From Briefing.com: 4:20 pm : The major indices closed in split fashion as investors found little conviction in the wording of the policy statement to indicate a pause at the next FOMC meeting in late June.
As expected, the Federal Reserve raised its benchmark lending rate by 25 basis points to 5.00%. However, the stock market did not get the indication it wanted from the Fed that the ongoing cycle of monetary tightening is finished. Instead, the statement read, "some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook." Thus, if economic growth remains strong, further rate hikes are likely; if inflation picks up much at all, rate hikes will be almost certain; but if economic growth slows, and inflation remains contained, today's increase could possibly be the final rate hike... for now.
Also, with the market still digesting the impact of Dell's (DELL 24.89 -0.31) warning yesterday with regard to tech spending, a disappointing sales forecast from tech bellwether Cisco Systems (CSCO 20.75 -0.93) last night exacerbated concerns of slowing growth in such an influential sector of the economy. Even though Cisco beat estimates by a penny and posted its strongest April quarter since 2000, playing into our bullish outlook on the company as a suggested holding in our Active Portfolio, Wall Street was left wondering why positive CEO commentary didn't translate into a stronger growth forecast. As a result, Technology pacing the way lower among the six economic sectors posting losses, weighed heavily on an already cautious sentiment heading into the Fed's decision to raise rates for a 16th straight time which left the door open for even more rate hikes.
Energy, however, provided some upside leadership as oil prices extended yesterday's gains. Nonetheless, a 2.1% surge in the price of crude and back above $72 a barrel, coupled with another 25-year high in gold prices also providing no relief on the commodity front, sidelined Energy's leadership as concerns of further tightening curtailing additional upside in the market took precedence. DJ30 +2.88 DJUA +0.7% DOT -0.4% NASDAQ -17.51 NQ100 -1.0% R2K -0.6% SOX -2.5% SP400 -0.2% SP500 -2.29 XOI +1.0% NASDAQ Dec/Adv/Vol 1979/1085/2.02 bln NYSE Dec/Adv/Vol 1848/1392/1.61 bln
4:20 pm: The major indices closed in split fashion as investors found little conviction in the wording of the policy statement to indicate a pause at the next FOMC meeting in late June.
As expected, the Federal Reserve raised its benchmark lending rate by 25 basis points to 5.00%. However, the stock market did not get the indication it wanted from the Fed that the ongoing cycle of monetary tightening is finished. Instead, the statement read, "some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook." Thus, if economic growth remains strong, further rate hikes are likely; if inflation picks up much at all, rate hikes will be almost certain; but if economic growth slows, and inflation remains contained, today's increase could possibly be the final rate hike... for now.
Also, with the market still digesting the impact of Dell's (DELL 24.89 -0.31) warning yesterday with regard to tech spending, a disappointing sales forecast from tech bellwether Cisco Systems (CSCO 20.75 -0.93) last night exacerbated concerns of slowing growth in such an influential sector of the economy. Even though Cisco beat estimates by a penny and posted its strongest April quarter since 2000, playing into our bullish outlook on the company as a suggested holding in our Active Portfolio, Wall Street was left wondering why positive CEO commentary didn't translate into a stronger growth forecast. As a result, Technology pacing the way lower among the six economic sectors posting losses, weighed heavily on an already cautious sentiment heading into the Fed's decision to raise rates for a 16th straight time which left the door open for even more rate hikes.
Energy, however, provided some upside leadership as oil prices extended yesterday's gains. Nonetheless, a 2.1% surge in the price of crude and back above $72 a barrel, coupled with another 25-year high in gold prices also providing no relief on the commodity front, sidelined Energy's leadership as concerns of further tightening curtailing additional upside in the market took precedence. DJ30 +2.88 DJUA +0.7% DOT -0.4% NASDAQ -17.51 NQ100 -1.0% R2K -0.6% SOX -2.5% SP400 -0.2% SP500 -2.29 XOI +1.0% NASDAQ Dec/Adv/Vol 1979/1085/2.02 bln NYSE Dec/Adv/Vol 1848/1392/1.61 bln
Chairman and Chief Executive Officer, Hong Lu, notified the Board of Directors of his resignation. Mr. Lu will remain as Chairman and C.E.O. of the co until December 31, 2006, focusing on the co's strategic opportunities and assisting during the transition. Mr. Lu will remain as a strategic advisor to the co after his formal departure in December. Tom Toy, currently an independent director of the co, will assume the position of chairman of the board as of January 1, 2007. Ying Wu, C.E.O. of China, will assume the C.E.O. position as of January 1, 2007. The co also announced that it started a search for a Chief Operating Officer who will be responsible for overseeing the co's worldwide operations and supporting its infrastructure enhancement efforts.
4:08PM UTStarcom announces leadership transition (UTSI) 7.26 -.23 : Co announces that its Chairman and Chief Executive Officer, Hong Lu, notified the Board of Directors of his resignation. Mr. Lu will remain as Chairman and C.E.O. of the co until December 31, 2006, focusing on the co's strategic opportunities and assisting during the transition. Mr. Lu will remain as a strategic advisor to the co after his formal departure in December. Tom Toy, currently an independent director of the co, will assume the position of chairman of the board as of January 1, 2007. Ying Wu, C.E.O. of China, will assume the C.E.O. position as of January 1, 2007. The co also announced that it started a search for a Chief Operating Officer who will be responsible for overseeing the co's worldwide operations and supporting its infrastructure enhancement efforts.
2:13PM Semiconductors Hldrs Trust tests/hovering just above its 50/200 sma at 36.90/38.88-- session low 36.88 (SMH) 36.94 -0.72 : Initial support below here is at the bottom of its near three week trading range at 36.79, with its 200 day ema at 36.61. Intraday resistance is at 37.05/37.16.
1:38PM Motorola stops RAZR copycat in Korea (MOT) 22.38 -.48 : Co announces it has reached agreement in a lawsuit filed in January against Korean manufacturer KBT Mobile Co. for infringements of patents, trademarks and designs for the acclaimed Motorola RAZR mobile phone. With the settlement, KBT has agreed to discontinue all manufacturing and sales of RAZR look-alikes.
11:46 am The Walt Disney Co (DIS)
29.86 +0.28: Disney's second quarter result further underscores our positive view on the company given its consistency and near and long term profit growth potential. Per share profits exceeded expectations by six cents driven by strong revenue growth and cost controls. Disney remains a suggested holding in our Active Portfolio given its status as a premier global branded media company with a virtually unmatched content library.
Overall, it was a stellar quarter. Overall revenues grew 3% to $8.03 bln despite well-known challenges in the quarter within its Studio Entertainment division. We anticipate revenues will continue to accelerate over the next two quarter given the turnaround in the film division with the highly anticipated release of the next Pixar film "Cars" as well as the next installment of "Pirates of the Caribbean." The standout this quarter was the Media Networks, posting an impressive 18% revenue growth driven by prime-time ratings at ABC, while ESPN continues to propel the Cable Networks unit. Parks & Resorts generated 7.4% top line growth on domestic park performance.
--Kimberly DuBord, Briefing.com
11:12 am Foster Wheeler Ltd (FWLT)
51.48 +2.16: Foster Wheeler on Wednesday reported strong operating results for the fiscal first quarter, benefiting from an active engineering and construction market, and a strong Industrials sector in general. However, the company recorded a per-share loss due to the completion of its debt reduction program. While Bermuda-based Foster Wheeler said net income for the quarter increased to $14.6 mln from $1.2 mln last year, it also reported a loss of ($0.08) per share as it paid out $19.4 mln in earnings to warrant holders. Excluding non-recurring items, earnings were $0.26 per share, compared with the Reuters Estimates consensus of $0.38 per share.
Operating revenues rose 24% to $645.8 mln, up from $523.1 mln a year ago. The company's engineering and construction group reported operating income more than doubled to $55 mln, as revenue rose 28% to $423.2 mln. New orders during the quarter increased 232% year/year to $1.53 bln, and backlog, or orders waiting to be fulfilled, increased 23% to $4.55 bln.
Overall, the latest results reflect Foster Wheeler's strong business procurement and operational performance, and continues to support our positive view on the company. With the completion of its debt reduction program, the company is well positioned to capitalize on the opportunities offered by a healthy engineering and construction market, as well as increasing demand from the Energy sector, which continues to drive investment in new or expanded facilities.
--Richard Jahnke, Briefing.com
11:01 am Symantec Corp. (SYMC)
17.30 +0.20: Symantec Corp., maker of the popular Norton line of antivirus and security software, said Tuesday that fourth quarter earnings fell on increased marketing expenses, but still topped analysts' expectations. Specifically, the Cupertino, California-based company posted earnings of $118.8 million, or $0.11 per share, down from $119.7 million, or $0.16 per share, in the year ago period. On an adjusted basis, which excludes certain charges, fourth quarter earnings were $0.26 per share - a penny better than the Reuters Estimates consensus.
For the quarter, revenue rose 74% to $1.24 billion from $712.7 million last year, while non-GAAP revenue edged up 1% to $1.3 billion. Symantec's enterprise security business represented 22% of total revenue and grew 9% during the period. The consumer business, meanwhile, comprised 28% of the top line and was essentially flat for the period. At the same time, sales and marketing expenses during the quarter almost doubled to $440.7 million from $227.3 million last year.
Looking to the first quarter, Symantec projected adjusted earnings of $0.20 to $0.21 per share and revenue between $1.22 and $1.25 billion. That compares with analysts' forecast for earnings of $0.24 per share on revenue of $1.25 billion, according to Reuters Estimates. For the fiscal 2007, the company said it expects to earn between $1.05 and $1.15 per share, in line with the consensus estimate of $1.13 per share. Full year revenue is expected in the range of $5.3 to $5.5 billion, versus the $5.41 billion consensus.
Despite the weaker than expected forecast for the current quarter, Symantec shares traded higher in pre-market activity, given the company's solid fourth quarter performance and strong consumer demand for its Norton products. At the current price level, Symantec shares are trading at roughly 15.1x forward earnings.
--Richard Jahnke, Briefing.com
10:57 am Legg Mason (LM)
116.52: Legg Mason Inc. exceeded analyst expectations Wednesday, reporting fourth-quarter earnings of $1.35 per share, excluding non-recurring items, thanks to acquisitions and an increase in assets under management. That was $0.10 better than the Reuters Estimates consensus of $1.25. Revenues rose 140.7% year over year to $1.05 bln versus a $1.01 billion consensus.
The most recent period was the first to fully reflect results from Legg Mason's acquisitions of Citigroup Asset Management and Permal Group. Recently added to the Standard & Poor's 500 Index, Legg Mason held assets under management of an aggregated $867.6 bln at the end of March, compared with $374.5 bln a year ago and $850.8 bln at the end of the year. The almost 2% sequential increase was mostly attributed to positive market returns.
The company indicated it continues to adjust to its new size as the result of acquisitions and said it will probably take until the September quarter before results reflect the company's actual and future earnings capacity. For our part, we currently have a Market Weight rating on the financial sector, supported largely by the fact the asset managers, such as Legg Mason, have continued to perform well despite the uncertain interest rate environment.
--Christine Marie Nielsen, Briefing.com
10:36 am Weight Watchers International, Inc. (WTW)
46.82: Weight Watchers International, Inc. made its shareholders feel a little lighter on their feet Wednesday after it reported first quarter earnings of $0.56 per share, $0.01 better than a Reuters Estimates consensus of $0.55. The company said stronger U.S. business helped to offset a sales decline in the U.K. and unfavorable foreign exchange rates.
But a weaker than expected top line number is weighing heavily on shares. Revenues rose 3.6% year over year to $342 mln, compared to consensus estimates of $359.7 mln. Weight Watchers, which also operates a weight management program over the Internet, said sales rose nearly 4% to $342 million compared with $330 mln in the year-ago period.
The company, which has a market cap of about $4.7 bln, reaffirmed its full-year 2006 earnings guidance of between $2.18 and $2.28 per fully diluted share, excluding expenses related to stock-based compensation. Including these expenses, the company expects full-year 2006 earnings of between $2.10 and $2.20 per share.
--Christine Marie Nielsen, Briefing.com
09:19 am Cisco Systems (CSCO)
21.27: We'll let the market ponder what Cisco's conservative guidance means, for our part the broad-based growth in the third quarter underscores our positive view on the network systems giant. Given Cisco's dominant market share position, it will continue to benefit from the convergence to Internet Protocol infrastructure by both enterprise and service providers. Whether in the end, the cable companies or the telecos prevail, it matters little considering Cisco holds the keys to the network.
In the third quarter, Cisco reported $7.33 bln in revenues and $0.29 in earnings per share, excluding options expense, vs. consensus of $7.16 bln and $0.26, respectively. The topline grew 10.5% sequentially and 18% yearly. Excluding the $407 mln from its acquisition of Scientific Atlanta, growth was up 4% q/q and 12% y/y - the strongest April quarter since the year 2000, according to Deutsche Bank. Growth was broad-based across all products and geographical regions led by switching and advanced technology group, which includes security, Linksys, IP telephony, wireless, storage, and its optical business. The US and emerging markets stood out, while Japan and Europe were modestly weak.
Excluding, the SFA impact, gross margins held steady at 68%, while service margins increased sequentially by 200 basis points to 66.5%. Cisco generated $2.3 bln in cash from operations. It purchased $1.2 bln worth of stock in the quarter. Looking ahead, Cisco raised the upper end of its fourth quarter guidance to 10-12.5%, equating to $7.8 bln to $7.95 bln, from 10-12%, excluding the SFA acquisition. It anticipates product order growth of 10-15%.
Considering the fact that Chambers noted the positive momentum he was seeing, the market was left wondering why it didn't translate into a stronger growth forecast. It may just be a matter of under-promising and over-delivering, nevertheless shares fell in after-hours trading. Cisco remains a suggested holding in our Active Portfolio due to its growth profile and valuation. We think the company demonstrated broad-based strength in the quarter and view the guidance as conservative given the bookings momentum.
--Kimberly DuBord, Briefing.com
10:37 am Sizeler Property Inv.: Ferris Baker Watts upgrades Neutral to Buy. Target $17. Firm upgrades rating on stock following earnings. The firm says the strong results were driven by better-than-expected retail revenue and net operating margin and a significant reduction in G&A costs and a lower level of hurricane/restructuring costs.
10:36 am FMC Tech: RBC Capital Mkts reiterates Outperform. Target $58 to $68. Firm also reits the co as their Top Small pick. The firm says the backdrop at the recent Offshore Technology Conference distinguishes FTI as a standaout in the sector, and mgmt is actively moving forward with its capacity expansion plans.
10:35 am RAE Systems: JMP Securities downgrades Mkt Outperform to Mkt Perform. The firm says the decelerating growth in China, in conjunction with an actual Y/Y decline in non-China revenue, suggests to them a heightened competitive environment.
10:35 am Multi-Fineline: Robert W. Baird downgrades Outperform to Neutral. Target $51 to $66. First, firm is concerned that revenue growth, while remaining high, may begin to decelerate as Motorola (MOT) growth moderates and as M-Flex's second handset customer ramps more slowly than we previously expected. Mgmt guided y/y revenue growth to +49%-61%. Their expectation had been +62%. Second, they note the co used cash flow of $22.4 mln during the quarter, primarily due to an increase in DSOs to 60 days from 54 days a year ago. Third, they see the MFS transaction as creating uncertainty and near-term potential issues, including regulatory requirements and possible Motorola-related integration issues. Fourth, given these factors, they believe M-Flex should trade at an average electronics multiple.
10:34 am Tower Group: KeyBanc Capital Mkts / McDonald initiates Buy. Target $34. Firm is saying they project operating earnings will rise 61% in 2006 to $1.66 from $1.03 a year ago. They say earnings growth in 2007 is also predicted to be robust with earnings rising 48% to $2.45. The firm says the co has given detailed guidance for 2006 with a range of estimate of $1.62-$1.68. They base their 2007 outlook on the co's any's ability to leverage its relationship with newly formed CastlePoint. Their projections exclude future acquisitions, although they anticipate the co will be active in pursuing opportunities.
10:26 am Kerr-McGee: Friedman Billings reiterates Outperform. Target $145 to $155. Firm is noting that yesterday the co announced higher production growth targets through 2008, increased capex, raised the dividend 25%, and announced that it will split the stock. While the market is starting to recognize the upside potential embedded in the stock, we believe investors will continued to be showered with good news over the course of the year. Also, firm says investors get this package at a 2x TEV/DACF discount vs the high-growth players. Reits Outperform and Top Pick.
10:25 am Limited: CL King upgrades Accumulate to Strong Buy. Target $30 to $32. Firm is saying that they strongly recommend investors to buy shares prior to Q1 results on May 18th. Firm believes their will be an adjustment to analyst estiamtes following earnings because of the likely significant improved results at the apparel division. Firm is increasing their EPS estimates for both Q1 and Q2 based on what they believe will be an oerating earnings gain of about $10 mln for the apparel divisions and the continued steady increases in Victoria's Secret operating results. Firm also states that the Express division coversions to lower-priced, faster-turn items is working and is anticipated to continue throughout the year.
10:24 am Comtech: WR Hambrecht reiterates Buy. Target $12 to $15.5. Firm ups target following earings. The firm says they believe that the co is executing well and continue to recommend investors accumulate COGO shares as they expect 2006 rev growth across all of Comtech's existing businesses and a strong ramp of its service business in
10:21 am Asyst: Am Tech/JSA Research downgrades Buy to Hold. Firm downgrades following 1H CY06 results that were below expectations and much of the gross margin improvement has been largely achieved. The firm says while bookings were strong, up 81% Q/Q, thereby providing visibility for a strong revenue outlook in 2H CY06, they believe the strong stock appreciation has priced in much of the rebound in business.
10:19 am EchoStar: Janco Partners reiterates Mkt Perform. Target $29 to $33. The firm says is expecting EchoStar to report a 4.7% sequential and 14.1% yoy increase in total revs to $2.296 bln. They look for 236K customer additions. The firm says concomitant EBITDA should be up 15.1% sequentially to $554 mln. They are assuming that Dish Network ARPU is up 3.9% yoy to $59.23. They are looking for churn at 1.6% and fully loaded SAC (both expensed and capitalized) of $730. The firm thinks there could be some favorable upside to both their S.A.C and churn estimates as they are implicitly allowing for a relatively static U.S. multichannel market with increased competitiveness from cable triple play bundles.
10:19 am Schawk: Robert W. Baird downgrades Outperform to Neutral. Target $26. Firm downgrades following earnings. The firm says while the opportunity to obtain meaningful synergies from the combination of Schawk, Seven Worldwide, and Winnetts remains appealing, visibility into the rev and margin potential is limited. |
