From Briefing:
LUCENT TECHNOLOGIES (LU) 79. An excellent earnings report for one of the most popular momentum stocks. Before the open Thursday, telecommunications equipment maker Lucent Technologies reported fiscal fourth quarter (Sep) earnings of $0.41 per share. That was 2 cent ahead of expectations and up 46% on a per share basis from the year earlier $0.28 per share. Revenues rose 16%, but were up 23% on a continuing operating basis, and revenues even rose 41% outside of the U.S. There is absolutely no question these are excellent numbers. The stock, which has dropped from a high of 108 1/2 in July, rose 4 3/16 on Wednesday in expectation of a good report, and may get another boost today. The only question for LU investors is the degree of risk for the stock. LU trades at 46 times trailing earnings. Given current growth rates, that is reasonable. But LU is not a small company and growth may have to slow at some point. LU has moved into the select class of Dell (DELL) and Microsoft (MSFT) as stocks that virtually everyone owns and that is perceived as near invincible. The telecommunications equipment business is more likely to hit trouble than MSFT's business, however. Networking companies were also once considered invincible, and even Cisco (CSCO) has been knocked back lately. Don't get us wrong, Briefing.com retains LU on our recommended core portfolio and we are happy to see the strong numbers this morning and the bounce in the stock. It is just that investors need to realize that while LU does carry a very high valuation and any slowdown in the business would hurt the stock. This quarter, that was not apparent, and the stock will remain a favorite of many individual traders and should continue to outperform the market near term. |
