From Briefing.com: 5:41PM Cisco Systems (CSCO) 22.94 +1.14: on conference call, management expects Q2 revenue to be up slightly above Q1 (1-3% sequentially or 10% year-over year); gross margin of 67-69%
4:08PM Cisco Systems beats by $0.02 (CSCO) 21.80 +0.22: Reports Q1 (Oct) earnings of $0.17 per share, $0.02 better than the Reuters Research consensus of $0.15; revenues rose 5.3% year/year to $5.10 bln vs the $4.85 bln consensus.
4:27PM Simple Tech beats by 2 cents, guides Q4 above consensus (STEC) 8.35 -0.05: Reports Q3 (Sep) earnings of $0.01 per share, $0.02 better than the Reuters Research consensus of ($0.01); revenues were $57.5 mln vs the $51.3 mln consensus. Co expects Q4 EPS of $0.02 on $63-$66 mln in sales, vs consensus of $0.01 and $57.9 mln.
4:17PM Qualcomm reports in-line Q4 results, issues guidance (QCOM) 46.59 -0.73: Reports Q4 (Sep) earnings of $0.29 per share, in line with the Reuters Research consensus of $0.29; revenues rose 3.7% year/year to $870.4 mln vs the $870.8 mln consensus. Co expects Q1 EPS of $0.37-$0.40 and expects revs to increase 16-22% sequentially (about $1.01-$1.06 bln), vs consensus of $0.35 and $989.1 mln. Co also expects FY04 EPS of $1.37-$1.43 and expects revs to grow 5-9% YoY (about $4.2-$4.4 bln), vs consensus of $1.38 and $3.91 bln. (All numbers exclude the QSI segment.)
4:03PM QCOM sees Q1 of $0.37-$0.40, consensus $0.35 :
4:03PM QCOM prelim $0.29, in line; revs $909 mln vs $870.75 mln:
3:30PM Qualcomm Earnings Preview (QCOM) 46.67 -0.65: -- Update -- QCOM is scheduled to report Q4 results tonight. Reuters Research consensus estimates are $0.29 and $870.75 mln. As noted in the 13:52 comment, ThinkEquity expects co will announce better-than-expected results and bring Dec guidance up a bit, but that guidance would need to change dramatically to drive significant upside to the stock price in the near-term. UBS believes co could deliver pro forma EPS of $0.30-$0.31 and could post DecQ of $0.37-$0.38 (current consensus $0.35). For 2004, firm is looking for QCOM to guide to $1.40-$1.45 (consensus $1.42).
3:23PM Cisco Systems nearing weekly resistance again (CSCO) 21.77 +0.19: -- Update -- -- Technical -- Stock is vacillating near the session high (21.78) and just below long term resistance after a staging a breakout on the weekly chart yesterday. The resistance of interest is at the Dec 2001 and Jan 2002 highs at 21.92 and 21.84, respectively (yesterday's high is at 21.85). Co is due to report earnings after the close today (see 15:17 update).
3:17PM Cisco Systems -- Earnings Preview (CSCO) 21.70 +0.12: Cisco Systems is scheduled to report Q1 results tonight after the close, with consensus standing at $0.15 in EPS and $4.85 bln in sales. The Street is virtually unanimous in expecting $0.15 (Wachovia is a penny below, Buckingham and CE Unterberg a penny above), while the co issued Q1 guidance of 2-4% sequential growth in revs and 67-69% gross margins. Wachovia said their checks indicate that US enterprise demand may have softened a bit after a strong start in Aug, and they hear that activity levels (proposals, projects, etc) are healthy, but that sales cycles are as long as 3-6 months; firm says this this bodes well for future qtrs but may lead to some conservatism in tone and guidance. CSFB, which expects an in-line qtr, believes the tone of the conference call will be positive, with customer activity levels increasing; firm estimates that a sales breakout associated with an improving economy has yet to emerge but could occur as early as Q2, and projects that book-to-bill will be slightly below 1.0 (in-line with guidance); in addition, firm sees sales/bookings strength in the Americas and Asia/Pacific, and thinks that service provider trends are improving gradually on a global basis.
1:52PM Qualcomm: Near-term story largely priced into stock -- ThinkEquity (QCOM) 47.25 -0.07: ThinkEquity comments that it appears investors have pushed past SARS woes and Asian inventory for the moment, leaving stock to approach firm's $50 tgt. While ThinkEquity expects that the co will announce better-than-expected results for the SeptQ and bring December guidance up a bit, firm believes mgmt will have to change guidance dramatically to drive significant upside to the stock price in the near term. While looking for significant appreciation in QCOM shares over the next 12-18 months as 3G enters the mix, firm believes near-term upside is already likely in the stock.
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3:58PM Shire Pharmaceuticals (SHPGY) 24.21 +1.13: The parables of Schering-Plough (00C) and Eli Lilly (LLY) - two pharmaceutical giants that built their empires around a single blockbuster drug - teach us that things can take a nasty turn when that drug loses exclusivity. Without a strong drug portfolio able to fill the hole the leading drug left, the company's rebuilding process can be particularly painful and can culminate in - for Schering-Plough at least - a 72% drop in annual profits, and a 31% decline in share price.
Shire Pharmaceuticals (SHPGY) is nowhere near the above scenario, but its current situation bears remarkable resemblance to the 'glory days' of Eli Lilly and Schering-Plough. 40% of the European drug maker's annual sales and over half of its net income rest with its Adderall franchise. The attention deficit hyperactivity disorder (ADHD) drug is the main drug on the marketplace, claiming 25% of the US market. With the rate of ADHD incidence on the rise - with some studies pegging adult prevalence at 2-6%, Adderall has enjoyed phenomenal success.
The drug's Q3 (Sept) sales jumped 35% from year-ago levels, to $130.3 mln, and drove a 16% rise in total revenues to $289.4 mln. Adderall hit a new record for prescriptions, growing 13%, owing to the 'Back to School' season that facilitated a sharp increase in medical diagnoses. EPS also improved, rising 3% to $0.38, and topping the Reuters Research consensus estimate by $0.02. The company expects such momentum to continue through year-end, leading to high single to low double digit EPS growth in FY03 (Dec) and mid to high teens revenue growth.
Despite such a rosy projection, Shire Pharmaceuticals is keenly aware of the gamble it is placing in Adderall's hands, and has made attempts in recent years to diversify its revenue stream. The company has engaged in six M&A deals since 1995, and none of them have netted the key drug management needed to replenish Shire's pipeline. Forsenol, a drug for hyperphospataemia, is the company's best late-stage drug today, and even that treatment has experienced multiple delays and has peak sales projections of less than $200 mln.
With that in mind, Shire is hardly prepared for Adderall XR's loss of patent protection a year from now. Analysts estimate that a generic version will appear on the market by 1H06 - the date set by Barr Labs's (BRL) Abbreviated New Drug Application (ANDA) filing. Such an event would eat away at Adderall's market share, which has already been threatened by Eli Lilly's (LLY) launch of Strattera, the first and only nonstimulant medicine approved for ADHD.
Consequently, Briefing.com would not recommend purchase of SHPGY shares for long-term investors. The stock may continue to rise higher off Adderall's momentum, but given the potential problems that lay in the way of the company, we believe that the risks outweigh the rewards at this time. -- Heather Smith, Briefing.com
3:26PM Qualcomm (QCOM) 46.85 -0.47: Qualcomm is scheduled to publish Q3 results after the close Wednesday. Reuters Research prints consensus EPS at $0.29 on revenue of $870.8MM (-0.4% year-over-year) and Q4 at $0.35 on $989.1MM (-9.9% year-over-year); C03 at $1.42 on $3.8B (+25.0% year-over-year) and C04 at $1.38 on $3.9B (+2.6% year-over-year).
Valuation
Shares trade at 9.8x C03E revenue of $3.8B and 9.5x C04E revenue of $3.9B; 33.0x C03E EPS of $1.42 and 33.9x C04E EPS of $1.38. On an inverted DCF/EVA basis, QCOM's valuation implies high 20% revenue growth over the next 10 years and over 500bps in margin expansion. We'll come back with an assessment of business conditions and growth, margin and valuation drivers post the Q3 report.--Ping Yu, Briefing.com
2:58PM Cisco Systems (CSCO) 21.48 -0.10: Cisco Systems is scheduled to publish Q1 results after the close Wednesday. Reuters Research prints consensus EPS at $0.15 on revenue of $4.85B (+0.1% year-over-year) and Q2 at $0.16 on $5.04B (+6.9% year-over-year); F04 at $0.64 on $20.32B (+7.6% year-over-year) and F05 at $0.74 on $22.71B (+11.8% year-over-year). Please visit the Stock Brief page for our take on what to expect for Q1, analysis of growth, margin and valuation drivers, and investment summary.--Ping Yu, Briefing.com
2:15PM Looking Ahead - Same-Store Sales : Come tomorrow morning, there won't be any shortage of tradeable items. To that end, Cisco and Qualcomm check in with their quarterly results tonight, the weekly initial claims and Q3 Productivity reports will be released at 08:30 ET, and the retailers will be providing same-store sales results for the month of October.
The table below provides estimates for 45 different retailers. The Briefing.com consensus estimate was computed from a survey of retail analysts following the designated company.
With respect to same-store sales performance in October, the consensus estimates are skewed toward expectations for growth as 31 of the 45 companies for which an estimate has been provided are anticipated to deliver positive results on a yr/yr basis. The fact that Halloween fell on a Friday this year should've helped general merchandise retailers, but overall, the market is a bit more reserved this go-around than it was ahead of the September results knowing that warmer than usual temperatures during the month most likely impeded sales of seasonal apparel.
The fires in California could very well impact the results of some retailers with stores in the area, but like Hurricane Isabel in September, the overall impact on same-store sales should be negligible. Retailers blaming the fires for a disappointment should be given some leeway by the market as the fires will be deemed an extraordinary event. By the same token, though, any retailer blaming the fires will warrant a closer look to be sure the fires, and nothing else, were the real source of disappointment. -- Patrick J. O'Hare, Briefing.com
Company Ticker Briefing.com Consensus
99 Cent Only Stores NDN +0.7%
Abercrombie & Fitch ANF -6.3%
Aeropostale ARO -2.6%
American Eagle Outfitters AEOS -18.7%A
Ann Taylor ANN +4.0%
bebe Stores BEBE +3.8%
BJ's Wholesale BJ +9.5%
Cache CACH +6.5%
Charming Shoppes CHRS +1.2%
Chico's CHS +12.8%
Children's Place PLCE +8.7%
Christopher & Banks CBK +1.5%
Costco COST +7.5%
Dillard's DDS -0.4%
Dollar General DG +4.0%
Dollar Tree DLTR +1.6%
Factory 2-U Stores FTUS -8.8%
Family Dollar FDO +4.8%
Federated FD +0.4%
Gadzooks GADZ -25.0%
Gap GPS +1.2%
Guess GES +5.3%
Gymboree GYMB -2.0%
Hot Topic HOTT +5.7%
J.C. Penney JCP -0.7%
Jos. A. Bank JOSB +6.0%
Kohl's KSS -6.0%
Limited LTD +2.5%
May Dept. Stores MAY -4.1%
Men's Wearhouse MW +6.0%
Michaels Stores MIK +1.1%
Nordstrom JWN +1.8%
Pacific Sunwear PSUN +6.0%
Pier 1 Imports PIR -0.9%
Ross Stores ROST +0.4%
Saks, Inc. SKS +1.4%
Sears S +1.7%
Sharper Image SHRP +8.0%
Shoe Carnival SCVL -8.0%
Talbots TLB +1.4%
Target TGT +2.8%
TJX Cos. TJX -0.6%
Urban Outfitters URBN +8.7%
Wal-Mart WMT +4.2%
Wet Seal WTSLA -9.3%
12:13PM Polo Ralph Lauren (RL) 30.92 +0.87: Already the world's largest-selling fashion designer, Polo Ralph Lauren (RL) wants more. The distinctive American brand intends to ramp up its presence in Asia and Europe, the latter presenting the greater challenge with its strong fashion house loyalties. CEO Ralph Lauren, however, has not been dissuaded, and has embarked on an unrelenting campaign that puts to test the universal appeal of his style.
After buying out most of the company's overseas partners and consolidating the business's operations, Ralph Lauren has proved that international customers are receptive to the brand's classic, clean lines. European revenues have more than doubled to $450 mln, and analysts estimate that the business could balloon to $1 bln by 2007. Asia has also contributed greatly to the sales picture, with demand in Japan fueling a rapid pace of new store openings.
Ralph Lauren has also assumed greater control over its Lauren and Ralph lines, having yanked both licenses from Jones New York (JNY) in June in a bitterly contested battle. The Spring 2004 Lauren line - the much larger of the two - is on track to begin delivery in January, and the company expects that the first full year of operations [FY05 (Mar)] should bring in approximately $400 mln in revenues.
The company's 2Q04 (Sept) report was a testament to management's efforts to realign its business. Retail sales comps rose 8%, driven by positive comps in all of Ralph Lauren's retail formats. Total sales, in turn, increased 10% to $707.8 mln. EPS matched the Reuters Research consensus estimate of $0.52 and was flat with the prior year period, impacted by start-up costs associated with the launch of the Lauren line.
Ralph Lauren reiterated its FY04 guidance of $1.74-1.79 (consensus of $1.79), which takes into account mid-single digit revenue increases. The company also said that Q3 (Dec) EPS should be $0.44-0.45 (consensus of $0.45) and Q4 (Mar) EPS should be $0.75-0.80 (consensus of $0.80), both of which are adjusted for the loss of licensing royalty associated with the Lauren and Ralph lines.
Briefing.com recommended purchase of RL shares in August of 2002, and since then, the stock has appreciated by 48%. RL has hit a new 52-week high today, and at these levels, we would take some profits from the shares' impressive run. We would not, though, close out a position entirely as the company stands to benefit from its traction in Europe/Asia and its control of its Lauren/Ralph lines. FY05 could prove to be a break-out year for the company, and stock multiples could be readjusted to be more on par with other luxury retailers - such as Coach (COH) and Tiffany (TIF) - as a result. -- Heather Smith, Briefing.com
9:25AM The Technical Take : A relatively quiet trading session on Tuesday as the market put together a generally consolidative session in the wake of the recent sprint to fresh 52-wk highs. Losses were minor and breadth mixed with both the S&P 500 and the Dow putting together inside trading days (lower high, higher low than previous session) which implies only limited selling pressure despite the minor increase in volume. This pullback did, however, snap the Dow's six session winning streak.
From a near term perspective we can make the case for a pause/consolidation to develop in the wake of the recent surge (Nasdaq Comp up 7% over 7 days) with short term technical readings holding on to a top heavy posture. This can be accomplished as a generally sideways event or as a modest slip back near the Oct 30/31 consolidation and retracement targets of the latest run. As mentioned above, the selling lacked conviction yesterday and the indices have merely edged back to initial support levels. However, given the recent sprint and the upcoming employment report, this would seem an opportune time for the market averages to catch their collective breath.
Longer term the extensive advance in terms of size and length that the market has embarked on has fundamentalists shouting high valuations and technicians yelling about high sentiment and low volatility. However, individual stock and sector leadership has remained strong with the daily and weekly charts are clearly in a bullish mode. And, despite potential for a short term consolidation until we can identify clear signs of selling (declines on stronger volume) and a breakdown in the charts, we will remain bullish from an intermediate term perspective. |
