From Briefing.com: The week started on a sour note for the tech sector as it fell prone to a low volume sell-off that was precipitated by a lack of any stirring catalysts, the continued backup in interest rates, a disconcerting outlook from Lexmark International (LXK 59.40 -14.10), an unconvincing SEMI book-to-bill report, and a general sense that the market is ripe for a period of consolidation as we head into the typically slow dog days of summer.
The lackluster showing was consistent with Briefing.com's cautious view heading into the week, and by and large, there was nothing on Monday that would prompt us to change that cautious, short-term stance. Sure, stock prices are lower and the Nasdaq is down 5.3% from its July 14 high, but further work needs to be done to work off the excesses that were built up in the latest tech rally.
From a technical vantage point, there was further deterioration on Monday as the Nasdaq violated the June trading range top in the 1686/1684 area with a close at 1681.41. As noted above, though, the sell-off occurred on low volume. Accordingly, the recent retreat is still considered as being part of the normal ebb and flow of a healthy market advance; and, as we have previously indicated, it will take a violation of the bottom end of the June trading range (1597/1598) on decisive volume before we suggest a sea-change in sentiment has taken place.
After Monday's close, Corning (GLW 7.51 -0.13), Novellus Systems (NVLS 34.55 -1.15) and Texas Instruments (TXN 17.88 -0.81) each reported their results for the June quarter. There were few surprises in that each company either met or surpassed consensus expectations. The guidance from these companies was mixed for the most part, but strikingly, there was an optimistic tone on business prospects in the commentary by management in either the press release or on the conference call. That may not drive a sharp rebound in the tech sector over the near-term, but again, it provides fodder for bulls to view dips as a buying opportunity.
Amazon.com (AMZN 35.33 +0.35) will be a focal point on Tuesday as it is slated to report its Q2 results after the close. The Reuters Research consensus revenue and EPS estimates stand at $1.02 bln and $0.06, respectively.
For further detail on earnings news, be sure to visit Briefing.com's In Play, Earnings Calendar, and Guidance pages.--- Patrick J. O'Hare, Briefing.com
6:30PM Monday After Hours price changes vs 4pm ET levels: Following a disappointing session for the cash market, which closed down 1.0-1.6%, the tone in the after-hours session is a bit more encouraging. Presently, the S&P futures are trading 0.3 points above the fair value of 978, while the Nasdaq futures are one point above the fair value of 1242.
Technology is King and earnings reports from tech companies are certainly dominating the scene. Texas Instruments (TXN 18.46 +0.58), designer and manufacturer of semiconductor products, reported Q2 (Jun) earnings of $0.07 per share, $0.01 better than the Reuters Research consensus of $0.06. Revenues rose 11.0% year/year to $2.40 bln, above the consensus of $2.30 bln. Going forward, the company expects Q3 EPS of $0.06-0.10, excluding $0.13 per share contribution from the company's previously announced sale of 24.7 mln shares of Micron Technology's (MU 14.02 +0.01) common stock, but including $45 mln in restructuring charges. The guidance appears to be comparable to the Q3 consensus of $0.11, as analysts' estimates for Q2 included restructuring charges.
Altera (00C0 18.51 +0.06), designer, manufacturer, and marketer of programmable logic devices, reported in-line earnings of $0.09 per share for Q2 (Jun) on revenues of $205.3 mln, which were above the consensus of $201.8 mln and up 14.7% year/year. The reported revenue was also above the guidance provided on June 3rd, which called for a range of $200.8-202.8 mln versus the consensus of $200.3 mln at the time.
Another in-line report came from Novellus Systems (NVLS 34.95 +0.40), which develops, manufactures, sells and supports systems used in the fabrication of integrated circuits. Specifically, NVLS reported Q2 earnings of $0.05 per share on revenues of $239.1 mln, which were above the consensus of $237.3 mln and up 7.7% year/year. According to CEO, Richard Hill, the company is cautiously optimistic that bookings will increase in Q3 as the company is seeing a rebound in the PC industry and parts of the telecommunications industry. On the conference call, management guided Q3 (Sept) revenues below the consensus estimate of $233 mln to $220 mln.
Another designer, manufacturer, and marketer of integrated circuits to report earnings this afternoon was Silicon Labs (SLAB 33.62 +1.33), which checked in with Q2 (Jun) earnings of $0.24 per share, $0.03 better than the consensus. Revenues of $69.1 mln were above the consensus of $67.0 and up a whopping 67.7% year/year. Looking to Q3 (Sept), the company forecasted EPS of $0.21-0.24 on $71-74 mln in sales versus the consensus of EPS of $0.22 and revenues of $70.4 mln. Separately, the company announces that Dan Artusi will assume the role of the CEO at the end of FY03, replacing Nav Sooch who will continue in his role as Chairman of the Board of Directors.
Another big winner in the after-hours session is JDA Software Group (JDAS 14.80 +2.40), provider of software solutions, which reported Q2 (Jun) earnings of $0.09 per share, $0.06 above the consensus. JDAS's revenues of $53.0 mln were well above the consensus of $44.6 mln, but shaped up for an 8% decline year/year. Additionally, the company announced a sampling of the companies that signed JDA Portfolio(R) contracts in second quarter 2003, including the likes of Dollar Tree Stores ($2.3 bln), Booker Cash and Carry ($5 bln), Telstra Corp ($11.3 bln) and The Bombay Company ($494 mln).
For added detail on these, and other developments, be sure to visit Briefing.com's In Play, Earnings Calendar, and Guidance pages. -- Victoria Glikin, Briefing.com
5:06PM Novellus sees Q3 gross margins improving on a sequential basis (NVLS) 34.55 -1.15: -- Update -- On call, NVLS expects Q3 gross margins to improve to the "45% range" from Q2's 44.1% level.. NVLS up by $0.45 to $35.00 in after hours.
4:59PM Novellus explains lower than expected Q3 revenue forecast (NVLS) 34.55 -1.15: -- Update -- On call, NVLS credits the sequential drop in revenues to a shift in product mix to Japan... The latter compounds the SAFB101 clause, and will "extend" the lag effect for sales realizations by 60-90 days, and into Q4 (Dec) for some sales.
4:53PM Novellus guides revenues below consensus estimates (NVLS) 34.55 -1.15: -- Update -- On call, NVLS sees Q3 (Sept) bookings of $220 mln, shipments of $210 mln, and revenues of $220 mln -- the latter falls below the Reuters Research consensus estimate of $232.9 mln... As for profititability, NVLS expects to be breakeven in Q3, which may include charges... The consensus estimate stands at $0.05.
4:43PM On call, Novellus says Q3 profits will be down, and revenues will be 'down significantly' (NVLS) 34.55 -1.15: -- Update -- More details to follow...
4:11PM Novellus matches consensus (NVLS) 34.55 -1.15: Reports Q2 earnings of $0.05 per share, in line with the Reuters Research consensus. Revs rose 7.7% year/year to $239.1 mln vs the $237.3 mln consensus. "Japan bookings for the quarter were a bright spot. We are cautiously optimistic that bookings will increase in the third quarter as we are seeing a rebound in the PC industry and parts of the telecommunications industry."
4:39PM Texas Instruments beats by $0.01, guides (TXN) 17.88 -0.81: Reports Q2 (Jun) earnings of $0.07 per share, $0.01 better than the Reuters Research consensus of $0.06; revenues rose 11.0% year/year to $2.40 bln vs the $2.30 bln consensus. Company sees Q3 EPS of $0.06-0.10, excluding a $0.13 gain from the sale of MU stock, but including $45 mln in restructuring charges. Guidance of $0.06-0.10 appears comparable to Reuters Q3 consensus of $0.11, as analysts' estimates for Q2 included restructuring charges.
4:27PM GlobeSpan Virata beats by $0.01 (GSPN) 8.96 -0.40: Reports Q2 (Jun) earnings of $0.05 per share ex-items, $0.01 better than the Reuters Research consensus of $0.04; revenues rose 61.9% year/year to $74.4 mln vs the $73.6 mln consensus.
4:19PM Altera reports in-line results (ALTR) 18.45 -0.35: Reports Q2 (Jun) earnings of $0.09 per share, in line with the Reuters Research consensus of $0.09; revenues rose 14.7% year/year to $205.3 mln vs the $201.8 mln consensus.
4:13PM Sanmina-SCI reports in line with consensus (SANM) 7.39: Reports Q3 (Jun) earnings of $0.01 per share, in line with the Reuters Research consensus of $0.01; revenues rose 1.2% year/year to $2.65 bln vs the $2.64 bln consensus. The co is guiding Q4:FY03 cash earnings (excl. charges) of $0.01 to $0.03 per share and revs in the range of $2.6 billion to $2.75 billion.
4:13PM Silicon Labs beats by 3 cents, guides above consensus (SLAB) 32.20 +0.01: Reports Q2 (Jun) earnings of $0.24 per share, $0.03 better than the Reuters Research consensus of $0.21; revenues rose 67.7% year/year to $69.1 mln vs the $67.0 mln consensus. Co expects Q3 pro forma EPS of $0.21-$0.24 (GAAP $0.18-$0.21) on $71-$74 mln in sales, vs consensus of $0.22 and $70.4 mln. Co also announces that Dan Artusi will assume the role of CEO at the end of FY03 and Nav Sooch will continue in his role as Chairman of the board of directors.
4:08PM Corning beats by $0.03, ex items, guides Q3 above consensus (GLW) 7.55 -0.09: Reports Q2 (Jun) earnings of $0.02 per share, excluding ($0.04) per share in after-tax charges, $0.03 better than the Reuters Research consensus of ($0.01); revenues fell 9.1% year/year to $752.0 mln vs the $725.4 mln consensus. Co also sees Q3 EPS of $0.01-0.03, vs R.R. consensus of $0.01, and revenues of $740-765 mln vs estimate of $740 mln.
Close Dow -91.46 at 9096.69, S&P -14.52 at 978.80, Nasdaq -27.02 at 1681.48: A set of June quarter reports that failed to live up to investors' augmented expectations took another chunk out of the mid-March rally today... Checkpoint Software (CHKP 16.86 -2.94) merely matched the Reuters Research EPS estimate, while Merck (MRK 59.78 -1.99) and Lexmark (LXK 59.71 -13.79) fell shy of consensus forecasts in their Q2 (June) reports... As a result, traders expressed their frustration over lackluster financial results that did not support the stock's rapid rise by taking the broader market sharply lower...
Profit-taking activity was rampant across most industry groups, but particularly concentrated in the software, storage, computer hardware, utility, drug, homebuilding, auto, and communications equipment issues... The latter group was impacted by a CSFB downgrade of Motorola (MOT 8.72 -0.33) to Underperform from Neutral based on its belief that the accelerating phone product life cycle will continue to weigh on MOT's market share... Areas, however, that found a bid in today's otherwise bearish session were the gold and internet shares... The gold stocks soared by 2.8% in response to the price of gold's $3.70 increase to $351.00/oz...
The precious metal's strong move higher was underpinned by the downturn in US equities and the slump in the dollar versus the euro... As for the internet shares, they attracted buying interest following Smith Barney's upgrade of Yahoo! (YHOO 31.05 +1.15) to Outperform from In-line based on its belief that the company's 2H03 expectations are conservative... Finally, today's only economic report - June Leading Indicators - did little to detract from the focus on earnings given that it is compilation of previously released economic reports...
Nonetheless, Leading Indicators indicated expansion for the index for a third month in a row - at 0.1% (consensus of 0.1%) - thanks to strong increases in stock prices and the money supply... Tomorrow, the market will again take its cue from the inflow of June quarter reports, with Texas Instruments (TXN 17.88 -0.81) and Novellus (NVLS 34.55 -1.15) tonight, and Colgate-Palmolive (CL 56.31 +0.01) tomorrow...Nasdaq 100 -1.5%, Russell 2000 -1.6%, SOX -2.0%, S&P Midcap 400 -1.2%, NYSE Adv/Dec 828/2455, Nasdaq Adv/Dec 1055/2066
3:40PM Novellus Earnings Preview (NVLS) 34.57 -1.13: Novellus reports its Q2 after the close with Reuters Research consensus estimates of $0.05 per share and revenues of $237.3 mln. In Goldman's preview, the analyst best exemplifies the expectations on the street by stating "expect no upside to Novellus' Q2 orders" and goes on to suggest guidance of 10% for Q3. In addition, the potential retirement of its synthetic lease could lead to EPS reductions with no change to cash flow. CSFB believes the co will perform in line with its mid-quarter update with a 210 basis point sequential decline being modeled in to gross margins to reflect lower shipment levels and higher warranty expenses. Analysts are less concerned with Q2 and more focused on whether some semblance of a recovery will be self evident in management's tone on the call and guidance for Q3.
9:37AM Yahoo! (YHOO) 30.60 +0.70: Smith Barney Citigroup upgrades In-line to OUTPERFORM. Target $33 to $38. Believes expectations for YHOO's 2H03 results are conservative and sees Overture buy as an important strategic move to help propel growth.
9:36AM Cymer (CYMI) 33.14 -1.87: Lehman Brothers downgrades Overweight to EQUAL-WEIGHT. Target $37 to $30. Cites valuation as well as belief that investors may not have factored in potentially weak 2H03 orders and profits.
9:34AM Motorola (MOT) 8.78 -0.27: CSFB downgrades Neutral to UNDERPERFORM . Target $7 to $7. Believes that accelerating phone product life cycle will continue to weigh on MOT's mkt share and/or operating margins.
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