From Briefing.com: Stocks opened lower Thursday as a weaker than expected Philadelphia Fed Index spurred investors to take profit on gains accumulated over the last two sessions (read the Economic Briefing page for analysis). The Dow and the S&P ticked into positive territory late in the session but closed on a down note. The Dow (DJI 10295.78 -4.52) eased 0.04%, the S&P (SPX 1122.31 -1.44) slipped 0.1% and the Nasdaq Composite (IXIC 1962.44 -14.32) fell 0.7%.
Tech shares initially resisted the selling pressure, opening modestly higher before steadily giving ground throughout Thursday's session. The Briefing.com Tech Index (BTI) slipped 0.5% with decliners leading advancers 1.8:1. Advancers rose 2.6% while decliners fell 2.4%. The Philadelphia Semiconductor Index (SOXX 480.66 -6.43) declined 1.3% after trading higher as much as 0.5%. Decliners outnumbered advancers 7.5:1.
Among Thursday's movers, M-Wave (MWAV 3.85 +1.26) surged 48.7% after boosting revenue outlook and Planar Systems (PLNR 12.69 -2.56) slumped 16.8% after guiding Q2 below expectations.
After the close: Adobe Systems (ADBE 36.27 +0.01) posted Q1 results ahead of consensus and guided above expectations; Solectron (SLR 6.10 +0.03) posted Q2 results in line with consensus, guided revenue above expectations and EPS in-line with consensus. Visit Story Stocks on Friday for the review of results and investment summary. Please refer to the Industry Briefs section for a list of companies reporting after hours.
Look for the PPI at 8:30am ET on Friday. Visit the Economic Calendar page for details.
Refer to the bottom of the Tech Stocks page for performance by sub-sector.--Ping Yu, Briefing.com
6:06PM SEMI Book-to-Bill : Semi equipment industry book-to-bill ratio fell to 1.14 in February versus Moors and Cabot's estimate of 1.19 (front end 1.22 and back end was 1.07). Bookings of 1.31 bln came in 6.4% above January's level of $1.18 bln and 71.6% above the $760 mln in orders posted in the same time a year ago.
5:13PM Lattice Semi announces delay of earnings release and restatement; updates Q1 guidance (LSCC) 8.90 -0.26: Co announced that it has not yet completed its deferred income accounting review, and because of this the release of year end earnings has been delayed. The coanticipates a restatement of the first three quarters for 2003 and believes the restatement will result in a reduction of 2003 year-to-date revenue of apprx $10 -11 mln, a reductiono f 2003 year-to-date cost of sales of apprx $1.5-2.0 mln and an increase of 2003 year-to-date net loss of apprx $8.5-9.5 mln. Separately, co provided an updated business outlook for Q3: Revenue is now expected to grow 10-13% sequentially (previously 6-10%), gross margins are expected to be apprx 57-58% of revenue, and total operating expenses are expected to be apprx $35 mln.
4:07PM Intersil expands manufacturing relationship with IBM (ISIL) 21.32 -0.65: Co announces that it will move all internal volume of its 0.6 micron BiCMOS wafer processing to IBM's Burlington, Vermont manufacturing facility in an extension of the foundry services agreement entered into between the 2 co's in Sept of last year. ISIL expects to report a non-cash charge in Q1 estimated to be approx $14 mln after tax, associated primarily with impaired excess equipment. Separately, ISIL concluded a routine audit exam with the IRS related to the 1999 and 2000 tax years; the result of this settlement will be a one-time gain of $15.9 mln, which will also be recognized in Q1. Co expects that the net impact of these one-time items will result in a slight increase to GAAP earnings for the qtr.
11:37AM Notable Mentions : Thomas Weisel reits its Outperform rating and $34 target on Jabil Circuits (JBL 28.38 +0.22) as it continues to be the firm's best EMS idea. It is the top performer on almost every metric, yet is the cheapest stock in the group, trading at 22x FY05 estimate vs a range of 25-35x for its peers. The firm reiterates its Outperform rating and 12-month target price of $34..... WR Hambrecht comments on retailer Brookstone (BKST 23.80 +0.80) after it reported Q4 results yesterday. Management issued guidance that is in line with expectations, but the firm believes it's likely conservative. The stock continues to be one of the firm's top stock picks for 2004. Also, its valuation is very attractive at a p/e of only 14x.
9:42AM AUGT: August Tech defended by AG Edwards 14.01 -0.24: AG Edwards out on August Technology (AUGT) saying the significant underperformance vs peers due to the emergence of a new possible competitor should be considered a buying opportunity. CAMTEK, an Israeli based manufacturer of printed circuit board inspection equipment, has been on the road with CIBC Capital Markets trying to raise $50 mln in a managed secondary offering. According to the firm, the co does not have a working product nor the in-house engineering talent to perfect a competitive tool. They believe CAMTEK is light-years behind August Tech in the wafer inspection business.
9:32AM SWKS tgt, estimates raised at Piper 11.36 -0.04: -- Update -- Piper Jaffray raising estimates and price tgt on Skyworks Solutions (SWKS). According to the firm, co is beginning to see meaningful traction at Motorola as the V300/V500/V600/V400 platform has ramped to volume production and is likely churning out at least 1.0 MM units per month at this juncture, ramping to 2.0 MM per month at the end of Q204. Also, according to channel checks, demand from Chinese domestic handset manufacturers is also improving. The firm believes Skyworks is also benefiting from strong sales into Nokia in support of CDMA platforms. They are expecting co to exceed Street consensus estimates of $175.1 MM in sales and EPS of $0.04 for the Mar04 period and are raising FY04 sales from $720.1 MM to $735.1 MM and EPS from $0.21 to $0.24. Tgt goes to $14 from $12.
9:25AM AMD initiated at SG Cowen; says stock is unattractive 15.35: SG Cowen initiates Advanced Micro (AMD). The firm believes the stock is unattractive based on (1) below-industry growth prospects caused by weak competitive positioning in emerging mkts and notebook processors; and (2) high relative valuation. The co's poor positioning in its processor business limits its growth potential. The firm forecasts a unit CAGR of 13% for AMD during 2003-05 vs 15% for the industry due to poor positioning in emerging mkts (only 10% of rev.).... Briefing.com Note: Morgan Stanley upgraded the stock today to Equal Weight from Underweight (see InPlay 7:32 ET).
11:26AM Jabil Circuit (JBL) 28.21 +0.05: Jabil Circuit reported Q2 results after the close on Wednesday. The provider of product research and design, prototype testing, product assembly, direct fulfillment, and product repair and warranty services printed Q2 EPS of $0.24 on revenue of $1.492B (+30.2% Y/Y) vs. Reuters Research consensus at $0.22 on $1.387B.
Demand was stronger than expected across all industries and geographies. The following table shows performance by industry sector vs. guidance:Sector % of Sales Q/Q % Growth Guidance
Automotive 8% 6% (15%)
Computing and Storage 14% 5% 2%
Consumer 21% (34%) (35%)
Instrumentation and Medical 11% 14% 0%
Networking 23% 29% 15-17%
Peripherals 6% 10% 4%
Telecom 12% 15% 5%
Gross margin declined 35 bps Y/Y to 8.8% on lower than expected manufacturing efficiency but operating margin, excluding amortization and extraordinary items, increased 49 bps Y/Y to 4.2% on overall scale efficiencies.
Guided for Q3 pro forma EPS of $0.25-0.27 on revenue of $1.575-1.625B (+29.2-33.3% Y/Y) vs. consensus at $0.24 on $1.464B; F04 EPS of $1.00-1.04 on $6.2-6.3B (+31.1-33.2% Y/Y) vs. consensus at $0.97 on $5.887B and prior guidance of $0.93-0.97 on $5.7-5.9B. GAAP EPS is projected at $0.21-0.23 and 0.83-0.87 for Q3 and F04 respectively.
Outlook is encouraging for JBL and the electronic contract manufacturing group. Growth continues to ramp across sectors and should give investors confidence that the recovery, particularly in tech, remains intact. JBL has diversified its business and operating footprint, providing a more stable business model. The company is likely to realize on-going margins improvement as a result of higher capacity utilization, an improving pricing environment and SG&A efficiencies, the benefits of a global economic expansion that continues to unfold.
As noted in the Q1 review (Story Stock, December 18, 2003), based on our inverted EVA / DCF model, JBL shares are priced for sustained low teens revenue growth assuming steady Y/Y improvement to low teens operating margin. The implied growth rate rises to the low 20% range assuming 7-8% operating margins, which would be more consistent with the company's historical operating performance. In either case, JBL shares are moderately priced on a relative value basis and are likely to continue to trend higher in the coming weeks. The following table shows price multiples and Y/Y growth rates for JBL compared against industry comps.Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth
TTM 2004E 2005E TTM 2004E 2005E
Jabil Circuit (JBL) 0.7 41.1 1.1 0.9 0.9 36.1% 32.1% 5.8%
Celestica (CLS) 0.6 (19.2) 0.5 0.5 0.5 (18.6%) 19.8% 12.5%
Flextronics (FLEX) 0.6 (23.3) 0.6 0.6 0.5 1.5% 7.0% 13.5%
Solectron (SLR) 0.4 (2.3) 0.5 0.5 0.4 17.5% 8.0% 13.3%
Electronic Instruments & Controls 0.8 (77.0) 1.0 5.0%
*P/SG Ratio: Trailing 12 month (Price / Sales) / Growth ratio as of March 12, 2004.
**P/OPG Ratio: Trailing 12 month (Price / Operating Income) / Growth ratio as of March 12, 2004.
We would continue to accumulate both JBL and Solectron (SLR 6.08 +0.01) but think upside will be modest for JBL. JBL shares have risen over 5.3% since December 18, 2003, outperforming the Nasdaq Composite (+0.01%), SLR (+0.3%) and the SOXX (-2.2%) over the same period. SLR reports Q2 results after the close on Thursday.--Ping Yu, Briefing.com |
