RtS, As usual, you have done a good job in outlining negatives for the market, and providing references for your reasoning. I agree with the concerns you have commented on, and between the 2 of us, I am sure we could come up with a lot more.
However, having said that, I think there are a lot of positives that exist as well. The employment rate is quite low, the general economy seems to be doing quite well overall, and the outlook for continued expansion of chip sales for 06, 07, and 08 is positive. While we have a lot of negatives to overcome, we also have a lot of positives IMO. This "tug of war" between the negatives and positives results in what I would call a "trading market". By my definition, this results in stock prices that continue to oscillate around a slowly moving mean. We do not have much, or any, euphoria presently, but by the same token, we do not have excessive pessimism. The result is a market that continues to stake out the "middle ground" with movement around the mean.
Speaking of market "long term bottom(s) like we had in Oct 98 and Oct 02, I don't think it is going to happen this year. To support that point of view, I first want to present a table that is a combination of previous earnings history along with estimates for the next 2 quarters. Then I want to compare that to the situation in the spring, summer, and fall of Oct 02
The table below, composed of 6 numeric columns shows several things. Columns 2 and 5 show the present consensus estimates for the upcoming Mar and Jun quarters for the stocks in the Group that report on Calendar quarters. Column 6 shows the expected percentage change in earnings for each stock in the Group from Mar to Jun. Note these numbers for the most part are quite positive. The 2 empty columns, 3 and 4, will be filled in as the upcoming reporting season progresses starting in about a month. At the bottom of the table, actuals are shown starting in Jun 04 and continuing on through the quarter ending in Dec 05.
The bottom line estimate for the upcoming Mar quarter is the same as the Dec 05 estimate. In Dec 05, actuals exceeded the estimate by 24 percent - can it be done again in Mar - we will just have to wait and see.
Note that from the Mar 05 quarter, estimates and actuals have been rising at a very good rate. Looking at the Jun 05 actual of 2.13, and comparing that to the Jun 06 estimate of 4.41, rising expectations for improved earnings through Jun 05 are in place.
- MAR JUN
- FISCAL QTR QTR QTR QTR QTR
- QTR EARN EARN PCT EARN PCT
SYMBOL END EST ACT DIFF EST CHG
ASML 1Q 0.19 0.26 37
ASYT 4Q 0.11 0.13 18
ATMI 1Q 0.21 0.24 14
BRKS 2Q 0.13 0.20 54
COHU 1Q -0.07 -0.05
CYMI 1Q 0.42 0.47 12
KLAC 3Q 0.56 0.65 16
KLIC 2Q 0.19 0.24 26
LRCX 3Q 0.62 0.70 13
MTSN 1Q 0.09 0.16 78
NVLS 1Q 0.21 0.28 33
PHTN 2Q 0.08 0.19 138
SMTL 2Q 0.14 0.17 21
TER 1Q 0.20 0.21 5
UTEK 1Q -0.03 0.05
VECO 1Q 0.06 0.14 133
WFR 1Q 0.35 0.37 6
MAR06 TOTAL 3.46 4.41 27
DEC05 TOTAL 3.46 4.28 24
SEP05 TOTAL 1.94 2.58 33
JUN05 TOTAL 1.70 2.13 25
MAR 05 TOTAL 1.25 1.46 17
DEC 04 TOTAL 2.70 2.91 8
SEP 04 TOTAL 4.13 4.25 3
JUN 04 TOTAL 3.49 3.91 12
To make a comparison to 2002, the table below shows quarterly earnings actuals for the Mar, Jun, and Sep quarters. Quarterly results for WFR were available for the Jun quarter only. Note that most of the earnings reported were losses. Adding up at the bottom line, Mar, Jun, and Sep were at -2.66, -1.56, and -1.69. For Mar, and Jun 06, the estimates are 3.46 and 4.41.
- 2002 2002 2002
- MAR JUN SEP
- QTR QTR QTR
- EARN EARN EARN
SYMBOL ACT ACT ACT
ASML -0.05 -0.05 -0.05
ASYT -0.33 -0.27 0.02
ATMI -0.09 -0.03 -0.10
BRKS -0.43 -0.45 -0.45
COHU -0.03 0.04 -0.03
CYMI 0.12 0.18 0.20
KLAC 0.17 0.23 0.23
KLIC -0.45 -0.28 -0.35
LRCX -0.12 -0.06 0.02
MTSN -0.70 -0.58 -0.38
NVLS -0.02 0.08 0.11
PHTN -0.08 0.02 -0.08
SMTL -0.14 -0.13 -0.10
TER -0.40 -0.28 -0.27
UTEK -0.11 -0.07 -0.46
VECO 0.00 0.02 0.00
WFR N/A 0.07 N/A
TOTAL -2.66 -1.56 -1.69
In other words, to get a "long term" bottom like Oct 02, we need a very bleak earnings outlook, not only from the estimate point of view, but also from the actual point of view. Now certainly estimates can change, and sometimes they can change quickly, but we are already in Mar 06 where it is expected that earnings at the bottom line will be 3.46. In Mar 02 it was -2.66. In other words, I think we have run out of time for any long term bottom this year. We presently have rising chip sales forecast for 06, 07, and 08, which will require, as a minimum, level spending for semi-equipment going forward, or as a more likely scenario, an upward spending environment.
Don |
