From Briefing.com: 6:16PM Tuesday After Hours prices levels vs. 4 pm ET: The extended session - with the S&P futures, at 1091 (flat with fair value), and the Nasdaq 100 futures, at 1400 (1 point above fair value - is relatively unchanged with the regular session after a slew of technology reports. Some companies impressed the investment community (Hewlett-Packard), whereas others left traders wanting more (Applied Materials, Network Appliance). The net effect is a flat trading session.
The below table lists the night's developments, as well as the stocks' reactions:
After Hours Mover % Change Move Reason for Move
Applied Materials (AMAT) unch World's largest chip maker beats the Q2 (Apr) Reuters Research consensus EPS estimate by $0.03 on revenues that rose 29% to $2.02 bln; On its conference call, AMAT guided Q3 (July) revenue to +5% sequentially and EPS to $0.23-0.25 - both at the high end of analyst estimates; Orders, however, were pegged at +5-10%, slightly below the overall consensus of +5-15%; Briefing.com pointed out in our Earnings Preview on In-Play (A Platinum page) that AMAT would have to hit on all points to find buying interest
Autodesk (00C0) -5% Software design company surpasses the Q1 (Apr) top and bottom-line consensus estimates by a wide margin and also puts Q2 (July) revenues above the market's expectation; Q2 earnings, however, were pegged at $0.26-0.30 (consensus of $0.29); Autodesk indicates that it intends to make up the difference later in the year - guiding FY05 (Jan) higher, but investors still take profits from ADSK's 110% run in the past year
Biogen (BIIB)/Elan Corp (ELN) BIIB +1% / ELN +2% At the Digestive Disease Week meeting, biotech companies partnered on the drug Antegren announce they will file with the European Medicines Agency for Antegren's approval in Crohn's disease; In a Phase III trial, the drug maintained clinical response and remission rates throughout 6 months among patients with Crohn's disease who had previously achieved clinical response; In Feb, the FDA gave Antegren (for multiple sclerosis) the OK to file based on 1 year of data from a 2 year study
Hewlett-Packard (HPQ) +5% Second largest computer maker matches the Reuters Research Q2 (Apr) EPS estimate of $0.34, but goes on to guide higher for 2H04 sales; Says revenues should be $39.7-40.7 bln, versus the 'current analyst estimate of $39.7 bln;' Management sees 2H04 EPS in line with the Street's forecast of $0.74; HPQ has underperformed the S&P 500 year-to-date on concerns that the Hewlett-Compaq merger may be encountering integration issues
Network Appliance (NTAP) -6% Major storage name meets the Q4 (Apr) consensus EPS expectation of $0.12 on sales that jumped 40% to $337.0 mln (consensus of $319.6 mln); Market is disappointed the company did not show upside to the bottom-line, and issued lackluster FY05 EPS guidance on its conference call; For further detail on management's outlook, please visit In-Play; Rival EMC is down tonight too
Tomorrow, there is not a lot on the earnings, economic, or events calendars to set the tone for the early going. Fed governors Bies and Gramlich will be speaking throughout the day - the former on corporate governance and the latter on GSEs and neighborhood reinvestment. Treasury Secretary Snow will also be giving two talks in Washington - for more information on his topics, visit Briefing.com's Events Calendar.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
4:51PM Photronics beats by 3 cents, revs beat (PLAB) 16.70 +1.59: Reports Q2 (Apr) earnings of $0.17 per share, $0.03 better than the Reuters Research consensus of $0.14; revenues rose 13.7% year/year to $97.2 mln vs the $96.1 mln consensus.
4:36PM Autodesk FY05 guidance (ADSK) 33.68 +0.00: -- Update -- Co also issued FY05 (Jan) guidance of GAAP EPS of $1.29-$1.36 and pro forma EPS of $1.44-$1.51 (consensus $1.36), and guided to $1.1-$1.125 bln in sales (consensus $1.07 bln)... see 16:20 comment for earnings release.
4:31PM ADC Telecom acquires KRONE Group for approx $350 mln (ADCT) 2.21 -0.02: Co announced that it has completed the acquisition of the KRONE Group, a global supplier of copper- and fiber-based connectivity solutions, cabling products and services. The acquisition is valued at approx $350 mln in which ADCT paid net cash of approx $294 mln and assumed certain defined liabilities consisting principally of KRONE's pension obligation for its German workforce. ADCT expects to take a charge for various acquisition-related expenses the amount of which has not been determined at this time. Excluding the charge and amortization of acquisition-related intangibles, ADCT expects the acquisition to be accretive to EPS in '04.
4:29PM Network Appliance announces $200 buyback (NTAP) 20.70 -0.35: -- Update --
4:28PM Elan and Biogen follow up : Companies released second PR (please see 16:10 comment): Companies announced that in a Phase III maintenance study, Antegren maintained clinical response and remission rates throughout six months among patients with Crohn's disease who had previously achieved clinical response. Additionally, a majority of natalizumab-treated patients who were also on chronic cortico steroid therapy were able to withdraw from cortico steroids and maintain response in contrast to those patients on placebo. "The results of ENACT-2 suggest the potential of natalizumab as a maintenance therapy for patients with Crohn's disease," said William J. Sandborn, MD, professor of medicine at the Mayo Medical School. "This study demonstrated sustained clinical response and remission rates throughout six months on natalizumab. It also showed that natalizumab may help patients eliminate or reduce concomitant use of corticosteroids from their chronic treatment regimen."
4:20PM Autodesk beats by $0.11, guides Q2 revs higher (ADSK) 33.69 +0.01: Reports Q1 (Apr) earnings of $0.41 per share, ex items, $0.11 better than the Reuters Research consensus of $0.30; revenues rose 41.3% year/year to $297.9 mln vs the $270.0 mln consensus. Company sees Q2 EPS of $0.26-0.30 vs consensus of $0.29 on revenues of $260-270 mln, consensus $256.3 mln.
12:11PM LSI Logic platforms selected by AVID Electronics for portable consumer products (LSI) 7.28 +0.13:
3:40PM Computer Sciences (CSC) 42.33 +3.30: Computer Sciences reported Q4 results after the close on Monday. EPS came in at $1.01 on revenue of $4.004B (+29.9% Y/Y) vs. Reuters Research consensus at $0.99 on $3.795B.
The consulting and systems integration business continues to be impacted by pricing pressure. Excluding the DynCorp acquisition, revenue increased approximately 9% Y/Y and 2% in constant currency. U.S. market may be picking up but Europe remains soft.
Utilization for the North America consulting business increased Y/Y to 71% but billing rates decreased. Management does not intend to add significant new hires until confirmation that utilization rate can be sustained in the upper 60% range.
Federal pipeline opportunity large at $31B, of which $21B is scheduled to be awarded in F05.
The following table shows sales and Y/Y change by revenue segment. Segment Revenue
($ in MM) % Sales Y/Y Growth
U.S. Commercial 956.3 24% 1.2%
Europe 1077.5 27% 28.5%
Other International 327.6 8% 8.5%
Global Commercial 2361.4 59% 13.2%
Dept of Defense 988.8 25% 70.1%
Civil Agencies 650.2 16% 57.7%
U.S. Gov't 1639.0 41% 64.9%
Total 3955.4 100% 29.9%
Gross margin declined 161 bps Y/Y to 20.3%. Operating margin, excluding amortization and depreciation, declined 128 bps Y/Y to 14.4%.
Guided for Q1 EPS of $0.55-0.59 on $3.7-3.8B (+4-6% Y/Y) vs. consensus at $0.57 on $3.769B; F05 EPS of $3.10-3.20 on $16.00-16.25B (+8.3-10.0% Y/Y) vs. consensus at $3.12 on $15.548B.
The following table shows price multiples and Y/Y growth rates for CSC compared against peers within the computer services and software & programming groups. Company *P/SG **P/OPG P/S Y/Y Revenue Growth
TTM 2004E 2005E TTM 2004E 2005E
Computer Sciences (CSC) 0.4 8.2 0.5 0.5 0.4 30.2% 5.3% 4.9%
Accenture (ACN) 0.6 6.8 1.7 1.6 1.5 9.2% 0.8% 9.6%
Affiliated Comp Svcs (ACS) 0.8 5.5 1.5 1.5 1.3 11.8% 8.1% 10.3%
Anteon Int'l (ANT) 0.7 8.4 0.9 0.8 0.7 27.9% 18.7% 13.7%
Convergys (CVG) 0.7 6.6 0.9 0.9 0.8 1.9% 5.0% 5.9%
Elec Data Sys (EDS) 0.3 (68.6) 0.4 0.4 0.4 1.4% (5.5%) 1.1%
Hewlett-Packard (HPQ) 0.5 15.3 0.8 0.8 0.7 18.4% 7.4% 6.2%
IBM (IBM) 1.1 11.5 1.6 1.5 1.4 9.7% 8.0% 6.1%
SI Int'l (SINT) 0.6 12.4 1.0 0.7 0.6 12.7% 49.4% 15.9%
Unisys (UIS) 0.5 9.0 0.7 0.7 0.6 5.9% 5.3% 6.6%
Computer Services 1.1 17.6 1.5 n/a 4.9% n/a
Software & Programming 2.7 34.1 4.8 6.9%
Blended 1.8 24.6 5.7 5.7%
*Normalized P/SG Ratio: Trailing 12 month (Price / Sales) / Growth ratio as of May 14, 2004.
**Normalized P/OPG Ratio: Trailing 12 month (Price / Operating Income) / Growth ratio as of May 14, 2004.
CSC's business model, as with other information technology services providers, has high operating leverage. Cash flow is greatly influenced by capital intensity and balance sheet management. Factoring in today's bounce, CSC shares are, based on our inverted EVA/DCF model, priced for sustained lower teens revenue growth from F07 assuming 7-8% (mid teens excluding amortization and depreciation) operating margin.
We think management can deliver on the implied growth rate given the company's strong history of accretive acquisitions but upside is limited unless management accelerates organic growth and improves full year operating margin. We would take profit on today's strength and wait for a 10-15% pullback before opening a new position.--Ping Yu, Briefing.com
11:39AM Agilent Technologies (A) 25.07 -0.45: Agilent Technologies reported Q1 results after the close Tuesday. The manufacturer of test, measurement and analysis solutions and semiconductor products for the communications, life sciences and semiconductor industries published pro-forma EPS of $0.24 on revenue of $1.831B (+24.8Y/Y) vs. Reuters Research consensus at $0.24 on $1.697B.
Book-to-bill was flat with Q2 at 1.03. The following table shows order and revenue growth, and operating margins by product segment. Product Segment Orders Revenue Y/Y Growth Op Margin
$ in MM % of Ttl $ in MM % of Ttl Orders Revenue
Test and Measurement 745 39% 705 39% 22.5% 8.1% 1.6%
Automated Test orders 286 15% 266 15% 30.6% 73.9% 12.8%
Semiconductor Products 523 28% 527 29% 24.5% 40.2% 12.3%
Life Sciences & Chemical Analysis 338 18% 313 17% 20.7% 16.4% 11.7%
Total 1,892 100% 1,831 100% 23.9% 24.8% 8.1%
Gross margin increased 564 bps Y/Y to 44.8%. Operating margin improved Y/Y from a loss to 8.1%. The company experienced order momentum in almost all of the company's major markets and geographies but also higher than expected costs associated with scaling to higher volumes in the Test and Measurement business. Management expects to bring T&M to double digit operating profit by Q4; reaffirmed commitment to operating break-even at $1.4B in revenue.
Guided for Q3 EPS of $0.25-0.30 on revenue of $1.80-1.90B (+19.8-26.5% Y/Y) vs. consensus at $0.25 on $1.713MM, and Q4 of $0.30-0.35 on $1.85-1.95B (+10.4-16.4% Y/Y) vs. consensus at $0.31 on $1.824MM.
The following table shows price multiples and Y/Y growth rates for A compared against a broad group of industry comps across the company's business lines. Company *P/SG **P/OPG P/S Y/Y Revenue Growth
TTM 2004E 2005E TTM 2004E 2005E
Agilent (A) 1.3 (32.0) 1.8 1.8 1.6 10.7% 13.7% 11.8%
AEterna (AELA) 1.2 2.9 1.9 2.2 2.0 64.7% (5.4%) 9.7%
Aeroflex (ARXX) 1.1 88.5 2.1 1.9 1.6 33.6% 46.6% 20.0%
Danaher (DHR) 1.5 11.2 2.4 2.1 2.0 18.3% 20.8% 7.9%
Keithley Instr (KEI) 1.5 82.3 2.6 2.3 2.0 11.0% 24.9% 14.7%
Lecroy (LCRY) 0.9 17.0 1.8 1.7 1.5 12.1% 15.6% 13.4%
Micromuse (MSEE) 2.7 (79.4) 3.8 3.4 2.9 12.3% 12.8% 15.9%
National Instr (NATI) 2.6 37.9 5.1 4.4 3.7 14.2% 22.3% 18.8%
Tektronix (TEK) 1.7 17.4 2.8 2.7 2.6 10.3% 12.9% 6.4%
Bookham (BKHM) 0.5 (4.9) 1.5 1.3 1.1 157.9% 15.4% 19.4%
Finisar (FNSR) 1.7 (7.6) 1.9 1.7 1.2 (0.2%) 10.7% 39.3%
JDS Uniph (JDSU) 7.1 (36.7) 6.9 6.8 5.9 (15.6%) 7.1% 16.7%
LSI Logic (LSI) 1.1 (20.9) 1.5 1.4 1.3 (0.3%) 14.1% 12.4%
RF Micro (RFMD) 0.8 16.1 2.0 1.8 1.5 86.4% 16.0% 15.3%
Skyworks (SWKS) 1.2 (38.1) 1.9 1.7 1.5 20.7% 22.1% 12.7%
STMicroelec (STM) 1.5 56.6 2.4 2.0 1.8 16.2% 22.9% 13.8%
Texas Instr (TXN) 2.5 26.2 4.1 3.4 2.9 20.9% 32.1% 15.5%
Vitesse Semi (VTSS) 2.9 (20.0) 5.3 4.4 3.2 27.3% 48.7% 36.0%
Affymetrix (AFFX) 3.3 4.9 5.8 5.3 4.7 8.3% 14.4% 14.2%
Applied Biosys (ABI) 1.5 14.9 2.2 2.2 2.1 1.0% (2.1%) 4.8%
Invitrogen (IVGN) 2.3 3.8 4.0 3.2 2.9 26.8% 33.9% 12.1%
PerkinElmer (PKI) 1.0 14.3 1.4 1.4 1.3 3.5% 7.8% 5.8%
Thermo Elec (TMO) 1.5 20.8 2.2 2.0 1.9 4.0% 11.9% 6.2%
Varian (VARI) 1.1 15.9 1.6 1.5 1.4 9.2% 10.3% 8.2%
Waters (WAT) 3.1 17.4 5.3 4.8 4.4 9.0% 13.9% 8.6%
Scien & Tech Instr 1.0 15.7 1.4 n/a 1.1% n/a
Elec Instr & Ctrls 0.7 241.2 0.9 7.4%
Comp Sys & Per 0.9 17.2 1.3 11.2%
Comm Equipment 1.5 29.3 2.0 (2.1%)
Semiconductors 2.5 29.7 4.1 18.2%
Software & Program 2.7 34.1 4.8 6.9%
Blended 1.4 56.9 2.0 8.5%
*Normalized P/SG Ratio: Trailing 12 month (Price / Sales) / Growth ratio as of May 14, 2004.
**Normalized P/OPG Ratio: Trailing 12 month (Price / Operating Income) / Growth ratio as of May 14, 2004.
We commented in the Q1 review, Story Stocks, February 18, 2004, that growth expectations priced into Agilent shares, which had risen more than 25% from the Q4 review, Story Stocks, November 18, 2003, were above levels that the company may be able to sustain on an organic basis given the revenue mix. We suggested investors take profits, and wait for a 15-20% pull-back or for sales growth to accelerate into the 20% range before initiating a new position.
Agilent shares have pulled back over 31% since the Q1 review and growth has accelerated. Agilent shares are now, based on our inverted EVA/DCF model, priced for sustained upper teens to 20% revenue growth from F06 assuming 15% operating margin.
Shares are close to fair value on a DCF basis and trade at a modest discount to in-line with peers, suggesting limited upside from current levels unless management demonstrates greater progress in improving operating leverage.--Ping Yu, Briefing.com
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