From Briefing.com: Tech shares gained ground on a day that stocks opened lower and generally struggled to find direction. The Dow slipped 11.33 to end the day at 9791.72 while the S&P managed to inch higher by 3.31 to close at 1050.07. The Nasdaq, led by broad strength in tech shares, gained 11.04 to close at 1950.14. The question on the minds of many investors is whether the quarter's performance reports and news flow provides the foundation for further gains or simply supports current valuation levels. We think the generally positive tenor of earnings reports and business outlook does provide a firm foundation for further gains ahead but that it is a time for selectivity. We continue to anticipate October to be a choppy month as investors and portfolio managers adjust portfolios for tax season, and exit stocks whose growth and margins performance clearly do not warrant holding the shares. One company that we think is worth holding:
Comtech Telecommunications (CMTL, 29.30 -0.55): Comtech Telecom provides point-to-point and point-to-multipoint equipment for transmitting voice, data and video applications. Improving revenue trend supported by a growing backlog and limited competition in select markets suggest opportunities for margin expansion. Trading at less than half industry multiples; at 2.2x Reuters Research consensus F04E revenue of $187.20MM and 1.9x F05E revenue of $212.0MM; 30.5x F04E EPS of $0.96 and 25.9x F05E EPS of $1.13.--Ping Yu, Briefing.com
6:07PM Thursday After Hours price levels vs. 4pm ET: Earnings have once again poured in after the close, with a number of industry-leading technology companies turning in their September quarter numbers. The results have been fairly reassuring, with most companies checking in at consensus expectations. However, this has not (in many investors' minds) supported the shares' considerable run year-to-date, and thus many stocks have traded lower tonight. Presently, the S&P futures, at 1047, are 2 points below fair value, while the Nasdaq 100 futures, at 1423, are 6 points below fair value.
The biggest story of the evening is eBay (EBAY 53.81 -3.69) and its Q3 (Sept) report. The stock has slid 6%, and taken with it shares of fellow internet retailer Amazon.com (AMZN 58.84 -1.07), despite the former's in line report and Q4 (Dec) guidance. EPS matched the Reuters Research consensus estimate of $0.18 on revenues that rose 84% year/year to $530.9 mln (consensus of $519.0 mln). The company now expects that consolidated Q4 (Dec) net revenues could be as high as $590 mln and EPS could be as high as $0.21. FY04 revenues were also projected as high as $2.9 bln. With all forecasts roughly in line with consensus estimates, investors have used the guidance as an excuse to book profits from the stock's impressive run.
Sun Microsystems (00C0 3.55 -0.08) shares have also weakened following the computer system maker's in-line 1Q04 (Sept) report. After lowering its net income outlook on September 29, Sun met the revised Reuters Research estimate calling for a net loss of $0.09 per share. Revenues, though, missed the consensus forecast, falling 8% to $2.54 bln. Gross margins also declined 1.1%, to 40.1%, from year-ago levels.
Semiconductor company Xilinx (XLNX 29.19 -0.96) has also taken a hit after missing the top-line estimate in its Q3 (Sept) report. Revenues were about $2 mln short of the $316.9 mln consensus. However, gross margin of 61% was better than expected, and up from 60% in the prior quarter. Additionally, EPS rose 45% to $0.16 and beat the Reuters Research estimate by a penny. Related companies of XLNX such as ALTR and LSCC have also fallen lower.
Stock of Broadcom (BRCM 32.97 +0.29), however, has gotten a lift after the company topped the net income and sales consensus estimates in its Q3 (Sept) report. On its conference call, management forecasted Q4 (Dec) sequential revenue growth of 7-9%, to approximately $455.4-463.9 mln, against the Reuters Research estimate of $437.2 mln.
Finally, Advanced Micro Devices (AMD 15.00 +1.04) also exceeded consensus forecasts on a top and bottom-line basis, and shares have spiked 7%. The semiconductor company noted that "we delivered strong sales growth in our microprocessor and Flash memory business lines while tightly managing our expense structure."
For complete coverage on these, and other developments, be sure to visit Briefing.com's In Play, Earnings Calendar, and Guidance pages-- Heather Smith, Briefing.com
6:43PM After Market Movers : Trading higher in reaction to earnings/guidance are AMD (+8.81%), ASPT (+8.76%), ATML (+7.33%), SCUR (+6.90%), PLCM (+6.05%), CNXS (+4.42%), PMCS (+3.99%) and BRCM (+1.59%). Losing ground in extended-hours action are shares of CNET (-7.60%), DCLK (-6.86%), EBAY (-6.43%), SPRT (-5.22%), PXLW (-4.50%), HLIT (-3.48%), XLNX (-2.82%) and SUNW (-2.75%).
5:50PM Broadcom guides Q4 revenues above consensus (BRCM) 32.68 +0.23: -- Update -- On its conference call, BRCM forecasted Q4 (Dec) sequential revenue growth of 7-9%, to approximately $455.4-463.9 mln, against the Reuters Research estimate of $437.2 mln. The company also said that Q4 gross margins should be relatively flat with Q3 (Sept).
5:29PM AVID increases guidance on the call (AVID) 54.61 +2.55: AVID increases Q4 guidance to $0.45 per share (ex items) and revs to $125.0 mln vs. Reuters Research consensus of $0.41 per share and revs of $123.7 mln. For the full year, the co is guiding earnings of $1.33 per share and revs of $470 mln. For FY04, co guiding earnings of $1.75 per share (ex items) and revenue guidance of about $520 mln vs Reuters Research consensus earnings of $1.73 per share and revs of $521.6 mln.
5:21PM Sun Microsystems earnings clarification (SUNW) 3.63 -0.16: -- Update -- Reuters Research is telling us that they are going with ($0.08) as comparable to their consensus of ($0.08). Analysts did include the $0.01 tax provision charge but they did not include the $0.01 equity loss on investments, which is what Reuters is excluding to come up with ($0.08).
4:43PM Harmonic announces 7.5 mln share offering (HLIT) 8.33 +0.18: -- Update -- Announces that it plans to publicly offer 7.5 mln shares of its common stock in an offering made from a shelf registration statement that became effective in April 2002; in connection with the offering, HLIT would also grant to the underwriters an option to purchase up to 1,125,000 additional shares to cover over-allotments.
4:41PM Integrated Device beats by $0.02 (IDTI) 12.66: Reports Q2 (Sep) pro forma loss of $0.01 per share, $0.02 better than the Reuters Research consensus of ($0.03); revenues fell 2.7% year/year to $80.8 mln vs the $81.9 mln consensus.
4:37PM Microchip reports in line, guides Q4 in line with consensus (MCHP) 27.17 +0.18: Reports Q2 (Sep) pro forma earnings of $0.17 per share, in line with the Reuters Research consensus of $0.17; revenues rose 1.0% year/year to $168.5 mln vs the $167.6 mln consensus. Co also guides Q4, sees EPS of $0.18-0.19, vs the R.R. consensus of $0.18, and revenues of $177-179 mln vs an estimate of $175.1 mln.
4:35PM Advanced Micro beats by $0.27 (AMD) 13.96 +0.30: Reports Q3 (Sep) loss of $0.09 per share, $0.27 better than the Reuters Research consensus of ($0.36); revenues rose 87.7% year/year to $953.8 mln vs the $866.9 mln consensus.
4:26PM Xilinx beats by a penny, misses on revs (XLNX) 30.15 +0.26: Reports Q2 (Sep) earnings of $0.16 per share, $0.01 better than the Reuters Research consensus of $0.15; revenues rose 13.5% year/year to $315.5 mln vs the R.R. $316.9 mln consensus and the First Call consensus of $317 mln.
4:26PM eBay reports, guides in line (EBAY) 57.50 -0.10: Reports Q3 (Sep) earnings of $0.18 per share, in line with the Reuters Research consensus of $0.18; revenues rose 83.8% year/year to $530.9 mln vs the $519.0 mln consensus. Company sees Q4 EPS of $0.21, in line with consensus; for Y04 sees EPS as high as $0.98 on revenues as high as $2.9 bln, consensus is $2.89 bln. EBAY sees revenue breakdown in Y04 as approximately $675 mln in Q1, $695 mln in Q2, $710 mln in Q3 and $820 mln in Q4.
4:22PM Atmel beats by a penny, guides Q4 revs above consensus (ATML) 5.05 -0.04: Reports Q3 (Sep) loss of $0.07 per share, $0.01 better than the Reuters Research consensus of ($0.08); revenues rose 12.2% year/year to $335.2 mln vs the $323.6 mln consensus. Co also guides Q4, sees revenues of approx $345.2-355.3 mln (sequentially up 3-6%) vs the R.R. estimate of $338.9 mln.
4:21PM Pixelworks misses by $0.02, ex items; guides for Q4 (PXLW) 12.65 +0.33: Reports Q3 (Sep) earnings of $0.02 per share, ex items, $0.02 worse than the Reuters Research consensus of $0.04; revenues rose 32.2% year/year to $35.5 mln vs the $34.5 mln consensus. Co. sees Q4 (Dec) EPS of $0.06-0.07, ex items, estimate is $0.06 and revenues in the range of $37.0-38.5 mln, estimate is $37.3 mln.
4:21PM XLNX prelim revs about $1 mln light :
4:21PM Advanced Energy reports Q3 results (AEIS) 22.55 +0.03: Reports Q3 (Sep) pro forma loss of approx $0.09 per share (excluding pre-tax charges of $2.2 mln related to restructuring charges and an intangible asset impairment, and a non-cash charge of $22.4 mln related to net deferred tax asset), vs the Reuters Research consensus of ($0.12); GAAP EPS was ($0.85); revenues fell 3% year/year to $68.6 mln vs the $66.7 mln consensus. Co expects Q4 loss of $0.14-$0.16, which assumes no tax benefit from the loss, vs consensus of ($0.02). It is not clear whether the co's EPS forecast is comparable with consensus.
4:20PM Rambus reports in line (RMBS) 26.96 +0.17: Reports Q4 (Sep) earnings of $0.05 per share, in line with the Zacks consensus of $0.05; revenues rose 16.7% year/year to $28.6 mln.
4:19PM Harmonic beats by $0.02, pro forma (HLIT) 8.31 +0.16: Reports Q3 (Sep) loss of $0.07 per share, ex items, $0.02 better than the Reuters Research consensus of ($0.09); revenues rose 27.8% year/year to $47.3 mln vs the $44.3 mln consensus.
4:15PM Silicon Image beats by $0.01, guides Q4 revs higher (SIMG) 6.03: Reports Q3 (Sep) earnings of $0.01 per share, ex-items, $0.01 better than the Reuters Research consensus of breakeven; revenues rose 13.1% year/year to $24.2 mln vs the $24.7 mln consensus. Co says its strong backlog position entering Q4, combined with the continued strength of new orders through the first half of October, positions it for sequential revenue growth of 20+ percent in Q4. At 20%, this computes to $29 mln vs the R.R. consensus of $27.3 mln.
4:14PM RSA Security beats by a penny; guides for Q4 (RSAS) 16.88 +0.24: Reports Q3 (Sep) earnings of $0.06 per share, $0.01 better than the Reuters Research consensus of $0.05; revenues rose 9.2% year/year to $64.5 mln vs the $63.4 mln consensus. Co. sees Q4 (Dec) EPS between $0.04-0.07 and revenues in the range of $63-67 mln, estimates are $0.07 and $66 mln, respectively.
4:13PM Fairchild Semi beats by $0.04, guides above consensus (FCS) 19.25 -0.24: Reports Q3 (Sep) earnings of $0.05 per share, $0.04 better than the Reuters Research consensus of $0.01; revenues fell 8.3% year/year to $330.7 mln vs the $331.8 mln consensus. Company sees Q4 revs to increase 6-8% sequentially, to $350.5-357 mln, consensus is $348 mln.
4:11PM Avid Tech beats consensus by $0.05 (AVID) 54.45 +2.39: Reports Q3 (Sep) earnings of $0.35 per share, $0.05 better than the Reuters Research consensus of $0.30; revenues rose 10.5% year/year to $119.1 mln vs the $117.1 mln consensus.
4:10PM Broadcom beats by a penny, ex items (BRCM) 32.57 +0.12: Reports Q3 (Sep) pro forma earnings of $0.14 per diluted share, excluding charges, gains and effects included in GAAP reporting, $0.01 better than the Reuters Research consensus of $0.13; revenues rose 46.8% year/year to $425.6 mln vs the $414.3 mln consensus.
4:09PM PMC-Sierra beats by a penny (PMCS) 16.31 -0.36: Reports Q3 (Sep) net of breakeven, $0.01 better than the Reuters Research consensus of ($0.01); revenues rose 5.9% year/year to $63.1 mln vs the $61.2 mln consensus.
4:06PM Cree reports in line (CREE) 19.00 -0.26: Reports Q1 (Sep) earnings of $0.12 per share, in line with the Reuters Research consensus of $0.12; revenues rose 35.7% year/year to $66.2 mln vs the $63.9 mln consensus.
4:06PM PMCS prelim $0.00, or a penny ahead; revs ahead :
4:02PM Monolithic misses by $0.03 (MOSY) 8.89 +0.13: Reports Q3 (Sep) loss of $0.01 per share, $0.03 worse than the Reuters Research consensus of $0.02; revenues fell 50.2% year/year to $3.5 mln vs the $4.7 mln consensus. Co. will release guidance during this afternoons conference call.
Close Dow -11.13 at 9791.72, S&P +3.31 at 1050.07, Nasdaq +11.04 at 1950.14: The major averages spent most of the session chopping around as traders exhibited a lack of conviction to the markets, as exemplified by volume, which can only be described as moderate at best... This hesitation stemmed from the tug-of-war between the long-term bullish expectations for stocks and the fear that the markets may be overextended on a near-term basis, especially in the face of the advance over the first part of October...
Nevertheless, the economic data proved to be a supporting factor as it revealed that the job market is stabilizing, inflation remains modest, production is accelerating, and the manufacturing sector is expanding... Please see Briefing.com's Economic Calendar for the complete list of economic reports... The announcement that had the most impact, though, was the Philly Fed Index report, which came in at 28.0 (consensus 15.6), boding well for the manufacturing sector and confirming yesterday's better than expected reading for the NY Empire State Index (at 33.7 vs. consensus of 16.0)... The Philly Fed Index report served as a catalyst to propel the markets higher and as a result, the Nasdaq and the S&P 500 closed with mild gains...
The Dow, for its part, would have had a better day had it not been for IBM (IBM 89.25 -3.49) and Caterpillar (CAT 74.25 -4.47), which alone shaved 60 points off the composite... Both stocks reported earnings, which had been deemed disappointing by the market... IBM, in particular, reported in-line EPS, but was light on revenues and cautious on the IT recovery... The decline in IBM's stock displays the wrath of the market that's priced for perfection on a company that under-delivered...
The report played its part in evoking valuation fears in the early going until investors identified IBM's weakness as company-specific... Sectors finishing in the red included the computer hardware, biotech, brokerage, and cyclical groups... Among the leaders to the upside were the semiconductor, healthcare, and gold groups... Elsewhere, the bond market closed with losses across the yield curve... The 10-year note ended the day down -18/32, with its yield at 4.47%...NYSE Adv/Dec 1900/1321, Nasdaq Adv/Dec 1821/1327
3:34PM Avid Tech Earnings Preview (AVID) 54.13 +2.07: Co is due to report Q3 earnings tonight with EPS and rev consensus standing at $0.30 and $117 mln, respectively. First Albany believes co could report Q3 results meeting or exceeding estimates; firm's own numbers are at $0.34 and $118.5 mln. However, firm believes that AVID shares could experience some profit taking after the conference call if co doesn't guide significantly higher for remainder of this yr and next yr. Also note that USB Piper Jaffray downgraded AVID on Tues (see Briefing.com archive) saying channel feedback led them to expect in-line performance in Q3 and Q4, while they believed the Street had priced AVID for outperformance. The stock's price at the time of the downgrade was $58.79
3:20PM Bond Market Summary : The treasuries got hit throughout the day; crashing through levels many expected would offer more of a struggle. The two-years are -09/32, yield 1.920%, five-years -13/32, yield 3.392%, ten-years -14/32, 4.449 and thirty-years -04/32 with a 5.296% yield. Some traders agree rates should move higher, with one east coast dealer saying today's move was a "weird play on the curve. The Fed is not going to tighten anytime soon," adding that there won't be any reason to if the officials keep "talking up the economy," especially in regards to employment growth. As Federal Reserve presidents spoke (San Francisco's Robert Parry in Berkley, Boston's Cathy Minehan in Massachusetts) today and Treasury Secretary John Snow in hearings regarding government sponsored mortgage finance enterprises Fannie Mae and Freddie Mac, traders found ample reason to slam treasuries, with the early economic data being almost secondary. One bond player had come in short bonds and by day's end said "the growth is here, evidenced by the numbers. Then they (Fed reps) start talking up job creation? Sold."
3:19PM Broadcom Earnings Preview (BRCM) 32.41 -0.04: Broadcom reports its Q3 after the close with Reuters Research earnings estimates of $0.13 per share and revs of $414.3 mln. Prudential expects the co to meet or beat consensus given their belief that the co is benefiting from a number of strong product cycles, including: WLAN, GbE, PVRs, cable satellite/set top boxes, and cable modems. The analyst points to the following data points from the co's customers to support its positive outlook: strong cable modem shipments from MOT, 6% q/q handset growth from Sony/Ericsson, and strong growth in GbE and WLAN from OEM/ODM DiLink. As for Q4, Wedbush Morgan expects mgmt to guide for Q4 upside for a high-single digit to low-double digit q/q growth, compared to current street expectation of 6%. Wedbush, which rates stock a Hold, believes BRCM could trade up further over the next 3-4 months with catalysts including upsides in earnings and guidance, and possible announcement of a new CEO. However, firm believes stock has a rich valuation trading at approx 48x 2004.
2:21PM Skyworks stages strong recovery (SWKS) 10.81 +0.34: -- Technical -- Issue broke below its recent range (and 50 day avg) in opening action but was able to bounce more than 6% off the early low. Currently hovering just below the session high of 10.83 with next resistances, if able to build on the reversal, at this week's high (10.93) and the Oct high following (10.99).
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