There wasn't a whole lot of love for the tech sector on Thursday as the earnings news from the likes of IBM (IBM 83.33 -3.41), Nokia (NOK 14.38 -3.57) and SAP AG (SAP 28.09 -2.61) failed to inspire investors. Instead, it motivated them to take some money off the table.
The scope of the decline, of course, prompted talk that a sea-change in sentiment was at hand. While we would agree that the path of least resistance over the near-term is to the downside, we aren't buying the argument at this juncture that bullish sentiment has run its course. Bear in mind that, headed into Thursday's session, the Nasdaq was up 30% year-to-date, and up 58% from its October lows. To say the least, the tech sector is vulnerable to periodic sell-offs, especially when there is reason to think it has gotten ahead of itself in discounting the timing and pace of a pickup in information technology spending.
That reason prevailed on Thursday as the lack of upside guidance from IBM, in particular, provided what was, arguably, an overdue reality check. The selling interest, as to be expected, was broad-based, steady, and largely one-sided throughout the session as momentum reversed to the downside on this particular occasion.
The pullback sent the Nasdaq through several support levels before it settled at 1698, or just 2 points above the pre-open 20-day exponential moving average. Briefing.com's technical take is that the inability to work back above intra-day resistances at 1703, and 1707/1709, leaves the door open to further downside forays with next support at the widely discussed June trading range top (1686/1684), which also marks the 50% retracement of the July rally. It is certainly worth pointing out, too, that from its recent high of 1776.10, a correction of 10% in the Nasdaq would place it at 1598. That level, incidentally, coincides with the bottom of the June trading range. We're not saying the Nasdaq is definitely headed there, but until it moves through that level on decisive volume, we'll be reluctant to suggest a sea-change in sentiment has taken place.
Microsoft (MSFT 26.69 -0.83) did its part to help stem the tide of Thursday's losses. Although the software giant came up a penny shy of the Reuters Research consensus estimate of $0.24 for fiscal Q4 (Jun), it provided upside revenue and EPS guidance for fiscal Q1 (Sep) and FY04. The company also noted in its press release that sales came in better than expected in fiscal Q4, suggesting that there was solid corporate and consumer demand for its products. That may not provide a material boost to the sector on Friday, but in due time, it will be something for the bulls to fall back on as an excuse to buy on weakness provided interest rates stay down.-- Patrick J. O'Hare, Briefing.com
6:06PM Thursday After Hours Price levels are as of 4 pm EST: The tech sector took it on the chin today, as a negative report from IBM got the market off to a negative start and things didn't get much better. On the brighter side of things, the machinery segment saw a very strong day as CAT nearly doubled earnings and IR also posted solid earings. The Dow closed lower by more that 43 points and stands at 9050, the S&P 500 lost 12 points and closed at 981. S&P 500 futures were at 980, in-line with fair value. NASDAQ 100 futures were also in line with fair value at 1257.
Microsoft (MSFT 27.00 +0.30) Reported Q4 (Jun) earnings of $0.23 per share, $0.01 worse than the Reuters Research consensus of $0.24, stock compensation expense is not included in this quarter's results. Revenues rose 11.2% yr/yr to $8.07 bln vs the $7.87 bln consensus. Company sees Q1 EPS of approx $0.23, which includes $0.06 in stock compensation expense, indications are Reuters consensus of $0.25 does not include this expense, sees revenues of $7.9-$8.1 bln vs consensus of $7.89 bln. MSFT sees Y04 revs of $34.2- $34.9 bln, above the consensus of $33.95 bln, EPS of $0.85-0.87, including after-tax equity compensation expense of approximately $0.24, which looks like an upside guidance vs consensus of $1.07, which does not appear to include this expense.
Yellow Corp (YELL 25.20 +0.30) Reported Q2 (Jun) earnings of $0.54 per share ex-items, $0.01 better than the Reuters Research consensus of $0.53. Revenues rose 10.4% yr/yr to $713.5 mln vs the $760.0 mln consensus. YELL expects Q3 EPS of $0.70-$0.80 vs R.R. consensus of $0.65.
PeopleSoft (00C0 17.87 -0.03) Released Q2 (Jun) earnings of $0.14 per share, excluding $0.03 special items, in line with the Reuters Research consensus estimates. Revenues rose 3.2% yr/yr to $497.4 mln and where ahead of the $482.9 mln consensus.
Lexar Media (LEXR 12.30 +0.25) announced Q2 (Jun) earnings of $0.09 per share, $0.03 better than the Reuters Research consensus of $0.06. Revenues rose an impressive 140.0% yr/yr to $81.5 mln, far above the $60 mln consensus. LEXR sees Q3 EPS of approx $0.09 on revs of $90 mln or more, vs R.R. consensus of $0.08 & $65.5 mln respectively. The Company also raised Y03 guidance to $0.34 vs consensus of $0.30, on revs of $335-350 mln, est $262 mln.
Robt Half (RHI 18.54 +0.00 ) Reported Q2 (Jun) earnings of $0.00 per share, $0.01 better than the Reuters Research consensus of ($0.01). Revenues rose 2.1% yr/yr to $483.0 mln and were ahead of the $476.8 mln consensus.
JB Hunt Trans (JBHT 45.00 -0.10) announced 2-for-1 stock split.
Tomorrow morning has a few earnings reports of note, with BlockBuster (BBI) and Key Corp (KEY) among them. Friday is the last day of the first week of earnings season as some of the major companies have now reported. There is still more to come, as next week holds several more reports.
For more detail on these, and other after hours developments, be sure to visit Briefing.com's In Play, Earnings Calendar and Guidance pages..--Brian Bolan, Briefing.com
6:18PM Microsoft (00C0) 26.69 -0.83: -- Update -- On the call Company says that it will not change its dividend or buyback program at its upcoming analyst day (26.91 + 0.22)
5:28PM PMC-Sierra provides Q3 revenue guidance (PMCS) 10.80 -1.21: -- Update -- On call, management indicates that Q3 (Sept) revenues could grow sequentially compared to revenues of $60.4 mln in Q2 (Jun), but prefers to forecast "flattish" revenus in Q3 for now. The current consensus is for revenues of $62.4 mln. Management is not able to determine revenue past Q3.
4:53PM Sierra Wireless beats by $0.02, guides Q3 above consensus (SWIR) 7.90 -0.69: Reports Q2 (Jun) earnings of $0.04 per share ex-items, $0.02 better than the Reuters Research consensus of $0.02; revenues rose 22.5% year/year to $20.7 mln vs the $19.8 mln consensus. Co sees Q3 revs and EPS (ex-items) of $24-$25 mln and $0.05-$0.06, better than consensus of $20.9 mln and $0.04, respectively.
4:48PM Fairchild Semi reports in line, ex items; guides for Q3 revs (FCS) 13.52 -1.04: Reports Q2 (Jun) earnings of $0.03 per share, excluding $0.57 in pre-tax charges for restructuring, impairments, and debt refinancing, in line with the Reuters Research consensus of $0.03; revenues fell 3.4% year/year to $348.1 mln vs the $353.3 mln consensus. Co. sees Q3 revenues to be in the range of $327.2-334.2 mln, R.R. estimate is $364.9 mln.
4:46PM Integrated Device beats by a penny (IDTI) 11.26 -1.09: -- Update -- Reports Q1 (Jun) loss of $0.05 per share, $0.01 better than the Reuters Research consensus of ($0.06); revenues rose 2.8% year/year to $83.0 mln vs the $83.1 mln consensus
4:41PM Atmel reports inline. (ATML) 2.66 -0.34: Reports Q2 (Jun) loss of $0.08 per share, in line with the Reuters Research consensus of ($0.08); revenues rose 1.2% year/year to $318.5 mln vs the $302.8 mln consensus. The Company believes that in the third quarter of 2003, revenues should be sequentially flat to up slightly.
4:36PM Microchip beats by $0.01, provides in line guidance (MCHP) 24.75 -1.64: Reports Q1 earnings of $0.16 per share, $0.01 better than the Reuters Research consensus. Revs rose 2.4% year/year to $161.3 mln vs the $159.7 mln consensus. For Q2, co sees EPS of $0.16-0.18 on revs of $163-171 mln (consensus $0.16 and $166.57 mln).
4:33PM Xilinx reports Q1 results (XLNX) 25.69 -0.84: Reports Q1 (Jun) earnings of $0.13 per share, $0.02 worse than the Reuters Research consensus of $0.15 (net income includes a pre-tax $6.4 mln charge relating to litigation... EPS would be $0.15 if this were excluded); revenues rose 8.1% year/year to $313.3 mln vs the $315.4 mln consensus. Co expects Q2 revenues to be flat to slightly up sequentially.
4:31PM MCHP prelim $0.16, penny ahead :
4:30PM Monolithic reports in line (MOSY) 10.18 -0.96: Company reports Q2 (Jun) earnings of $0.02 per share, in line with the Reuters Research consensus of $0.02; revenues fell 31.2% year/year to $4.5 mln vs the $5 mln consensus.
4:30PM Lexar Media beats, guides above consensus. (LEXR) 12.05 +0.53: Reports Q2 (Jun) earnings of $0.09 per share, $0.03 better than the Reuters Research consensus of $0.06; revenues rose 140.0% year/year to $81.5 mln vs the $60 mln consensus. Co sees Q3 EPS of approx $0.09 on revs of $90 mln or more, vs R.R. consensus of $0.08 & $65.5 mln respectively. Co also raises Y03 guidance to $0.34 vs consensus of $0.30, on revs of $335-350 mln, est $262 mln.
4:29PM Microsoft guides for Y04 (MSFT) 26.69 -0.83: Sees Y04 revs of $34.2-34.9 bln, consensus $33.95 bln, EPS of $0.85-0.87, including after-tax equity compensation expense of approximately $0.24, which looks like an upside guidance vs consensus of $1.07, which does not appear to include this expense.
4:25PM Microsoft misses by $0.01, guides revs up (MSFT) 26.69 -0.83: Reports Q4 (Jun) earnings of $0.23 per share, ex items, $0.01 worse than the Reuters Research consensus of $0.24, stock compensation expense is not included in this quarter's results; revenues rose 11.2% year/year to $8.07 bln vs the $7.87 bln consensus. Company sees Q1 EPS of approx $0.23, which includes $0.06 in stock compensation expense, indications are Reuters consensus of $0.25 does not include this expense, sees revenues of $7.9-8.1 bln vs consensus of $7.89 bln.
4:12PM PMC-Sierra beats by a penny, ex items (PMCS) 12.11 -1.26: Reports Q2 (Jun) loss of $0.02 per share, excluding multiple items, $0.01 better than the Reuters Research consensus of ($0.03); revenues rose 10.8% year/year to $60.4 mln vs the $59.4 mln consensus.
Close Dow -43.77 at 9050.82, S&P -12.36 at 981.73, Nasdaq -49.95 at 1698.02: In what has been a reoccurring trend this reporting season, encouraging earnings reports and reassuring economic data did little to stir buying interest today as traders ventured that such improved results were already priced into the market... The indices' double-digit rally since March has been rooted in expectations of stronger economic and corporate growth, and evidence that has validated such forecasts has been used as a reason to lock profits, rather than to bid stocks higher...
As a result, the stock market took a dive for a third day in a row as traders sold into high-flying groups' strength, causing market internals to turn negative and technical conditions to deteriorate... Technology, in particular, felt the brunt of the selling pressure with heavy losses in semiconductor, networking, wireless, storage, and computer hardware... Reports out of Nokia (NOK 14.40 -3.5), QLogic (QLGC 46.65 -4.70), Internet Security (ISSX 11.74 -3.04), SAP AG (SAP 27.99 -2.71), and IBM (IBM 83.22 -3.52) provided the catalysts for profit-taking in the aforementioned groups...
Other areas of the broader market similarly fell as brokerage, drug, retail, and transportation provided ample leadership to the downside... The Dow, conversely, held in for the most part and traded just below the unchanged mark for most of the day... Strong earnings reports from Caterpillar (CAT 63.57 +5.28), United Technologies (UTX 73.61 +1.42), and Coca-Cola (KO 44.72 +1.81) led traders to rotate money into areas of the market that had not participated (to the same degree) in the recent advance... Elsewhere, today's economic data met a chilly reception as improved conditions in the manufacturing sector, and housing and labor markets, did little to divert traders' attention from valuation concerns...
Specifically, jobless claims for the week of July 12 ended a three-week streak of increases with a 29K drop to 412K (consensus of 425K)... June building permits increased to 1.817 mln (consensus of 1.790 mln), and June housing starts rose to 1.803 mln (consensus of 1.750 mln) for their highest level since January... Finally, the July Philadelphia Fed Index indicated manufacturing in that region expanded for a third month in a row, to 8.3 (consensus of 7.0) from 4.0...
Tomorrow, the market will weed through another slew of earnings reports, most notably from Microsoft (MSFT 26.69 -0.83), PeopleSoft (PSFT 17.90 +0.01), and Xilinx (XLNX 25.69 -0.84) tonight...DJTA -2.1%, Nasdaq 100 -2.8%, Russell 2000 -2.9%, SOX -4.2%, S&P Midcap 400 -1.7%, NYSE Adv/Dec 763/2506, Nasdaq Adv/Dec 644/2505
3:15PM Microsoft Earnings Preview (MSFT) 26.70 -0.82: -- Update -- Microsoft reports Q4 results after the close tonight, with Reuters Research ests standing at $0.24 in EPS on $7.87 bln in sales. Goldman Sachs believes that results are likely to be slightly above their ests of $0.23 and $7.85 bln given that PC demand has likely been a bit stronger than expectations set by mgmt and that currency translation may also provide some upside; they also expect deferred revs to be up about $130 mln sequentially. Firm also says that the co's cash position is likely to have reached close to $50 bln by the end of June, and thinks that mgmt may discuss their plans for their cash hoard on the call (firm believes the co has a strong preference to repurchase stock). Bernstein expects MSFT to report above-consensus EPS of $0.26 on $7.95 bln in sales; firm says the co should post YoY margin improvement, and given difficult comps they expect negative growth in Q1, which may incorrectly provide fodder for the more bearish voices on the Street; also, option expense will lower reported figures and guidance, which is a non-operating event that is likely to cause some confusion and perhaps a sell-off in the stock due to the appearance of a reduction in expectations.
2:59PM EMC Corp upgraded to Overweight at Pacific Growth (EMC) 9.73 -0.44: Pacific Growth upgrades to Overweight from Equal-Weight; despite the selloff following the co's flat Q3 guidance, firm says much of the heavy lifting needed to position EMC for the future has been successfully completed: costs have been cut sharply and the product portfolio has been substantially broadened and reinvigorated; in addition, the remaining variable, "go to mkt" execution, is something the co has historically been pretty good at accomplishing.
11:16AM QLogic upped to Mkt Perform at Punk Ziegel (QLGC) 47.44 -3.91: --Update-- The upgrade from Sell is based on improved valuation. Due to improving fundamentals, firm now believes the stock is correctly valued.
OmniVision (OVTI) 37.00 -2.65: Co priced 3.09 mln newly issued shares of its Common Stock by the Company and 125,000 shares by selling stockholders at $38.75 per share.
Marvell (MRVL) 35.18 -1.53: CIBC downgraded to Sector Perform from Sector Outperform based on valuation, as the stock has exceeded its $36 target; firm would be buyers again near $30.
Exar Corp (EXAR) 15.44 -1.74: First Albany downgraded to Neutral from Buy following stronger than expected Q1 results; firm cited valuation, as the stock has reached its $17 target.
Advanced Micro (AMD) 7.27 -0.05: Needham upgraded to Buy from Hold following stronger than expected results; firm cited the following factors for its upgrade: it is impressed with the co's restructuring actions over the last few qtrs, it has been positive on the potential for the co's new 64-bit microprocessor offerings for some time, it considers the increased exposure to flash memory to be positive, and a fair amount of the financial statement uncertainty surrounding the flash memory consolidation has now been removed. Target is $13.
Cypress Semi (CY) 12.70 -1.69: Before the open, reported Q2 (Jun) pro forma earnings of $0.03 per share, excluding amortization of intangibles as well as other acquisition-related and restructuring charges, in line with the Reuters Research consensus of $0.03; revenues rose 0.5% year/year to $203.1 mln vs the $198.4 mln consensus.
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