The idea of earnings next week sends shudders down the spineless bears... but if MSFT beat whisper what can I do or if TXN comes up roaring it was expensive at 48 $ last Nov 98, it naturally very expensive at 154 $.. but the fact is that the news of next week earnings have nothing to do with my bullish stance they are just facts, yes like ostricth if people want to sink their heads in sand and avoid these earnings it is all on them the fact is that earnings that will take the market higher or topple it are now beginning let the game start.. who wuns for the cover will be the most interesting story of next weekend..
Will Microsoft Surprise... Again?
By Karyn McCormack
DOMINANT CHIPMAKER Intel (INTC) survived its disappointing second-quarter earnings report this week by issuing a rosy outlook for the remainder of the year. After the bell Monday, investors are likely to get even better news from fellow tech bellwether Microsoft (MSFT).
The software giant, which is the world's most valuable corporation in terms of market capitalization, usually reports an earnings surprise, but is typically more cautious when it talks about the future. Back in April, when Microsoft reported results for its third quarter ended March, the company turned in earnings that were three cents higher than the consensus estimate. Microsoft's earnings per share jumped 40% to 35 cents, while revenue rose 15% (or by $560 million) to $4.3 billion, from year-ago levels. On a sequential basis, earnings per share were a penny lower and revenue was $610 million lower, or by 12%.
At the same time, the company took a somber tone when it talked about the fourth quarter. Microsoft told analysts that it was still worried that its growth would slow if corporations delay software purchases because of the Year 2000 bug. In the same breath, though, the company forecast that revenue in the fourth quarter ended June would increase by roughly $500 million from the prior quarter, driven by the April launch of its Office 2000 software. The company said that this translates into revenue growth of roughly 20% and earnings growth of about 40% from a year ago. The current consensus earnings-per-share estimate for the fourth quarter is 36 cents, 44% higher than the same quarter in 1998. For fiscal year 1999, analysts expect Microsoft to earn $1.35 a share, 52% higher than last year.
The question is, if fourth-quarter revenue will be up from last quarter, not down, wouldn't that mean that earnings should be even higher than the consensus? Perhaps investors have a clue. The so-called whisper number that is circulating on message boards is 38 cents a share. On Friday, the stock hit a new high on hopes that Microsoft's earnings will meet or come in higher than the whisper forecast. There's also buzz that the company could announce a tracking stock of its Internet operations at a meeting with analysts on Thursday. If so, there could be even more sizzle in the stock.
Still, one Wall Street analyst is not sanguine. John Puricelli at A.G. Edwards said that he expects Microsoft to report fourth-quarter earnings per share of 35 cents and $4.9 billion in revenue. The analyst thinks that the earnings last quarter were inflated by gains from selling parts of its $10 billion investment portfolio. "I think they missed their number last quarter. They made it with some funky financial [moves]," Puricelli says. "I think it will try to do the same again this quarter."
According to Microsoft, investment income in the third quarter rose to $720 million from $190 million a year earlier. "The increase was due to the larger investment portfolio generated by cash from operations, coupled with realized gains of more than $350 million from the sale of certain bond and equity securities," the company wrote in its third-quarter earnings release. Granted, many companies have large investment portfolios, but gains on such securities sales may mask a slowdown at a company's core business.
Microsoft has been faced with questions of how it counts its beans before. At the beginning of July, the company admitted that the Securities and Exchange Commission is investigating the way Microsoft records revenue. The probe was prompted by a Wall Street Journal story last January in which a former Microsoft auditor alleged that the company had improperly set aside hundreds of millions of dollars to boost future earnings. The company told analysts that it will make a few changes to some of its accounting practices that were unrelated to the SEC's probe.
As for the stock, Puricelli has a Maintain rating on Microsoft because he considers it to be too expensive. At its current price, Microsoft is trading at 65 times the consensus earnings-per-share forecast of $1.53 for fiscal year 2000.
Many major tech companies, including America Online (AOL) and others will join Microsoft in the earnings game next week. Here are a few important events coming up:
Monday
Before the market opens, Novellus Systems (NVLS) is expected to report quarterly earnings. Analysts expect the chip-equipment maker to earn 31 cents a share, compared to 46 cents a share a year ago.
Besides Microsoft, IBM (IBM) is reporting quarterly earnings after the market closes. Analysts expect IBM to earn 88 cents a share, compared to 81 cents a share a year ago.
Lattice Semiconductor (LSCC) announces first-quarter results. Analysts expect earnings per share to be 52 cents, compared to 41 cents a year ago.
Disk-drive components maker Innovex (INVX) reports third-quarter results after the close. The consensus estimate is for 18 cents a share, compared to 16 cents a year ago.
Internet advertising company DoubleClick (DCLK) is expected to report a loss of 13 cents a share, a penny less than a year ago, after the close.
Online broker E*Trade (EGRP) is expected to report a loss of 12 cents a share, compared to a profit of four cents a share a year ago, after the close.
Qualcomm (QCOM) is expected to report earnings per share of 63 cents, vs. 17 cents a year ago, after the close.
Tuesday
LJR Redbook reports weekly retail sales.
Lucent Technologies (LU) reports quarterly earnings before the market opens. Analysts expect the telecom-equipment maker to earn 23 cents a share, compared to 16 cents a share a year ago.
Texas Instruments (TXN) reports second-quarter earnings before the open. The company is expected to earn 86 cents a share, compared to 35 cents a year ago.
Cypress Semiconductor (CY) reports second-quarter results before the open. The chipmaker is expected to earn 12 cents a share, compared to posting a seven-cent loss a year ago.
Philip Morris (MO) is expected to earn 85 cents a share, compared to 82 cents a share a year ago.
Home builder D.R. Horton (DHI) announces third-quarter results before the open. The earnings-per-share estimate is 65 cents, compared to 50 cents a year ago.
After the close, Computer Associates (CA) is expected to report earnings per share of 39 cents, compared to 34 cents a year ago.
Hutchinson (HTCH) reports third-quarter results after the close. Analysts are expecting the disk-drive maker to lose 20 cents a share, compared to a loss of 47 cents a share a year ago.
Duane Reade (DRD) announces second-quarter results before the open. The drugstore chain is expected to report earnings per share of 14 cents, compared to nine cents a year ago.
A handful of Internet companies are reporting quarterly results after the close. Excite At Home (ATHM) is expected to lose two cents a share, compared to a loss of a nickel a share a year ago. Infoseek (SEEK) is expected to lose 42 cents a share, compared to a loss of four cents a share a year ago. uBID (UBID) is projected to lose 49 cents a share, wider than a 14-cent loss a year ago.
Wednesday
The Commerce Department reports June housing starts at 8:30 a.m. ET.
Disney (DIS) is expected to report third-quarter earnings per share of 20 cents, the same as a year ago.
Data storage company EMC Corp. (EMC) posts second-quarter results before the open. Wall Street is expecting the company to earn 24 cents a share, six cents more than a year ago.
Black & Decker (BDK) is expected to earn 77 cents a share, compared to 57 cents a share a year ago.
E-tailing giant Amazon.com (AMZN) reports second-quarter results after the close. The company is expected to lose 51 cents a share, more than the 12-cent loss a year ago.
Beyond.com (BYND) will report its second quarter. The consensus estimate calls for a loss per share of 65 cents, much wider than the 25-cent loss a year ago.
Onsale (ONSL) will announce second quarter results after the close. The e-tailer is expected to have a loss of 60 cents a share, compared to a 21-cent loss a year ago.
Western Digital (WDC) will post its fourth quarter after the close. The consensus estimate calls for a loss of 94 cents a share, compared to its $1.59 loss a year ago.
Atmel (ATML) announces second-quarter results after the close. The chipmaker is expected to earn 13 cents a share, compared to a year ago when the company had no earnings.
Apple Computer (AAPL) hosts its annual Macworld Expo in New York through Friday.
Thursday
Federal Reserve Chairman Alan Greenspan testifies before the House Banking Committee. Microsoft hosts a meeting with Wall Street analysts.
Nokia (NOK) reports quarterly earnings before the open. Analysts expect the mobile phone company to earn 49 cents a share, compared to 34 cents a share a year ago.
Network Solutions (NSOL) reports earnings before the bell. Analysts expect the company to earn 16 cents a share, double its profit a year ago.
Consumer electronics retailer Tandy (TAN) reports second-quarter results before the open. The consensus earnings-per-share estimate is 29 cents, seven cents better than a year ago
America Online is reporting fourth-quarter earnings after the close. The leading ISP is expected to earn 11 cents a share, compared to six cents a share a year ago.
Gateway (GTW) reports second-quarter results after the close. The PC maker is expected to earn 55 cents a share, compared to 38 cents a year ago.
Sun Microsystems (SUNW) is expected to report fourth-quarter earnings per share of 46 cents, compared to 37 cents a year ago, after the close.
Quantum (QNTM) posts first-quarter earnings after the close. The disk-drive maker is expected to earn 10 cents a share, compared to two cents a year ago.
Software maker Synopsys (SNPS) is expected to report earnings per share of 64 cents, compared to 53 cents a year ago, after the close.
Xerox (XRX) is expected to report earnings per share of 62 cents, compared to 54 cents a year ago.
Friday
Ericsson (ERICY) is reporting quarterly earnings before the open. Analysts expect the mobile phone maker to earn 15 cents a share, compared to 21 cents a share a year ago.
Amazon.com (AMZN) is hosting an analyst meeting.
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