From Briefing.com: Eyeballing a one-point loss at the Nasdaq would perhaps lead one to conclude that Monday was another boring day of trading. Granted, the excitement meter was turned down a notch, but boring isn't the best descriptor of Monday's action since it was one of those days that traders appreciate more than most. In other words, it was a day of wide point swings in the indices.
The early action was dominated by the bears as the Nasdaq, led by its technology components, was staring at a 28-point loss within the first hour of trading. The rest of the day, though, was spent in recovery mode. Driven by a program trade in the late afternoon, the Nasdaq did turn positive, but ultimately, it petered out heading into the close to finish the session in red figures.
The rebound effort was aided by several factors, with technical considerations playing a major part. The Nasdaq, in its early swoon, fell back to 1687, which is an area that marks the top of the June trading range and which has been a clear line in the sand for bullish participants. As that level held, it prompted some renewed buying activity that was concentrated primarily on big-cap issues. The latter's favorable influence on the proceedings was evident in the fact that the Dow and S&P managed to finish in positive territory despite breadth figures at the NYSE and Nasdaq that favored decliners by a wide margin. The QQQs, interestingly, flirted with a re-test of their 50-day simple moving average, but garnered support to end the day virtually unchanged.
In other developments, SG Cowen played a supportive role with its upgrade of Cisco (CSCO 19.26 +0.11), which reports after Tuesday's close, to Strong Buy from Outperform. Semiconductor stocks also continued to hold their own amid reports that SIA indicated worldwide semiconductor sales in June rose 10.0% yr/yr to $12.5 bln, but were flat on a sequential basis. Another helpful factor was the bond market, which enjoyed a winning outing that saw yields decline across the yield curve.
As for Cisco, it will be a focal point before, during, and after market hours on Tuesday. The Reuters Research consensus estimates for its fiscal fourth quarter are pegged at $0.15 and $4.68 bln, respectively. The company's earnings reporting history suggests it will either meet estimates or come in a penny or two above expectations. In other words, if there is any disappointment, it is likely to be in the top-line rather than the bottom-line. Margin trends and guidance will be the key drivers of its stock following the release of its results. For fiscal Q1 (Oct), the consensus estimates are $0.15 and $4.81 bln. In general, we expect Cisco to say that it is seeing some slight signs of improvement in demand, that visibility remains cloudy overall, and that it feels good about the issues it can influence and control.-- Patrick J. O'Hare, Briefing.com
6:00PM Monday After Hours price levels vs. 4 pm ET levels: Buyers are scant and the after-hours session is lower. Currently, the S&P 500 is 1.5 points below the fair value of 982 and the Nasdaq is 3 points below the fair value of 1269.
The uninspiring tone of trade is not being helped by the better-than-expected Q2 (Jun) earnings report by MetLife (MET 27.95 +0.59), provider of insurance and other financial services. MET topped the Reuters Research Consensus by $0.02 with its earnings of $0.72 per share, excluding benefits $0.09 from a reduction of a previously established liability, $0.08 from the merger of International's Mexican operations, and $0.05 in investment losses. Revenues rose 8.3% year/year to $8.88 bln versus the $8.76 bln consensus.
Another company to report upside earnings was Western Wireless (WWCA 15.36 +0.64), provider of rural wireless communications services. Excluding a net gain of $40.5 mln on the sale of a Croatian venture, WWCA checked in with EPS of breakeven, $0.11 above the consensus estimate. Revenues of $359.2 mln were above the consensus of $341.0 mln and up 23.5% year/year.
Financial services company, Principal Financial Group (00C 32.59 -0.01) is lower despite delivering earnings $0.06 above the consensus. Specifically, PFG reported Q2 (Jun) EPS of $0.67, excluding $0.05 in special charges. Revenues rose 3.3% year/year to $2.41 bln versus the $2.37 bln consensus. Going forward, the company said it sees Q3 EPS of $0.59-0.62 (consensus $0.60) and FY03 EPS of $2.45-2.50 (consensus $2.45). This guidance includes the impact of expensing employee stock options and the employee stock purchase plan of approximately $0.05 in 2003 and additional pension benefit expense of approximately $0.11 per share in 2003. As such, guidance appears to be to the upside.
Biopharmaceutical company, Cephalon (CEPH 46.22 -1.97) reported Q2 (Jun) earnings of $0.31 per share, which was in line with the consensus. Revenues of $168.8 mln rose 39.9% year/year and were above the consensus estimate of $164.1 mln. Nevertheless, CEPH is on the defensive due to its warning for Q3, which called for EPS of $0.40, below the consensus of $0.41. For FY03, the company reaffirmed EPS of $1.50 versus the consensus of $1.48.
Also on the defensive is the communications equipment company, Avanex (AVNX 3.72 -0.17), after it reported in-line Q4 (Jun) loss of $0.11 per share, ex-items. AVNX's revenues of $5.5 mln were lighter than the consensus of $5.7 mln and up 1.9% year/year.
For more detail on these, and other after hours developments, be sure to visit Briefing.com's In Play, Earnings Calendar and Guidance pages. -- Victoria Glikin, Briefing.com
4:06PM Rudolph Tech beats by a penny, guides. (RTEC) 20.50 -0.15: Reports Q2 (Jun) earnings of $0.02 per share, $0.01 better than the Reuters Research consensus of $0.01; revenues rose 6.3% year/year to $13.9 mln vs the $14.0 mln consensus. Company sees Q3 EPS of "$0.02 plus or minus a penny" vs R.R. consensus of $0.03.
Close Dow +32.07 at 9186.04, S&P +2.67 at 982.82, Nasdaq -1.56 at 1714.06: The stock market struggled to find its rhythm today and the Dow, Nasdaq, and S&P 500 jumped around in a range of 161, 36, and 14, points, respectively, before settling for a relatively flat close... The aimless nature of today's trade was rooted in several factors, the most influential being persistent concerns regarding the near-term investment appeal of stocks... Unease surrounding the overextended technical nature of the indices has undercut the momentum of the recent rally, and the sharp rise in treasuries' yield has only further undermined the conviction of buyers ...
Tellingly, the breadth figures favored decliners over advancers today, and volume totals were relatively light at both the NYSE and Nasdaq ... Nonetheless, buyers put together enough of a rally effort to pull the market up from its mid-day doldrums, and lay the groundwork for a higher finish for the blue chip averages, and a only slightly lower close for the Nasdaq... Pronounced selling pressure in biotech pressured the latter, which was dragged lower on account of Genzyme's (GENZ 47.58 -1.70) decision to buy SangStat (SANG 22.23 +6.76) in an all cash deal valued at $600 mln...
Relative strength in semiconductor, however, provided a buffer against the weakness in biotech following Goldman Sachs' upgrade of Novellus (NVLS 36.77 +1.07) to Outperform from In-Line... The firm cited its belief that the company's mid-quarter update will be a positive catalyst for the stock... As for the broader market, modest buying activity in retail, homebuilding, and pharmaceutical lifted the S&P 500 above the unchanged mark...
Finally, today's sole economic report - Factory Orders for June - contained encouraging news for the beleaguered manufacturing sector, but its results were dismissed by traders given the predicative nature of the release... Orders grew at their fastest rate in three months - by 1.7% - and exceeded the consensus estimate of 1.5%...NYSE Adv/Dec 1170/2087, Nasdaq Adv/Dec 1275/1840
Exar Corp (EXAR) 15.39 +0.49: upped to Mkt Outperform from Market Perform at JMP Securities... upgrade follows stock's 20% plus pullback over the last few weeks. Firm has confidence in the management team's ability to successfully grow the company out of this downturn through organic growth and targeted acquisitions. Price target $18.
NVIDIA (NVDA) 20.46 +0.74: Announced the acquisition of MediaQ, a leading provider of graphics and multimedia technology for wireless mobile devices. NVIDIA is expected to pay for the acquisition predominately in cash with its completion in the third quarter of its FY04. According to chief executive officer of NVIDIA Jen-Hsun Huang, "This acquisition supports NVIDIA's strategy of extending our platform reach and accelerates our entry into the wireless mobile markets."
WR Hambrecht comments on Semiconductor sales data : For the month of June, worldwide semiconductor sales totaled $12.5 billion, up 10% y/y and flat month/month. Key takeaways from the data include: 1) NAND flash shipments grew 57% q/q in Q2 vs. firm's estimate of at least 50%; firm believes its estimates of 10-20% bit shipment growth in Q3 for SNDK and LEXR may prove conservative; 2) YTD IC volumes continue to track ahead of peak 2000 levels which supports firm's positive bias towards SAT sector including Amkor and ASE Test; 3) SYNA continues to benefit from positive notebook trends although product mix is hurting growth prospects in 2H:03; and 4) preliminary indications suggesting total handset market growth of 0-5% vs. firm's previous expectation of 5-8% which support caution heading into Q3 for wireless IC names including RFMD and SWKS.
Kulicke & Soffa (KLIC) 9.37 +0.68: upped to Market Perform from Reduce at Adams, Harkness & Hill...Firm raised its rating on KLIC to market perform based upon its improving bottom line outlook due to the co's cost control actions. The analyst believes the cost control measures should come to fruition over the next three to four quarters. Price target increased from $7 to $10.
Novellus (NVLS) 36.77 +1.07: Goldman Sachs upgraded to Outperform from In-Line... The upgrade is based on a) firm's view that the negative issues that have caused the stock to underperform its peers since mid-April have been resolved, b) relative to its peers, the stock is trading at a 20% discount on normalized free cash flow, c) co has good exposure to some of the customers that are driving the emerging equipment upturn, d) given the historically high correlation of the equipment stocks and NVLS' underperformance YTD, firm expects NVLS to outperform most of its front-end peers, and e) expects that both the Applied report and Novellus' mid-quarter update will be positive catalysts for the equipment stocks and believes that investors will look to NVLS to add additional exposure.
3:33PM Rudolph Tech Earnings Preview (RTEC) 20.43 -0.23: Rudolph Technology reports its Q2 after the close with Reuters Research earnings consensus of $0.01 per share and revs of $14.0 mln. ThinkEquity believes the co could report slightly higher than consensus revs given their expectations of $14.5 mln with EPS in line. Firm believes the stock is one of the best ways to play the ramp in 0.13micron (with copper interconnect) wafer starts within the semi cap equipment space. However, the analyst expects the second half for the co should be "lumpy" for quarterly bookings in the range of $15-$20 mln.
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