From Briefing.com: 4:30PM Applied Materials beats by $0.02, ex items, beats on revs (AMAT) 20.46 +0.20 : Reports Q1 (Jan) earnings of $0.19 per share, excluding non-recurring items, $0.02 better than the Reuters Estimates consensus of $0.17; revenues rose 4.3% year/year to $1.86 bln vs the $1.81 bln consensus.
4:20PM Hewlett-Packard beats by $0.04, beats on revs; guides for Q2 and Y06 (HPQ) 31.67 -0.82 : Reports Q1 (Jan) earnings of $0.48 per share, excluding non-recurring items, $0.04 better than the Reuters Estimates consensus of $0.44; revenues rose 5.6% year/year to $22.66 bln vs the $22.55 bln consensus. Co issues guidance for Q2, sees EPS of $0.47-0.49 vs. $0.45 consensus; sees Q2 revs of $22.4-22.6 bln vs. $22.6 bln consensus. Co narrows Y06 guidance to higher end of range, sees EPS of $1.90-1.95 vs. $1.83 consensus (previous guidance was $1.88-1.95); sees FY06 revs of $90-91 bln vs. $90.86 bln consensus (previous guidance was $89.5-91.0 bln).
4:19PM Synopsys beats by $0.04; issues in line Q2 & FY06 guidance (SNPS) 22.22 +0.07 : Reports Q1 (Jan) earnings of $0.18 per share, excluding non-recurring items, $0.04 better than the Reuters Estimates consensus of $0.14; revenues rose 7.8% year/year to $260.2 mln vs the $258.7 mln consensus. Co issues in-line guidance for Q2, sees EPS of $0.13-0.17 vs. $0.16 consensus; sees Q2 revs of $262-270 vs. $264.12 mln consensus. Co issues in-line guidance for FY06, sees EPS of $0.65-0.73 vs. $0.70 consensus; sees FY06 revs of $1.06-1.09 vs. $1.08 bln consensus.
4:07PM QLogic to acquire PathScale (QLGC) 38.68 -1.38 : Co announces that it has entered into a definitive agreement to acquire PathScale. Pursuant to the terms of the agreement, the co will pay approximately $109 mln in cash and assume the outstanding unvested stock options of PathScale. The acquisition is expected to close in early April following the satisfaction of customary closing conditions.
4:01PM LTX Corp announces that austriamicrosystems has purchased and installed 2 configurations of its Fusion X-Series family of test systems (LTXX) 5.71 +0.18 : Co announces that austriamicrosystems has purchased and installed two configurations of its Fusion X-Series family of test systems. Fusion EX was selected and multiple systems have been deployed for production testing of austriamicrosystems' next generation analog devices. Fusion DX was selected and deployed for production testing of standard linear products and for engineering applications. In addition, austriamicrosystems has utilized LTX's applications engineering resources to develop various test applications.
4:20 pm : Wednesday's spotlight rested upon new Federal Reserve Chairman Ben Bernanke. His testimony before the House Financial Services Committee was widely anticipated and closely watched. Upon the market's initial digestion, the indices reflected a modestly positive bias, but then gave back gains before managing to close moderately higher. The Fed Chief's comments essentially offered nothing surprising, and the market took comfort in that. His emphasized desire to maintain continuity with the Greenspan Fed further assuaged some of the market's anxiety that had built in expectation of his address.
Ultimately, however, he didn't do anything to dispel the market's sense of uncertainty as to when the monetary tightening cycle will end. While the Chairman did note that clear substantial progress has been made in removing monetary policy accommodation, his concession that monetary policy actions will be increasingly dependent on incoming data makes it clear that he will endorse further tightening if the data warrant it. The Chairman has not changed the perception that a rate hike is coming on March 28; his concern about strong economic growth suggests that incoming data may in fact lead to two more rate hikes, and Fed funds futures suggest another rate hike following that one is more likely than not. We remain concerned that if two more rate hikes are in fact coming, the stock market will have trouble posting significant gains through mid-year. The market does not seem as troubled by that as we are.
A separate factor that affected trade today was a 3.0% drop in the price of crude. Yesterday, oil closed below $60 per barrel for the first time this year. Today, crude finished at $57.83. The catalyst was a much better than expected inventory report from the Department of Energy. Last week, crude supply increased more than four times as much as the market had expected. Gasoline supply also rose much more than estimated, and distillate inventory unexpectedly rose. The energy price action incited some selling across the Energy sector (-0.3%), but, overall, it held up relatively well. Continued pullbacks in metals fueled more profit-taking across the Materials sector (-0.3%).
The energy price declines were supportive for the broader market. In particular, retailers built off of yesterday's momentum that strong retail sales data fostered, and transportation stocks outperformed.
Driven by strength in biotechs and some broad-based buying, Healthcare (+0.7%) led the market. A moderate advance in the Financial sector (+0.4%) further helped the indices rise. Brokers hit an historic high as expectations for solid M&A activity during 2006 continue to be fulfilled. To that end, Merrill Lynch (MER 75.26 +0.10) and BlackRock (BLK 152.01 +6.05) confirmed their plans to merge today. Merrill will combine its investment management business with BlackRock's for a 49.8% stake. Both boards have approved the deal to form one of the world's largest asset management firms, which should close during Q3. The corporate front was a relatively quiet one, and took a back seat to the economic front that Bernanke dominated. With the understanding that Fed policy will be increasingly dependent on the data, the focus is likely to remain there. In particular, the market awaits January PPI on Friday and January CPI on Wednesday.DJ30 +30.58 NASDAQ +14.26 SP500 +4.47 NASDAQ Dec/Adv/Vol 1145/1877/1.79 bln NYSE Dec/Adv/Vol 1187/2068/1.73 bln
12:02 pm La-Z-Boy (LZB)
15.49 -0.77: La-Z-Boy on Tuesday said third quarter profits fell more than 5% from a year ago on slower sales, but still beat analysts' expectations. For the most recent quarter, the furniture maker posted earnings of $10.5 million, or $0.20 per share, down from $11.1 million, or $0.21 per share, in the year ago period. Excluding a restructuring charge of $0.01 per share, La-Z-Boy earned $0.21 per share - six cents better than the Reuters Estimates consensus of $0.15.
Third quarter sales fell 0.9% year/year to $502.3 million as a slowdown at some of the company's smaller upholstery units offset increases in its branded products. In the Upholstery segment, sales declined 1.4% to $352 million on slightly lower volumes. The operating margin, however, increased to 7.2% from 6.2%, due to an improved cost structure. Casegoods sales were $109.9 million, down 1.8% year/year, while operating margin improved to 6.0% versus 1.9% a year earlier. Retail sales increased 29.6% to $57.4 million due primarily to the acquisition of 21 stores in the fourth quarter of last year. The company said the segment incurred a loss, though, as a volatile retail sales environment and continued transition costs associated with the acquired stores offset top-line growth.
For the current quarter, La-Z-Boy expects sales to be essentially flat with last year's $566 million, and earnings between $0.26 and $0.32 per share. That compares with analysts' estimates for revenue of $564.28 million and earnings of $0.31 per share, according to Reuters Estimates. While the guidance matched expectations, La-Z-Boy's stated concerns about the macro environment and consumer confidence leaves some cause for concern as the company continues to grapple with declining sales. Investors, therefore, should remain on the sidelines with respect to the stock until the company can demonstrate greater operational progress and paint a clearer picture going forward.
--Richard Jahnke, Briefing.com
11:57 am Outback Steakhouse (OSI)
40.01 -4.65: As if having what several polls claimed as one of this year's worst Super Bowl commercials wasn't enough, Outback Steakhouse missed Wall Street's expectations for the sixth consecutive quarter. Hurt by hurricane losses and hefty impairment charges, the Tampa, Florida-based restaurant chain said that fourth-quarter profits fell 25%, reporting net income of $28 mln or $0.37 per share. Excluding non-recurring items, adjusted Q4 (Dec) earnings of $0.46 per share checked in nine cents shy of the Reuters Estimates consensus.
Revenues rose 12% year/year to $918 mln, but that was shy of the $931 mln analysts were expecting. System-wide sales grew 11.0% year/year but sales at its Outback Steakhouse restaurants open at least 18 months fell 0.6% in the quarter. Looking ahead, the company believes fiscal 2006 EPS will range from $1.65 to $1.75. After adjusting for stock-based compensation expenses, as well as hurricane and impairment charges, FY06 earnings are seen growing a modest 2-7% to $1.89-1.98 in 2006, which is well below the Reuters Estimates consensus of $2.56 and expected earnings growth of 15% annually over the next 5 years.
On a positive note, the company said its board of directors authorized the repurchase of an additional 1.5 mln shares, doubling its existing plan and reflective of management's confidence in the long-term value of the company. Nonetheless, an Outback buyback isn't enough to get investors back into the stock over the near-term. In contrast, one restaurant chain which is clearly enjoying good operating momentum is McDonald's (MCD), a suggested holding in our Active Portfolio.
-- Brian Duhn, Briefing.com
11:47 am RealNetworks (RNWK)
7.99 -0.54: After the market close on Tuesday, RealNetworks reported fourth quarter earnings that beat Wall Street's estimate, helped by a large antitrust settlement with Microsoft (MSFT). However, the digital media company also projected profit and revenue for the current period below analysts' expectations, sending shares lower in early trading. At the current level, the stock is valued at 21.3x forward earnings, a hefty premium to its larger competitors Apple Computer (AAPL) and Microsoft. The lofty valuation continues to detract from a more favorable investment proposition, despite the strong quarterly results.
Seattle-based RealNetworks earned $295.6 million, or $1.61 per share, in the fourth quarter, compared with a loss of $972,000, or ($0.01) per share, a year earlier. That was $0.16 better than the Reuters Estimates consensus of $1.45. During the quarter, RealNetworks received $478 million related to the $761 million settlement with Microsoft. The also company expects to receive up to $283 million in additional payments over the next five quarters.
Amid strong music and games sales, revenue grew 15% year/year to $83.6 million. Music revenue was $26.1 million, while games revenue was $15.7 million. That represented an increase of 29% and 52% over the same quarter last year, respectively. Video, consumer software, and other revenue was $22.6 million, a decrease of 10%, and media properties revenue was $9 million, a 55% increase. Meanwhile, business products and services revenue fell 8% to $10.2 million.
Looking to the first quarter, the company forecast earnings of $0.11 to $0.13 per share, which are expected to include a gain of $40 million, or $0.22 per share, from the settlement with Microsoft, as well as other charges totaling $0.10 per share. The company also sees revenue in the range of $82 to $86 million. According to Reuters Estimates, analysts are expecting earnings of $0.10 per share on revenue of $89.97 million.
--Richard Jahnke, Briefing.com
09:53 am Merrill Lynch (MER)
75.52 +0.36: After days of speculation, Merrill Lynch confirmed it has agreed to swap its asset management unit for a 49.8% stake in BlackRock (BLK) - the fastest growing fund management company. The transaction is worth an estimated $4.65 bln - the second largest for Merrill. For its part, Merrill will record a $1.1 bln gain from the deal and estimates the loss of the asset management unit (10% of revenue) will reduce earnings slightly next year. BlackRock, the third largest bond management firm, will now oversee a trillion dollars under management. The market was warmly welcomed the speculation sparked by a Wall Street Journal report earlier this week, sending shares in both companies higher.
The deal gives Merrill a significant advantage over the likes of Morgan Stanley (MS), which just recently broke off its own negations with BlackRock. The new arrangement allows Merrill to outsource its fund management business, which was restricted by SEC regulations from recommending in-house funds. In one foul swoop Merrill resolves this conflict, diversifies its product base, and taps into BlackRock's high growth performance. The company has grown its assets at 4 times the rate Merrill has over the last year. The deal is expected to be closed in the third quarter of this year. PNC, which owns 70% of the fund management company, announced it will report a $1.6 bln gain on the merger.
In a conference call with analysts, Merrill's Stanley O'Neal said the deal values its fund unit at $9.5 bln. O'Neal also stated that while it wouldn't rule out further deals, he sees no further "transformational" acquisitions in Merrill's future. According to the CFO, the capital generated by the deal may be used to buyback shares. BlackRock's Fink stated, the company was looking for a "strong foothold" in the retail market, which it accomplished in spades moving BlackRock into the upper echelon of the fund management business. The growth opportunities and operating leverage as a result of the deal will likely continue to support shares.
--Kimberly DuBord, Briefing.com
09:22 am Abercrombie & Fitch (ANF)
68.78: Abercrombie & Fitch on Tuesday reported fourth quarter earnings soared 58% from a year ago on higher sales at its namesake and Hollister chains, but cautioned that growth may begin to slow. Specifically, the clothing retailer posted net income of $164.6 million, or $1.80 per share, compared with $104.3 million, or $1.15 per share, a year earlier. According to Reuters Estimates, analysts were expecting the company to earn $1.78 per share.
Revenue for the quarter rose 40% year/year to $961.4 million, while sales at stores open at least one year grew 28%. Abercrombie & Fitch net sales increased 19% to $473.6 million, led by an 18% same store sales gain for the company's flagship chain. Abercrombie sales grew 57% to $121.8 million and Hollister sales 71% to $358.9 million. Comparable store sales, meanwhile, were up 59% and 34%, respectively.
While Abercrombie believes it will continue to see positive comparable store sales increases in the current year, it warned that growth will not be at the level reported over the past 13 months. The company expects earnings for the first half of the current year to range from $1.23 to $1.28 per share, including approximately $0.08 of stock option expense. On a comparable non-GAAP basis, ex-items, that represents a 21% to 26% increase compared to last year, the company said.
Despite the softer outlook, the latest results underscore our positive outlook on the stock. Since outlining Abercrombie's investment thesis in mid-December, shares have gained nearly 10%. Although the company faces tougher comparisons, we believe Abercrombie is well positioned for future growth as its stylish clothing and iconic brands continue to resonate well with consumers.
--Richard Jahnke, Briefing.com
09:13 am Las Vegas Sands (LVS)
50.41: Surpassing analysts' estimates by six cents, Las Vegas Sands delivered Q4 (Dec) earnings of $0.33 per share, after backing out divestiture gains, pre-opening expenses, development costs, and litigation settlements. Stronger profits at its Sands Macao casino in Macau (China) and The Venetian in Las Vegas helped lift fourth-quarter earnings 59% year/year.
Revenues rose 44.0% year/year to a record $501 mln (consensus $447 mln), as table games drop, or buy-ins, increased 17.6% year/year to $320 mln. Total Las Vegas casino revenue was $105 mln in Q4, reflecting an increase of 45.3% from a year ago. Consolidated adjusted property EBITDAR in Q4 came in at $190.5 mln, a 53.5% year/year increase.
Following its earnings release last night, the company also said it plans to register 55 mln shares in a secondary offering, which will benefit LVS founder and CEO Sheldon G. Adelson, his family and certain other stockholders. Based on Tuesday's closing price, Adelson's plan to loosen his personal position in LVS by selling about 42.83 mln shares is expected to net him about $2 bln. Even though this secondary won't dilute the ownership positions of existing shareholders, as it merely reduces Adelson and his family's ownership to about 70.5% of outstanding LVS stock, such an offering will nonetheless pique concerns about the stock's near-term prospects. With shares of LVS up more than 70% since bottoming last October, news of the secondary offering has prompted some profit taking that has the stock trading lower in pre-market action.
--Brian Duhn, Briefing.com
08:46 am Caremark Rx (CMX)
49.01: The first of the US pharmacy benefit managers to report earnings, Caremark Rx, posted a 42% increase in profits on higher sales of mail-order and generic drugs. Caremark, which lost a contract with managed care provider Humana (HUM) in October, has refocused its business away from the higher-volume, but lower-profit retail segment. Mail pharmacy revenues totaled $3 bln and claims were 15 mln, representing increases of 30% and 20%, respectively, that offset retail client terminations.
Caremark, which is expected to generate earnings growth of 17% this year, has a history of tracking earnings in-line with consensus, which occurred once again this quarter. Revenues grew 5% year/year to $8.4 bln. The better mix translated into a 40 basis point improvement in gross margins to 6.8%. Caremark indicated Medicare Part D and the timing of generic launches will impact full year results. The company narrowed its FY06 guidance to $2.33-$2.38 per share, excluding stock option expenses, upping the low end by three cents. For Q1, it sees EPS of 50-51 cents per share. Both forecasts are right on target with expectations.
This was a solid start for the PBM group, setting the stage for Express Scripts (ESRX) and Medco Health Solutions (MHS) later in the month. The entire group performed well throughout 2005 in anticipation of Part D, but it has languished recently until the market gets more color on PDP enrollment and generic launches. CMX trades at 21x forward earnings.
--Kimberly DuBord, Briefing.com |
