From Briefing.com: General Commentary - It didn't take an expert to figure out that when you added the negative earnings news out of Intel to the fact that the Nasdaq had rallied nearly 15% in four sessions the sum of the equation would be a sizable correction. Tech-heavy index obliged by falling 50 points, or 3.9%.
Though the decline was relatively broad-based, at least throughout technology, the damage done was minimal. Index merely pulled back toward gap/fibonacci retracement support. Given that the floor held on its first test, traders apt to try and rally sector in today's session.
Relatively decent earnings news out of IBM - at least it wasn't a big miss - should give the sector a needed psychological boost as well. In fact, most of the early earnings reports have been better than feared. That doesn't mean the turnaround is finally here, just that companies are generally beating severely reduced expectations.
Though it's early we are also noting that the tone of the conference calls isn't quite as bearish as after Q2. There is still time for this viewpoint to change, but so far traders have to be pleasantly surprised by the earnings news - at least given the fears coming in.
For all the post-close/pre-open earnings news, please see Briefing.com's Earnings Calendar and/or In Play pages.
Robert Walberg
6:03PM After Hours Wednesday Price changes vs the 4 pm close: The seesaw trade noted after hours this week continues with today's bias firmly bullish. The earnings deluge has begun and there have been several reports that have given the market, and in particular tech, a boost.
Big Blue IBM (+4.9%) beat on the bottom line by $0.03 for Q3 with revenue in line with the consensus. Company said is generally comfortable with the range of analyst expectations for its Q4 performance (current Multex consensus is $1.34 EPS and revenues of $22.27 bln).
One of the top performers on a volume/percentage gain basis is QLogic (QLGC +10.4%) which beat the top line consensus by $0.02; revenue was also above the estimate; announced that it authorized a program to repurchase up to $100 mln of the company's outstanding common stock. Competitors BRCD (+8.3%) and VRTS (+4%) have followed QLGC higher.
All around favorable report from Symantec (SYMC +5.7%) as the company beat on the top (by $0.07) and bottom lines for Q2 and raised guidance for Q3. Now expects EPS at approximately $0.38 with revenue of $335-355 mln (excluding costs from acquired businesses) vs consensus of $0.35 and $336.5 mln. For FY03 expects earnings of $1.55 (consensus $1.42) and revenues at $1.33 bln (consensus $1.31 bln).
Advanced Micro (00C +13.7%) missed on the bottom line for Q3 by $0.07 with revenue slightly above consensus. However, company said it expects Q4 sales to improve significantly and for its loss to be significantly reduced.
The exception to the positive tech news has come from Apple Computer (AAPL -3.4%). The company reported earnings of $0.02 and revenue of $144 bln both of which were in line with the consensus. However, now expects revenue to be up slightly from the Sep quarter, and expects a slight profit for the quarter before non-recurring items" (consensus $0.09 per share and $1.57 bln).
The S&P futures, currently at 869.50, is trading 8.5 points above fair value, the Nasdaq 100 futures, currently at 930 is trading 17 points above fair value while the Nasdaq 100 AHI is up 16.34. For further details, be sure to visit Briefing.com's In Play, Earnings and Guidance pages. -- Jim Schroeder, Briefing.com
6:57PM IBM guidance (IBM) 64.90 -3.58: -- Update -- A CCBN transcript of the IBM call, together with Reuters and Dow Jones accounts of the call have led us to conclude that the company's Q4 revenue guidance excluded PwC, and that therefore this was a "clean" comparison in which both IBM's guidance and analysts' consensus estimate excluded PwC revenues of about $1 bln. The guidance in the prepared remarks had been quite ambiguous on this point, but IBM's answer to Goldman's Laura Conigliaro appears from the transcript to have been clear: Q4 revenues will be near the $22 bln consensus excluding PwC, and closer to $23 bln including PwC. We have removed two earlier comments that suggested IBM revenue guidance might have included PwC. IBM shares at 69.75 after hours, +7.5% from the 4 pm close.
5:57PM IBM Q4 guidance revisited (IBM) 64.90 -3.58: -- Update -- Some confusion among analysts with respect to Q4 guidance from IBM and whether the company was indicating it would need the PwC Consulting contribution to be generally comfortable with Street estimates... here is the text of IBM's prepared remarks: "Looking to Q4, we will now begin to benefit from the added revenue from our enhanced Business Consulting Services. Most Street models have not yet taken this into account. After adjusting for that revenue and the earnings impact, I am generally comfortable with the range of expectations for our performance in Q4"... While this ambiguous comment could have been interpreted as a warning, IBM's stock is trading in a manner that suggests the market believes IBM is excluding PwC to make a clean comparison... IBM +5.25 at 70.15
5:09PM IBM comments on PwC acquisition (IBM) 64.90 -3.58: -- Update -- On call, says it continues to expects PwC Consulting acquisition to have an impact of about $0.30 per share in Q4 ($0.05 from ongoing operations, including amortization of intangibles; $0.08-0.09 related to deal proceeds; and $0.15-0.16 worth of transition charges)... maintains that deal will be accretive in 2H03 and break-even for full-year... IBM +3.09 at 67.99
4:59PM Symantec raises guidance (SYMC) 35.56 -1.48: -- Update -- On conference call, company guides Q3 (Dec) to around $0.38 EPS and $335-355 mln revenues (excluding costs from acquired businesses) vs. Multex consensus estimates of $0.35 and $336.5 mln; puts operating expenses at $204 mln. Company expects FYO3 earnings to come in at $1.55 and revenues at $1.33 bln vs. consensus of $1.42 and $1.31 bln.
4:56PM QLogic beats by two cents (QLGC) 23.36 -3.04: -- Update -- -- Correction -- QLGC reported pro forma EPS of $0.28, two cents better than the Multex consensus (we originally reported EPS of $0.26, or in-line with consensus). QLGC trading up 7.1% to 25.02 after hours.
4:52PM IBM lowering pension plan rate of return assumptions (IBM) 64.90 -3.58: -- Update -- On call, says it is lowering its rate of return assumptions for its pension plan in 2003 to 8.0-8.5% (from 9.5% in 2002)... notes that this assumption will affect income statement by roughly $700 mln, but impact will be offset by $900 mln in productivity savings... says its working assumption is that it will contribute as much as $1.5 bln to the U.S. pension plan with plan for it to be fully funded by 2005... IBM +2.10 at 67.00
4:47PM QLGC rises 4.2% in after hours; BRCD up 4% in sympathy :
4:45PM QLogic beats by two cents (QLGC) 23.36 -3.04: Reports Q2 (Sep) earnings of $0.28 per share, two cents better than the Multex consensus of $0.26; revenues rose 7.7% year/year to $108.5 mln vs the $105.2 mln consensus.
4:45PM Itron beats by $0.03; reaffirms guidance (ITRI) 18.24 -0.37: Reports Q3 pro forma EPS of $0.29 a share, $0.03 better than the Multex consensus. Revs rose 20% to 73.1 mln (consensus $71.5 mln). ITRI reaffirms guidance for 2002 and 2003.
4:42PM QLogic announces repurchase program (QLGC) 23.36 -3.04: Announces it has authorized a program to repurchase up to $100 million of the company's outstanding common stock.
4:40PM PLX Tech beats by 3 cents (PLXT) 2.18 +0.12: Reports Q3 (Sep) net of breakeven, $0.03 better than the Multex consensus of ($0.03); revenues fell 20.6% year/year to $8.3 mln vs the $7.9 mln consensus. Expects Q4 revs of $8-$9 mln, vs consensus of $7.5 mln.
4:35PM Apple Computer matches estimates (AAPL) 14.56 -0.60: Reports Q4 (Sep) earnings of $0.02 per share, in line with the Multex consensus of $0.02; revenues fell 0.5% year/year to $1.44 bln vs the $1.43 bln consensus; "expects revenue to be up slightly from the September quarter, and expects a slight profit for the quarter before non-recurring items" -- Multex consensus estimates are $0.09 per share and $1.57 billion respectively.
4:30PM Celeritek reports in-line Q2, guides Q3 revs below consensus (CLTK) 7.31 -0.08: Reports Q2 (Sep) loss of $0.10 per share, in line with the Multex consensus of ($0.10); revenues rose 2.6% year/year to $15.5 mln vs the $15.0 mln consensus. Expects Q3 revs to be $13.0-$14.0 mln, vs consensus of $15.2 mln.
4:23PM CDW Computer beats by $0.04; Q4 sales guidance a little light (CDWC) 48.44 -1.66: Reports Q3 earnings of $0.63 per share, $0.04 better than the Multex consensus of $0.59. Sales rose 16.1% to $1.151 bln (consensus $1.138 bln). For Q4, co sees EPS of $0.50-$0.52 on sales of $1.065-$1.090 bln (consensus $0.51/$1.093 bln).
4:21PM SanDisk beats by 7 cents (SNDK) 15.65 -0.85: Reports Q3 (Sep) earnings of $0.16 per share, $0.07 better than the Multex consensus of $0.09; total revenues rose 114.1% year/year to $141.1 mln vs the $127.1 mln consensus.
4:21PM Advanced Micro revenues in line with preannouncement (AMD) 3.49 -0.50: Reports Q3 (Sep) loss of $0.74 per share, $0.07 worse than the Multex consensus of ($0.67); revenues fell 33.6% year/year to $508.2 mln vs the $500.5 mln consensus and Oct 2 guidance of "approximately" $500 mln. Company says that it expects Q4 sales to improve "significantly" and for its loss to be "significantly" reduced; Multex consensus estimates currently anticipate a Q4 sales increase of 10% with loss per share narrowing to $0.56.
4:19PM Elec For Imaging tops by a penny; reiterates for Q4 (EFII) 15.35 -0.01: Reports Q3 earnings of $0.14 per share, $0.01 better than the Multex consensus. Revs fell 27% to $92.7 mln (consensus $91.94 mln). Remains comfortable with Q4 outlook of $0.14 on revs of $93 mln.
4:08PM IBM beats by three cents (IBM) 64.90 -3.58: Reports Q3 (Sep) earnings of $0.99 per share, $0.03 better than the Multex consensus of $0.96; revenues were $19.8 billion vs the Multex consensus estimate of $19.8 billion.
4:06PM Celestica beats by a penny (CLS) 12.08 -1.62: Reports Q3 (Sep) earnings of $0.20 per share, $0.01 better than the Multex consensus of $0.19; sees Q4 revs in the range of $1.7 - $1.9 billion, and adjusted earnings per share between $0.13-$0.21 -- Multex consensus estimates are $0.22 per share and $2.0 billion respectively
4:05PM Symantec beats by $0.07 (SYMC) 35.56 -1.48: Reports Q2 (Sep) earnings of $0.38 per share, $0.07 better than the Multex consensus. Revs rose 34% to $325.23 mln (consensus $307.55 mln).
3:54PM Applied Micro (AMCC) 3.38 -0.29: Stock tests a 5 year low on co's severely subdued business outlook following the release of AMCC's penny better (at a loss of $0.04) Q2: communications revenues are expected to be flat to down and last-time buy orders appear to be fading. CSFB maintains their $3 price target on shares given a lack of near-term catalysts, a competitive market for legacy products, risk to the scope of the outsourcing trend, and structural profitability impediments in the industry. SG Cowen remains cautious due to continued deterioration in telecom and slashes their 2002/2003 estimates.
3:24PM Linear Tech (LLTC) 24.66 +0.28: Analysts advise investors to continue avoiding shares despite co's in line report last night. Merrill Lynch writes "while LLTC's focus on high returns has allowed the co to improve gross margin, we believe the strategy has also led to limited topline growth;" firm reiterates their valuation-driven Reduce rating on stock. Banc of America notes mgmt's guidance for flat to slightly higher revenues and earnings in the Dec qtr was slightly lower than their estimates that call for revenue of $147.8 mln and EPS of $0.18; maintains their Mkt Performe on LLTC's high relative valuation.
2:51PM Novellus (NVLS) 24.53 -1.60: Co's report didn't offer investors the improving picture of demand they had hoped for: NVLS beat consensus estimate by $0.02 at $0.11 but provided mixed Q4 guidance (expects Q4 EPS of $0.11 and revenues of $211 mln vs. consensus of $0.06 and $216.1 mln). Analysts remain lukewarm on shares: Lehman Brothers maintains their Equal weight rating given their belief that NVLS is not yet at an inflection point in bookings and stock's high valuation relative to historical trough levels ... CSFB assumes a bullish poisition and encourages investors to take a second look at shares: firm is relatively more positive here due to NVLS's strong market position in copper and better current valuation.
2:31PM Broadcom (BRCM) 11.34 -2.26: Stock leads the semis fall on the impact of INTC and MOT's disappointing report and lowered Q4 outlook. CIBC expresses concerns gross margin will remain under pressure through H103 at INTC and negatively affect BRCM's business ... Merrill Lynch notes MOT saw its broadband business revenues decline by 6% sequentially and points out MOT was a 13% customer for BRCM in the June qtr and accounted for about one-half of BRCM's set-top box and cable modem IC revenues. Firm believes it will be a challenge for BRCM to make Merrill's forecast of 1% sequential revenue growth and reiterates their Neutral rating.
1:57PM Genesis Microchip spikes on contract speculation (GNSS) 11.81 +1.06: Stock has spiked in the last 10 min on chatter that the co has won a contract from GTW; while we cannot confirm this speculation, we do note that yesterday GTW announced yesterday that it will make flat panel displays standard on its PCs.
1:48PM Motorola (MOT) 7.86 -2.24: Stock sets a 10-year low as analysts and investors question the co's turnaround following the release of mixed Q3 results: despite the fact MOT reconfirmed guidance several times in the past month, co fell short on revenues (reported $6.37 bln vs $6.76 bln consensus) and lowered Q4 earnings to $0.10 vs $0.13 consensus. USB Piper Jaffray downgrades MOT to OUTPERFORM from Strong Buy due to weaker results at PCS, concerns regarding the rollout of new handsets and a cautious outlook by mgmt in its earnings release. Wachovia Securities reiterates their Hold rating citing a weaker than expected order backlog and weak economic outlook.
1:16PM Semiconductors lead the way lower -- edge below 20-day exponential moving avg : -- Technical -- SOX posting an 8.6% intraday loss -- currently trading at 246 which is just below its 20-day exponential moving average at 247.5. Look for initial support at today's intraday low of 245 followed by an additional floor at the Monday low of 238. To the upside, look for initial resistance now at 247.5 followed by additional overhead in the area of 252. Sector components leading the move include: MOT, MU, INTC, AMD, BRCM, LSI
12:32PM RF Micro Device (RFMD) 6.86 -1.80: After close yesterday, company beat Q2 consensus and reaffirmed Q3 earnings, but stock is currently trading down 20%. Several mixed analyst comments have emerged. CIBC Wrld Mkts downgraded to SECTOR PERFORM from Sector Outperform, due to dilutive acquisition of Resonext, and belief shares will remain range bound until greater visibility on earnings growth. On positive side, Thomas Weisel reiterated Buy, noting diversification trends continue and expansion in WLAN through acquisition. Needham & Co reiterated Strong Buy rating and price target of $14.
12:27PM Motorola Q4 guidance clarification (MOT) 7.95 -2.15: -- Update -- Previously (see 09:03 ET comment), we had indicated there was some confusion on our part regarding MOT's Q4 EPS guidance during its presentation... Initially, Briefing.com indicated MOT maintained the Q4 earnings guidance provided on its Q2 conf. call... We deleted that reference when MOT provided an additional slide later in its presentation that showed lowered guidance for Q4 and FY03 (see 08:50 ET)... the initial entry should have read that MOT was maintaining the Q4 guidance it gave for net special items on its Q2 conf. call
10:17AM Qualcomm (QCOM) 34.43 -0.91: Needham & Co initiated with a Hold rating, saying strong near-term momentum and long-term secular growth story is outweighed by lofty valuation and problematic W-CDMA rollout. QCOM appears well positioned to benefit from a long-term secular trend towards CDMA as GSM networks upgrade to W-CDMA; however, firm thinks current valuation, especially considering possible near and longer term challenges that company could face, likely leaves limited room for upside in shares over medium-to-longer term.
10:14AM Technical Levels : So yesterday, we made a big deal about whether the Nasdaq could clear -- and hold -- its 50-day simple moving average. As it turns out, the average trader is now faced with a good news/bad news sort of scenario.
The good news is that yesterday, the index did indeed manage to clear its 50-day simple moving average. In fact, perhaps it would be more accurate to say the Nasdaq obliterated its its 50-day sma of 1,268 with a closing level of 1,282. Total volume traded was unusually strong on the session, and market internals were hitting extreme bullish readings. By the end of the day, over 1.7 billion shares had been traded on the Nasdaq and advancing volume outpaced declining volume by nearly 10 to 1.
Yet by now, you've all been made well aware of what the proverbial 'catch' might be. Intel (INTC) capped the spectacular rally by reporting earnings two cents below consensus and reducing its outlook on fourth quarter revenue and earnings. The company also disappointed with its spending plans -- management now expects 2002 capex in the ballpark of $4.7 billion, comfortably below the previous expectation in the range of $5.0-$5.2 billion.
Now many of you are asking yourself why we even care about Intel -- this is titled 'Technical Levels' right? We'll leave the gruesome earnings details alone at this point. Just suffice it to say those results came at an unfortunate point for the markets from a technical perspective. The subsequent market reaction will be important to watch. Yet it's also worth keeping in mind that this 'subsequent reaction' will likely be measured in days rather than hours.
All this brings us to the straight technical levels. Look for initial Nasdaq support at congestion in the range of 1,240 to 1,242. That area is followed by additional support at 1,220 and a more important floor at the index' 20-day exponential moving average of 1,212. To the upside -- and this is with today's massive gap lower in mind -- look for notable initial resistance at 1,250. That's followed by much more significant overhead at the exact point we were looking towards yesterday. Namely, its 50-day simple moving average which currently rests at 1,269. -- Mike Ashbaugh, Briefing.com
9:03AM Motorola Q4 clarification (MOT) 10.10: -- Clarification -- In an earlier portion of conference call, MOT presented a slide in which it appeared as if there was an indication that there was no change in the Q4 earnings estimate provided on its Q2 earnings conference call... formal presentation ended, though, with a slide that detailed company's lowered guidance for Q4 and 2003 versus prior estimates... at this point, we are not able to go back and review the slide b/c the function isn't available on webcast... we have deleted the earlier Q4 earnings reference
NVDA NVIDIA estimates cut at Morgan Stanley (9.44) Morgan Stanley cuts FY03-04 ests, saying aggressive pricing trends are likely to significantly hamper gross margins for the next 12 months; cuts FY03 to $0.60 from $0.80 and FY04 to $0.60 from $1.05 (well below consensus of $0.80 for both years), and cuts price target to $18 from $28
MOT Motorola talks of reduced visbility (10.10) -- Update -- On call, company's COO says in his opening remarks that company has experienced reduced visbility in its outlook for key markets, particularly in the last 30 days
MOT Motorola maintains Q4 guidance (10.10) -- Update -- On call, says there is no change to the Q4 earnings estimate it provided on its Q2 earnings conference call
MOT Motorola expects higher EPS in 2003 (10.10) -- Update -- On call, says it expects higher EPS in 2003 versus 2002; forecasts capital expenditures of approx. $1.0 bln, which is up from approx. $800 mln in 2002... expects positive operating and free cash flow in 2003
MOT Motorola cut to Outperform at Piper (10.10) -- Update -- USB Piper Jaffray downgrades to OUTPERFORM from Strong Buy due to slightly weaker results at PCS, concerns regarding the rollout of new handsets and a concerned outlook by mgmt in its earnings release.
7:52AM Pre-Market Movers : Most of the early action is to the downside. Major movers include INTC -15.5% (investors/analysts flee stock after earnings miss; COF -13% (Wachovia cuts to Sell after earnings), AMAT -8% and NVLS -5.6% fall in sympathy with INTC.
7:46AM Merrill Lynch reports pro forma of $0.61 vs $0.59 Multex consensus (MER) 35.99:
7:45AM Infineon cuts capex by a third (IFX) 7.27: Traders citing Bloomberg tell us that IFX will cut their 2003 capex to the bottom of their previous range of $1.0-$1.5 bln.
7:42AM Earnings Summary : The numbers are flooding in this morning. Early reports include PFE, which beat by $0.01 but guided a penny below consensus; KO matched consensus, though cautions full yr could miss by $0.01-$0.02; JPM made $0.16 vs $0.09 consensus; GPT beats by 1.4%; TAP.A comes in $0.02 ahead; WHR tops consensus by 2.5% or $0.04 per share... Remember to use Briefing.com's Earnings Calendar for estimates, actuals, and dates/times of earnings reports for the entire reporting season. Also see Briefing.com's Guidance page for upside and downside earnings/revenue guidance.
7:37AM Capital One downgraded at Wachovia (COF) 34.64: Wachovia downgrades to SELL from Hold due to a significant deterioration in COF's fundamentals; although co beat ests last night by a wide margin, firm says it was difficult to discern the core earnings power of the co; in addition, firm says mgmt sounded confused on their conference call and failed to provide a credible explanation for why loan growth is going to slow.
7:31AM S&P futures vs fair value: -9.0. Nasdaq futures vs fair value: -26.0. U.S. equity futures pointing lower after disappointing results/guidance from INTC stalls rally. Major European markets ease 0.5% to 1.0% led lower by chip stocks... U.S. 10-yr rebounds slightly (+4/32, yield 3.977%)... A host of Intel downgrades this morning... On the earnings front, KO and PFE make numbers but give guidance that is slightly below consensus.
7:27AM RF Micro Device downgraded by CIBC (RFMD) 8.66: CIBC downgrades to SECTOR PERFORM from Sector Outperform due to the dilutive acquisition of Resonext for $100 mln; believes shares will remain range-bound until greater visibility on earnings growth.
7:23AM Motorola: STM denies chip merger speculation (MOT) 10.10: STMicroelectronics (STM) "strongly denies" this morning's Financial Times story, which reported that senior French and Italian officials said STM is in talks to buy MOT's semi operations.
7:19AM JP Morgan Chase beats by $0.09 (JPM) 18.61: Reports Q3 earnings of $0.16 per share, $0.09 better than the Multex consensus. Revs fell 7.7% year/year to $7.30 bln vs the $7.14 bln consensus.
7:16AM Coca-Cola posts in line EPS; full-yr may fall $0.01-$0.02 shy (KO) 52.48: Posts Q3 net of $0.48 a share (before items), in line with the Multex consensus, vs yr-ago EPS of $0.43. Revs rose 13.3% to $5.322 bln (consensus $5.239 bln). KO cautions that full yr earnings may fall $0.01-$0.02 below consensus expectations.
7:11AM Intel cut to In-Line at Solly, target cut to $14 (INTC) 16.52:
7:02AM Pfizer beats by a penny; guidance $0.01 below consensus (PFE) 31.79: Posts Q3 net of $0.39 a share, $0.01 better than the Multex consensus. Revs rose 12% to $8.725 bln (Multex consensus $8.69 bln). For Q4, co sees EPS of $0.47 (consensus $0.48).
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