Updated: 08-Jul-98 MOT AFTER CLOSE
MOTOROLA (MOT) 55 +1 7/16: What a game! And we don't mean the All-star game or the World Cup. Imagine what would happen to a stock trading at 51 1/2 that was expected to report earnings of $0.21 a share, but reported earnings of just $0.01 a share, a whopping 20 cents below expectations, while also reporting a 6.7% drop in year-over-year revenue. It would get slammed. Companies, including MOT, have learned not to do that. Instead, on June 4, with the stock at 51 1/2, MOT announced that second quarter earnings would be "well below" expectations which were then at $0.21 a share profit. This at least was phrased differently from the first quarter warning, when their press release said earnings would be "significantly below" expectations, a phrase which they had also used in the third quarter of 1997. Apparently, the market has become used to MOT warnings, because the stock actually has risen 3 1/2 points in the month since the June 4 warning. Now, after the close Tuesday, the company proudly beat the new, much lower, consensus of a loss of $0.04 a share by 5 cents as MOT reported profits of $0.01 a share. That is one penny from a company that three years ago in this same quarter earned $0.79 a share. Yet, the way it works these days is the market simply reacts to whether the earnings number beats current expectations, and MOT did that just fine. The stock obviously did not adjust for lowered expectations since the warning, but we would not be the least bit surprised to see it move towards 60 in the near future on this earnings report. That's the way the game is played these days, and MOT seems to have managed this one just right. Still, while the stock may benefit near-term from positive Wall Street spin, it is hard to get excited about this stock long-term, which has underperformed while profits have evaporated and revenue has declined. At some point, MOT has to also produce some growth, not just beat constantly lowered expectations.
Source : briefing.com |
