From Briefing.com: Stocks finished off their highs as the initial euphoria from a bigger than expected drop in first-time jobless claims, 382K vs. 395K consensus, wore off. Across the three major leagues, in almost identical play, the opening action was decidedly positive with bulls batting for a homer on high volume. By 2:00pm ET, the homers began looking more like fast dropping fly balls. As luck would have it, all balls fell in fair territory. Here's how the individual action played out at games' end: Dow slid into home plate at +49.11 (9680.01), S&P at +4.96 (1038.73), and Nasdaq at +18.12 (1911.90). In ether league action, tech shares held firm across the board, and Yahoo! (YHOO 42.75 +3.96) slammed a home run with Q3 results, propelling its shares further into the stratosphere.
Yahoo!'s Q3 results indicate Internet advertising is beginning to pick up. Eighty-four percent of Yahoo!'s revenues are from North America, suggesting there may be comparable market opportunities in Europe, Asia and South America that have yet to be tapped. But unlike the U.S., these are not monolithic markets. The most obvious barriers to market penetration are language and cultural nuances that influence local buying patterns. Nevertheless, these markets represent enormous opportunities for a company with geographic reach and a strong understanding of local markets. One company well positioned to gain from growth of Internet advertising and a rebound in traditional media advertising in Europe is:
Trader Classified Media (TRDFF, 9.25; TRDR on Premier Marche EUR 8.30): Trader Classified Media publishes classifieds through over 60 web-sites and 350 print titles across 21 countries. The company is profitable, has a fair balance sheet, is cash flow positive and boasts over 5.6MM unique Internet visitors and 9MM readers each month. Expanding into developing Europe and South America. Has footprint in Asia. Signs of rebound in Europe have yet to emerge. Currency risk. Thinly traded. Trading at 1.7x TTM revenues of EUR442.9 and 69.2x TTM EPS of EUR0.12.--Ping Yu, Briefing.com
6:08PM Thursday After Hours price levels vs. 4pm ET: The extended session has taken its cue from the regular session, and is trading in lackluster fashion. Carryover from the late-day sell-off, combined with a few earnings warnings, has curbed widespread buying interest. Presently, the S&P futures, at 1038, are 1 point above fair value, while the Nasdaq 100 futures, at 1396, are 3 points below fair value.
Communications equipment company Juniper Networks (JNPR 18.82 +0.42) got things started off with its Q3 (Sept) report. The company topped the Reuters Research consensus EPS estimate by a penny, with EPS of $0.04, on revenues that rose 13% from year-ago levels to $172.1 mln (consensus of $166.8 mln). Due in part to the encouraging top-line trend - something Briefing.com pointed out in our preview as a metric Juniper would need to show in order to move higher, JNPR has advanced 2% in the extended session. JNPR's closest competitor is CSCO, a company analysts will be comparing Juniper's report to tomorrow.
Elsewhere, shares of Electro Scientific (ESIO 24.51 +0.60) have moved 3% higher despite a $0.05 EPS miss in the company's Q1 (Aug) report. The provider of high-technology manufacturing equipment reported a net loss of $0.34 per share and revenues that declined 47% to $20.9 mln. Despite this, net orders increased 67%, to $42.7 mln, due to renewed customer demand in its semiconductor and electronic interconnect groups, and this fact has contributed to the stock's positive showing.
As for non earnings-related announcements, OpenTV (00C0 4.38 +0.26) said it won an appeal on a patent case against Walt Disney's (DIS 21.91 +0.03) ABC and ESPN units. The interactive television company announced that the US Court of Appeals for the Federal Circuit issued an opinion vacating the grant of summary judgment by the US District Court for the Southern District of New York. That suit alleged that the enhanced television or ETV system offered by ABC and ESPN in connection with their broadcast of ABC's Monday Night Football and "Who Wants to Be a Millionaire" and ESPN's Sunday Night Football infringed three ACTV patents.
General Dynamics (GD 79.79 -0.02) has also announced a favorable development for its company. The aerospace giant received a $98.6 mln order from the US Army Joint Munitions Command, located in Rock Island, Illinois, for the production of Hydra-70 2.75- inch (70mm) rockets, motors, and warheads. The order extends deliveries through March 2006 on a contract awarded to General Dynamics in 1999. The total contract value to date is $833.8 mln.
One of General Dynamics's competitors, Northrop Grumman (NOC 85.24 -0.01), has narrowed it FY04 (Dec) sales outlook. The Navy's decision to delay by one year (to November 2005) the planned Refueling and Complex Overhaul (RCOH) of the nuclear-powered aircraft carrier USS Carl Vinson will impact management's expected FY04 sales by approximately $300 mln, resulting in a revenue outlook of approximately $28 bln versus the previously estimated range of $28-29 bln. Northrop added that it still continues to expect included double-digit earnings per share growth, assuming pension costs are the same as 2003, segment operating margin in the mid-7% range, and cash from operations of approximately $1.5 bln.
For more detail on these, and other developments, be sure to visit Briefing.com's In Play, Earnings Calendar, and Guidance pages. -- Heather Smith, Briefing.com
3:29PM General Electric Earnings Preview (GE) 30.19 -0.01: -- Update -- General Electric is scheduled to report Q3 earnings tomorrow morning, with consensus ests standing at $0.40 in EPS and $32.47 bln in sales. Goldman Sachs expects the co to report $0.39, at the low end of the co's guidance of $0.39−$0.42, and expects commentary on continued difficult end mkts in Plastics and Power Systems. In addition, firm does not expect the co to comment on 2004 guidance and continues to believe that the consensus 2004 est of $1.70 is too high (their est is $1.65), and consequently thinks that estimate reductions could be an overhang on the stock over the next month. Bernstein expects the co to report in-line results, and says checks suggest GE may be able to tell investors that there continue to be stronger than expected performances in NBC, Power Systems, and GE Commercial Finance ex-GECAS (especially real estate); on the other hand, firm notes weak trends in standard medical equipment, Consumer products, and Plastics, and says its tax rate would also be a substantial source of disappointment if it comes in at the rate seen in 1H03 (firm assumes 20% in Q3 vs 24% in 1H03).
3:17PM Dow, Nasdaq drop 80 pts and 28 pts, respectively over past hour : As stated in the 14:38 and 15:02 comments, there are a couple things being cited for the sudden pullback: 1) major buyer moves to the side, and 2) rumor that AMAT, which reports next month, may guide down. Neither rumor is strong. Interestingly, we've been checking around on a rumor we heard earlier this week that GE's number would disappoint. Several people have heard it, but no one seems to believe it enough to take a position based on it. Notable, however, that GE is trading in the red going into tomorrow morning's report.
1:35PM Xilinx -- Detwiler Mitchell comments on pricing outlook (XLNX) 30.53 +0.34: According to firm's sources in the field, leading FPGA vendor Xilinx is starting to feel the heat as customers increasingly look to convert their current high-cost FPGAs to ASICs, which carry a significantly lower unit cost. Not only does firm hear anxiety over conversions in its conversation with Xilinx, but the emergence of the "hybrid" chips are being taken very seriously by the design engineers as well as their managers. Firm is hearing that XLNX began to cut pricing on some of its higher-end Virtex parts - by as much as 20-30% at selected accounts. According to Detwiler's sources, most of the price changes will not be pushed to market until late Q4 or Q1 of next year. Firm does not expect to hear good things out of Xilinx when the co posts Q3 results on the 16th of the month, and sales contacts indicate that September closed with a bang on some nice book-ship orders. Contacts in the manufacturing chain indicate that UMC was fully loaded and met upside demand for 300mm XLNX devices. But firm believes that guidance is another topic altogether.
11:22AM The UTEK Debate 30.91 -1.39: Needham lowered its rating on UTEK this morning to Hold from Buy. The move is based off of the firm's belief that laser thermal processing technology is poised to experience challenges which may delay or diminish its adoption at the 65nm node. In addition, the firm believes early adopters of 65nm process technology such as INTC and IBM are not adopting laser thermal processing for their 65nm processes, therefore adding fuel to the analyst's belief that the argument for adopting this technology is not as compelling as the stock reflects. However, Berean Capital believes 65nm designs are still on the drawing board as IDMs struggle with 130 and 90nm, and adds that integrated device manufacturers have not made any choices on photolithography, dielectric, gate/metal for the 65nm nodes. Any speculation to orders for UTEK would be premature. The firm reiterated its Buy this morning and would add positions to the stock on a pullback.
10:16AM Bell Micro upgraded at Raymond James (BELM) 8.33 +0.83: -- Update -- Raymond James upgrades to Outperform from Mkt Perform based on stronger than expected Q3 rev and EPS results as well as increased confidence in the co's outlook (see 8:49 comment for preannouncement); firm says their checks on IT demand in Europe are showing early signs of strengthening after lackluster conditions for most of this year, and their view of the U.S. is that IT demand has been improving since late May and is tracking slightly stronger than seasonal. Target is $9.
9:41AM Cabot Micro defended at Lehman (CCMP) 60.71 +1.18: Lehman believes that concerns regarding mkt share loss and pricing pressure are overblown and recommend long-term investors buy the shares; key takeaways from the co's conference last week include: 1) CMP tool/consumables mkts are poised for recovery, 2) CCMP should continue to possess majority mkt share and an increasing mix of higher priced slurry will help avg selling prices, and 3) disruptive technologies face hurdles/lack critical mass, and firm expects traditional CMP to be widely used for the foreseeable future. Target is $79.
9:30AM Emulex downgraded at CE Unterberg on valuation (ELX) 28.21 +0.01: -- Update -- CE Unterberg Towbin downgrades to Short-Term Mkt Perform from Buy based on valuation, as the stock has exceeded their $27-$28 target range; also, firm believes that the shares are likely to trend sideways in the near-term as it looks to close and integrate its acquisition of Vixel, and notes that potential dilution may occur to full year ests.
3:22PM Looking Ahead - GE : One of the bluest of the blue chip companies will report its quarterly results before the start of trading on Friday. That company is General Electric (GE 30.13 -0.07), and contrary to the vibe ahead of Yahoo!'s (YHOO 42.86 +4.07) earnings report, expectations aren't aberrantly high. If anything, they are on the low side.
The Reuters Research consensus estimates are pegged at $0.40 and $32.47 bln, respectively. At those levels, analysts are essentially expecting no growth from General Electric, which posted a profit of $0.41 per share on revenues of $32.59 bln in the yr-ago period.
Believe it or not, flat would be good for GE considering that it posted a yr/yr drop in EPS in 4Q02 (-21.0%), 1Q03 (-9.0%) and 2Q03 (-14.0%). Its top-line performance has been lackluster, too, with revenues up 4.1% in 4Q02, down 0.7% in 1Q03, and up 0.1% in 2Q03.
For the conglomerate, an in-line report should be good enough to appease the market, but not strong enough to move the market with any real conviction. GE's earnings history suggests it shouldn't have any problem living up to bottom-line expectations as it has made a habit of posting earnings per share that are either in-line or a penny ahead of the consensus estimate. Thus, its top-line results should garner increased attention and growth of any kind in that area should be greeted with a degree of optimism given GE's reach across so many different businesses.
As a reference point, the Reuters Research consensus estimates for Q4 are $0.47 and $37.18 bln. For FY04, the consensus EPS expectation is $1.70, which would represent yr/yr growth of 8.3% if GE hits the consensus mark for FY03 that was revised down to $1.57 after GE tightened its guidance range in the wake of its Q2 report. Briefing.com will follow up with a review of GE's results Friday morning on the Story Stocks page.-- Patrick J. O'Hare, Briefing.com
2:22PM Juniper Networks (JNPR) : 18.59 +0.64 Juniper is due to report Q3 results after the close. Reuters Research pegs consensus EPS at $0.03 on revenues of $166.8MM, with EPS estimates ranging from $0.03-$0.04 on revenues of $165MM-$170MM. For Q4, consensus is at $0.03 on $173.3MM, with estimates ranging from $0.03-$0.04 on $160MM-$184MM.
Investors will be scrutinizing top-line growth as well as margin trends. In Q2, Juniper posted gross margin of 62.2% and pre-tax income margin of 10.8%. This compares against Cisco (CSCO 21.15 +0.36) with gross margin of 70% and pre-tax margin of 29%. The companies have different reporting periods.
Juniper trades at a premium to Cisco. In order to rationally sustain current valuations, management will need to grow the company's top-line in excess of 30% per year and achieve margins roughly in-line with Cisco. Juniper is a beneficiary of the migration to converged networks. If the Avaya (AV 13.04 +0.68) ads are any indication, interest and competition for unified communications, VoIP and converged network solutions is picking up, which should help feed the market for Juniper products. We'll follow up tomorrow with an assessment of Juniper's Q3 results.--Ping Yu, Briefing.com
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Glad to hear your cable modem is back up to full speed. I wish my cable reception was good here. No cable for Internet in the boonies.
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