From Briefing.com: The SIA (Semiconductor Industry Association) reported that worldwide market billings for September jumped 17.5% year-over-year. By geographic market, Asia-Pacific (38.9% of billings) led the way higher, rising 24.4%, followed by Japan (23.3% of billings, +18.8%), Europe (18.8% of billings, +17.3%), and the Americas (19% of billings, +4.5%). Add in the ISM report that the October PMI came in at 57% vs. consensus at 55.8% and 52.4% in September, and that new orders came in at 64.3% vs. 60.4% in September, and it was all the data investors needed to jump back into the water after kicking sand along the water's edge for the last month.
Tech shares moved firmly higher, led by semiconductors and semi cap equipment stocks, up on average 3.3% and 4.3% respectively. Advancers led decliners 4:1, with advancers up an average of 3.9% vs. a loss of 3.4% for decliners. As with previous fundamentals-related rallies, alternative energy stocks did not participate, shedding on average 0.5%.
Investors should pay heed to the fact that both Conexant Systems (CNXT 5.20 -0.63) and GlobespanVirata (GSPN -0.04) failed to participate in a broad-based rally that took virtually every other semiconductor company higher, despite announcing a business combination that is expected to be accretive to earnings within the first nine months, will create a company that offers one of the broadest semiconductor portfolios for the broadband market, and, in our view, help to dampen competitive pressures. It underscores just how great expectations are; that valuations already factor in significantly higher growth rates and margins than what individual companies are currently delivering. We note again, that though equities may be modestly undervalued, this is a time for selectivity, particularly among tech shares.--Ping Yu, Briefing.com
6:13PM Monday After Hours price levels vs. 4pm ET: The buying frenzy that swept the regular session and sent the major indices above their October highs has cooled in the after hours session, where the S&P futures, at 1055, are 3 points below fair value, and the Nasdaq 100 futures, at 1440, are 5 points below fair value. Profit-taking appears to be the source of the market's ennui, as most earnings reports came in at, or above, the market's expectation.
Shares of United Surgical Partners (USPI 32.30 +1.65) have surged 5% following the operator of short-stay surgical facilities's better than expected Q3 (Sept) report and raised FY03 (Dec) guidance. The company said that due to the strength of its hospital joint ventures, FY03 EPS should be $1.03-1.05 (from $0.95-0.98) and revenue should be $435-440 mln (from $390-405 mln). United Surgical also put FY04 EPS at $1.30-1.33 and revenues at $508-518 mln, both of which were above the Reuters Research estimates of $1.25 and $479.5 mln, respectively.
Protein Design Labs (PDLI 13.45 +1.20) has also found investors receptive to its Q3 (Sept) report. The biotech company that specializes in the discovery and development of humanized monoclonal antibodies reported a net loss of $0.20 - a penny ahead of the consensus estimate - and net sales that increased 43% year/year to $9.3 mln. For FY03 (Dec), Protein Design said it expected a revenue increase of 30-35%, and a net loss of approximately $0.42-0.47 versus the Reuters Research estimate calling for a loss of $0.44.
Life insurance company Metlife (MET 31.87 +0.36) has also released its Q3 (Sept) results tonight. EPS checked in at $0.73 per share, which is not comparable to the Reuters Research estimate as it excludes multiple charges and gains, including an $0.08 gain from tax benefits. Revenues, however, were comparable, and missed the consensus expectation, rising 9% to $8.82 bln (consensus of $8.93 bln). Related companies of MET include the likes of JHF, MFC, NFS, PEG, and PL.
Darden Restaurants (00C 21.24 -0.01) issued fairly mixed October same-restaurant sales results that followed the company's move to guide lower for Q2 (Nov) on September 24. Same-restaurant sales at Olive Garden were up 2-3%, whereas same-restaurant sales at Red Lobster were down 4-5%. The latter's results during Q1 (Aug) were impacted by an all-you-can eat crab promotion that incurred much higher than anticipated food and beverage costs.
Finally, Cephalon (CEPH 45.82 -0.60) stock has weakened despite the biotech company's encouraging Q3 (Sept) report. Excluding a one-time charge, Cephalon reported EPS of $0.47, which was $0.06 better than the Reuters Research estimate, on revenues that jumped 46% to $190.0 mln. Based on the strength of its current sales, the company raised its FY03 (Dec) EPS guidance to $1.52 (consensus of $1.49). Cephalon, however, also said that FY04 EPS should be approximately $2.00, below the Street's estimate of $2.06, and that has likely been the source behind the stock's pullback.
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
Close Dow +57.34 at 9858.46, S&P +8.31 at 1059.02, Nasdaq +35.49 at 1967.70: The market opened in the green and never looked back... The early positive bias was incited by favorable data from the Semiconductor Industry Association, indicating that September sales rose 6.5% sequentially and 17.5% year/year for the third quarter... The market got an additional boost from better than expected economic reports, including the ISM report at 57 (consensus 55.8) and the Construction Spending report at 1.3% (consensus 0.4%)... The ISM report was telling of growth in the manufacturing sector and was particularly convincing on the back of strong regional manufacturing surveys...
Combined with last week's advance Q3 GDP reading of 7.2%, the strong ISM report proved just what the market needed to set new 52-week highs for the major averages, as well as the mid- and small-cap indices, which set not only new year highs, but also new all-time highs... Among the leading groups to the upside were the retail, financial, and technology groups, including the semiconductor, software, hardware, internet, and networking sectors... The laggards of note included the biotech, oil services, and gold groups...
The latter coincided with a $7.50 decline in the price of gold to $377.10/oz, which resulted from the advance in the U.S. equities, as well as the stronger dollar against the euro and the yen, which made the dollar-priced metal more expensive for overseas buyers... Elsewhere, the bond market closed the session with losses across the yield curve and the 10-year note down -13/32, bringing its yield up to 4.35%...NYSE Adv/Dec 2276/986, Nasdaq Adv/Dec 2163/1077
3:16PM ATYT: Do not believe Microsoft/IBM agreement alters ATYT's graphics deal with Microsoft -- TD Newcrest 15.00 +0.66:
12:31PM Needham comments on CNXT/GSPN merger : Needham believes that this morning's Conexant (CNXT 5.26 -0.58)/GlobeSpan (GSPN 6.15 unch) merger is very logical, as CNXT was facing a heavy investment program to catch up with GSPN, TXN, BRCM, Atheros and others in 802.11, and was narrowly focused on ADSL for CPE only. Firm also believes the impact on CTLM is positive, since it calls attention to the co's low valuation as well as deal activity in DSL in particular; although it is unclear who the most likely suitor for CTLM would be, firm says BRCM and TXN are possibilities if either or both decide they do not have enough scale in ADSL; however, firm thinks that CTLM's very low equity valuation suggests that it would have difficulty buying an attractive 802.11 chip co such as privately-held Atheros.
Aeroflex (ARXX) 9.94 +0.69: Co announced the acquisition of Celerity Systems from L-3 Communications for $10.25 mln, consisting of cash, ARXX common shares, and a release of certain liabilities. Celerity Systems makes modular digital test and measurement products for the communications, satellite, wireless, and broadband test mkts.
National Semi (NSM) 42.82 +2.19: UBS maintained their Buy rating and raised their target to $48 from $40 based on strong demand from the handset and notebook sectors as well as operating expense savings from restructuring activities.
NeoMagic Corp (NMGC) 2.67 +0.04: After the close, announced departure of CFO to pursue other opportunities. He will remain as acting CFO until his replacement is found and will continue with NeoMagic in an advisory role through March of 2004.
Virage Logic (VIRL) 9.95 -0.01: Inks multi-yr pact with LSI for embedded memory IP. Under the terms of the agreement, LSI Logic has licensed Virage Logic's silicon-proven embedded Self-Test and Repair (Memory System and its Area, Speed and Power Memory product lines.
Emcore (EMKR) 5.14 +0.48: Co said it has sold its TurboDisc Metal Organic Chemical Vapor Deposition business to Veeco Instruments (VECO 26.39 +1.09). The sale will allow Emcore to focus on its communications product lines, including its fiberoptic, wireless, CATV, and satellite products. Management believes its remaining product lines will generate between $90-$100 million in revenue this fiscal year.
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