This was the statement issued on Monday from JP Morgan:
"Monday November 3 12:38 PM EST
RESEARCH ALERT - Newbridge Networks raised
NEW YORK, Nov 3 (Reuters) - J.P. Morgan said on Monday it raised its rating on shares of
Newbridge Networks Corp to buy from a long-term buy.
Analyst William Rabin said its 12-month price target was $70 per share.
Company's core business continued to perform well and the stock was trading at a reasonable
valuation.
Rabin raised his 1998 earnings estimate to $1.34 per share from $1.30 per share and his 1999
earnings estimate to $1.89 per share from $1.88 per share.
Rabin said after talking to Newbridge's management, he was more confident that the
company's selling, general and administrative expense would return to about 25 percent of
sales by the end of fiscal 1998.
Company would successfully control costs over next several quarters, paying special
attention to keeping the number of net new employees down in the short-term. "
8 hours later, NN announces that they will fall short of estimates. If you notice Rabin spoke with NN's management. Hmmm.? I don't get it. Something doesn't seem right. If I were Rabin, I would be rather pissed, unless he knows something else. Another contract perhaps? NN announced the BT contract 2 weeks after the last earnings release.
Also, NN made a similar pre-announcement for last quarter:
"KANATA, Ont., Aug. 5 /CNW-PRN/ - Newbridge Networks today announced preliminary
estimates of financial results for the first quarter of fiscal year 1998, ended August 3, 1997.
Revenue for the quarter is expected to be approximately $435 million, an increase of 52%
compared with revenue of $286 million for the first quarter of fiscal 1997 and a slight decrease
compared with revenue of $441 million for the forth quarter of fiscal 1997. Net earnings for the
first quarter of fiscal 1998 are expected to be within 5% of earnings for the fourth quarter of fiscal
1997. "
Earnings for the 1Q came in 5% BELOW 4Q earnings (C$0.37 1Q - C$0.39before charges 4Q) with lower revenue. So if revenues for 1Q and 2Q are the same and 2Q earnings are suppose to come in 10-15% below 1Q, I do not see where margins are improving! The only possibility for a suprise is if NN actually comes in 10-15% ABOVE 1Q earnings. The release Method posted might have assumed it would be below because of last quarter's statement.
Lots of promise, little results!
Niedz |
