Dow Jones Newswires -- April 9, 1998
ATI Tech's 2Q Earnings Beat Analysts' Estimates By SCOTT ADAMS Dow Jones Newswires TORONTO -- ATI Technologies Inc.'s (T.ATY) second-quarter earnings of 79 Canadian cents a diluted share, announced earlier Thursday, exceeded analysts' expectations. ATI's latest quarterly results were up from its first-quarter earnings of 73 Canadian cents a diluted share and well above the 24 Canadian cents a diluted share reported in the year-earlier second quarter. Pierre Boucher, an analyst with HSBC Securities, said he was officially expecting ATI to report net of 65 Canadian cents a diluted share in the second quarter. But he told Dow Jones he believed the company might even beat that official estimate by a few cents. Boucher wouldn't discuss his estimates for ATI's fiscal 1998, but said he has raised his price target on the stock Thursday, to C$90 from the previous target of C$62. Boucher was waiting for ATI to report the second-quarter results before revising his target. In early trading Thursday on the Toronto Stock Exchange, ATI's shares are up 2.95 at 70.75. Analyst Brian Antonen of Research Capital Corp. said he was expecting earnings of 73 Canadian cents a diluted share for ATI's second quarter. Antonen said he's revising his estimates and his price target upwards, but declined to say by how much. In an April 1 report, Antonen had a price target on the stock of C$78. ATI Technologies Inc. (T.ATY) reported second-quarter revenues of C$285.5 million, up from C$263.4 million in the first quarter and from C$151.5 million in the second quarter of fiscal 1997. The Thornhill, Ont.-based maker of graphics computer chips reported a gross margin of 37.9% in the latest quarter, up from 36.4% in the first quarter and 30.5% in the year-earlier second quarter. Research Capital Corp.'s Brian Antonen said ATI beat his expectations because he was looking for second-quarter revenues of C$275 million and a gross margin equal to that achieved in the first quarter. Analysts said ATI's second-quarter margins were about as strong as they ever expect them to be. Antonen said his financial model of the company for the rest of the fiscal year won't include a gross margin estimate as high as the "very strong" margins of the second quarter. Margins may come down because of price competition in the second half of the year. "They're beating up their competitors so badly that (competitors) may come in and try and fight back and cut prices and that could impact the margins," Antonen said. "(But) the second half of the year in terms of revenues should be similar if not stronger than the first half, even if there is price competition, because the market share gains are so large," he added. In his April 1 report, Antonen raised his earnings estimate for ATI's fiscal 1998 to C$2.85 a diluted share. He raised his fiscal 1999 estimate to C$3.70. Previously, he was expecting earnings of C$2.36 a diluted share and C$3.09 a diluted share, respectively. In that report, his price target was raised to C$78, from his previous target of C$65. Analyst said they expect ATI to continue to announce design wins in the business and commercial graphics chip markets in the second half of the fiscal year, as well as in the notebook market, a relatively new area for ATI. "There are interesting growth opportunities for ATI going forward," Boucher said. "Obviously it is a very competitive industry. Things move quickly. But it seems that for the time being, ATI is firmly in place and firmly in control. Things can change quite dramatically and quite quickly, but for the time being I don't see any short-term threat from any front." "These guys have got a ton of momentum and they should be able to keep it going through the second half of the year," Antonen said. Briefing Book for: T.ATY </inap-bin/bb?sym=T.ATY&page=0>
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