too early to return to the EMS sector. Just yesterday, CSFB reduced estimates for a number of EMS companies...It is getting more difficult to find cyclicals that have not already run amid signs of an economic recovery. Also helping the rotation into cyclicals has been the continuation of tech companies warning. It's understandable that traders do not want to be holding tech names in this environment. The recent trend has been to bid up cyclicals as we are only at the beginning of the economic recovery. While many cyclical stocks have had nice runs, history shows that many sectors enjoy 6-9 months of strong returns. Briefing.com believes there is more upside in a number of sectors and we believe the stocks are much more likely to guide higher when they report Q1 results. There are still some good cyclical plays out there. In fact, we recently upgraded the auto sector. -- Robert J. Reid, Briefing.com
finance.yahoo.com^SOXX+^IXIC&d=t
578.84 has served as strong support for the SOX the last couple of days. Monday and Tuesday of next week could serve up more earnings warnings. I'm waiting to see how everything lines up then before going long. As the fall in ESST shows the last couple of days even good news does not serve to keep certain stocks from selling off even on good days.
Have a great weekend! You almost got an "Atta Boy" yourself today Don.
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