From Briefing.com: Thursday's trading action speaks to the cautious optimism that underpin equity capital markets. Tech shares opened on average a modest 0.5% lower following Wednesday's gains, which were driven by optimism over bullish comments regarding technology spending from International Business Machines (IBM 91.09 +0.40) and the Gartner Group (IT 12.87 -0.17). By Thursday morning, tech investors decided to checked their enthusiasm at the markets' door, having had a full night to digest the fact that current growth expectations are for the most part baked into stock prices, as was reflected in the trading of Applied Materials (AMAT 24.74 -0.70) and Dell (DELL 35.64 -0.03) shares.
By session's end, tech shares were essentially flat, with decliners giving up on average 1.9% and advancers gaining 2.7%, the difference being offset by decliners outnumbering advancers almost 1.5:1. This cautious optimism is likely to continue until investors get fresh data points to chew on during mid-quarter updates. Until then, bulls will be more like cattle grazing on the plains, slow, in nondescript fashion, while the bears will be more like cubs picking at berries. Occasionally, there will come the backpacker who stumbles across the startled bear but for the most part, it's going to be uneventful cattle drives home, no bull runs for now.--Ping Yu, Briefing.com
6:38PM Thursday After Hours prices levels vs. 4 pm ET: Profit-taking has marked the after hours trade as investors have used a round of generally better than expected quarterly earnings reports as an opportunity to lock profits. Presently, the S&P futures, at 1057, are 1 point below fair value, while the Nasdaq 100 futures, at 1435, are 6 points below fair value.
Although the company accidentally posted its Q3 (Oct) results on its website approximately 40 minutes before the regular session close, Dell Computer's (DELL 35.41 -0.23) earnings have still dominated the extended session. EPS rose 24% from the prior year-period, to $0.26, and matched the Reuters Research consensus estimate. Net revenues rose 16% to $10.6 bln due, in part, to a 30% increase in Dell's global server shipments. Management said that it anticipates Q4 (Jan) shipments of up 25%, revenues of up 18% to $11.5 bln (consensus of $11.2 bln), and EPS of up 22% to $0.28 (consensus of $0.28). DELL shares, however, have weakened some - a move Briefing.com anticipated in our Earnings Preview when we said that much of Dell's expected growth is already priced into shares.
BEA Systems (BEAS 13.30 -0.80) stock has also lost steam despite the application infrastructure software company's reassuring Q3 (Oct) earnings report. BEA Systems matched the consensus expectation of $0.08 on revenues that rose 8% to $252.1 mln. The company's competitors include the likes of IBM, ORCL, and SUNW.
Coffee king Starbucks (00C0 32.35 -0.65) announced record revenues and EPS for is fiscal fourth quarter, with revenues coming in at $1.08 bln (up 25%) and EPS checking in at $0.17 (up 13%). The latter was in line with the Reuters Research consensus estimate. The company also said that continues to expect FY04 EPS of $0.83-0.85, which includes an approximately $0.02 per share benefit from a 53rd week in the year.
Discount retailer Kohl's (KSS 50.58) reported an 11% drop in Q3 (Oct) EPS, to $0.35, that was in line with the Street's consensus estimate. The top-line, however, missed the $2.45 bln consensus forecast, rising instead just 12% to $2.39 bln as comparable store sales decreased 1.3%. The company's lackluster results have been an extension of its recent trend of weak sales and declining profitability.
Finally, shares of Univision (UVN 34.39 +1.41) have bucked the negative tone of trading, and found a respectable bid in the after hours market. The Spanish language media company surpassed the Reuters Research estimate by $0.03 - coming in at $0.16 - on revenues that increased 19% to $321.1 mln. The company also issued encouraging FY03 guidance, putting EPS and revenues at $0.52-0.54 and $1.30-1.31 bln versus the consensus of $0.52 and $1.26 bln, respectively.
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
3:26PM Volume Breakout -- Hifn (HIFN) 12.83 +0.93: Up strongly today on 12x avg daily volume is Hifn, a chipmaker for network infrastructure developers. In its SepQ report, the co said that after a difficult year, it is now seeing a steady recovery, particularly with its larger networking customers. In fact, Cisco became its largest semiconductor customer for the first time, reflecting the start of volume shipments associated with earlier design wins... There is only one analyst covering the stock, but the estimate for sales next year is $33 mln, a 60% jump over the just completed fiscal year. However, the co is still unprofitable. Note, the stock has moved aggressively higher the past few weeks, but continues to be a trader favorite.
3:25PM Dell Computer reports in line, guides Q4 EPS in line, revs above consensus (DELL) 35.83 +0.18: Reports Q3 (Oct) earnings of $0.26 per share, in line with the Reuters Research consensus of $0.26; revenues rose 16.2% year/year to $10.62 bln vs the $10.52 bln consensus. Company sees Q4 EPS of $0.28 vs consensus of $0.28 on revenues of $11.5 bln vs consensus of $11.2.
2:46PM Applied Materials (AMAT) 24.63 -0.81: After the close Wednesday, Applied Materials printed Q4 EPS of $0.06 on revenue of $1.2B (-15.5% year-over-year and +11.5% sequentially) vs. consensus at $0.05 on revenue of $1.1B. Management guided for new orders in Q1 to grow by approximately 20% sequentially, with EPS of $0.06-$0.08 on revenue of $1.26B-$1.30B (+5%-8% sequentially). This compares against consensus EPS of $0.07 on $1.2B. Please visit the Stock Brief page for our analysis of Q4 results and growth, margin and valuation drivers, and investment summary.--Ping Yu, Briefing.com
Applied Materials: Not Enough Bananas to Go Around
13-Nov-03 14:29 ET
[BRIEFING.COM - Ping Yu] After the close Wednesday, Applied Materials (AMAT 24.63 -0.81) printed Q4 EPS of $0.06 on revenue of $1.2B (-15.5% year-over-year and +11.5% sequentially) vs. consensus at $0.05 on revenue of $1.1B.
Management guided for new orders in Q1 to grow by approximately 20% sequentially, with EPS of $0.06-$0.08 on revenue of $1.26B-$1.30B (+5%-8% sequentially). This compares against consensus EPS of $0.07 on $1.2B.
Backlog slipped from $2.53B in Q3 to $2.50B.
Margins Analysis
Gross margin improved 880 bps sequentially and declined 120 bps year-over-year to 40.5% as AMAT realized improving efficiencies on sales of 300mm systems, and sub-0.15µ technologies accounted for a higher percentage of the sales mix..
Operating margin improved 820 bps sequentially and declined 900 bps year-over-year to 0.3%. Management cut SG&A by $46MM or, as a percent of sales, by 150 bps sequentially and 130 bps year-over-year to 12.2%, and trimmed R&D by $45MM or 20 bps year-over-year to 18.7% of sales.
Valuation
AMAT trades at 7.0x F04 revenue of $5.8B (+29.6% year-over-year) and 5.2x F05 revenue of $7.8B (+34.5% year-over-year); 53.5x F04 EPS of $0.46 and 28.6x F05 EPS of $0.86. As noted in the AMAT Q4 preview, on an inverted DCF/EVA basis, assuming substantial operating margin expansion to over 20% and aggressive balance sheet management, AMAT's valuation implies that revenue growth will have to accelerate into the high-30% range for the eight years beginning in F05, or almost 8% sequentially every quarter through 2012, to justify the current valuation.
Summary: Given AMAT's clear leadership position, AMAT shares can sustain a leadership price multiple of about 5x forward sales. However, for shares to move higher from current level, AMAT will have to deliver growth in the high-30% range implied by our model. This, against semiconductor industry capex growth of 25% in 2004, indicates AMAT would have to capture significant market share. Competitors have been gearing up for battle. With our model already factoring in over 1300 bps improvement in operating margin, the battle for market share and the push to move shares higher are all uphill battles.--Ping Yu, Briefing.com
2:07PM BRKS -- Volume Alert 26.15 -0.42: Stock moves to lows of day; we are hearing that selling is due to comments made at the JP Morgan Small Cap Conference that are being perceived as somewhat cautious.
12:57PM Wal-Mart (WMT) 55.89 -2.07: The Q3 earnings results from the world's largest retailer are in and the market doesn't like them. The source of disappointment lies in the recognition that Wal-Mart missed the consensus EPS estimate of $0.47 by a penny and registered its first decline in gross margin in eight quarters. From a top-line perspective, there was little to gripe about as net sales of $62.5 bln were up 13.1%, which was slightly ahead of the Reuters Research consensus estimate of $62.2 bln.
The bottom-line here is that the market didn't like Wal-Mart's bottom-line, or rather, it didn't like the fact that Wal-Mart was unable to achieve greater expense leverage in the face of a solid sales performance to deliver more meaningful profit growth. That may seem a bit picky when taking into account that Wal-Mart actually reported record sales and earnings for the period, but when a stock trades at a near 50.0% premium to the market multiple - like WMT was - there can be no chinks in the armor.
As for the decrease in gross margins, it was attributed largely to the markdowns the company took in August to clear its summer inventories. It was noted by management, too, that pressure on margins will continue given consumers' cautious spending habits that are resulting in higher sales for opening price point products. Consolidated operating expenses in Q3 were down 7 basis points on a yr/yr basis, but upward pressure from utilities and insurance costs acted as a restraint on operating expense improvement.
Wal-Mart conceded that its performance quality in Q3 didn't measure up to its performance in the first half of the year, and although it believes the holiday season will be better than last year, it acknowledged that it believes the season will be more competitive than normal as customers remain cautious. For Q4, WMT is anticipating EPS of $0.63-0.65 (consensus is $0.65) and comp store sales to be up 3-5%; it expects EPS of $2.03-2.05 for the fiscal year (consensus is $2.06). Previously, Wal-Mart guided to $2.00-2.05 for the fiscal year, but added that it had a preference for the higher end of the range.
Clearly, the market was hoping for more from Wal-Mart, but its conservative outlook has knocked the wind out of the retail sector's sails today. That is understandable given the strength in the sector of late, and let's not forget either that the market didn't appear to have too many qualms last week with Wal-Mart's October same-store sales performance and forecast for November same-store sales growth of 3-5%. Remember, WMT traded higher the day that guidance was offered.
Its losses today, undoubtedly, are a function of valuation concerns that Briefing.com highlighted following Wal-Mart's Q2 report in August. For all intents and purposes, though, the company's Q3 report was a good report and the conservative outlook was nothing out of the ordinary for its conservative-minded management team. The problem with Wal-Mart's report was that it just wasn't good enough to sustain the stock's upward momentum. In brief, there is cause in Wal-Mart's latest update to take some profits, but there is no cause for long-term investors to jump ship on this well-managed, industry-leading company that is growing its bottom-line at a double-digit rate. -- Patrick J. O'Hare, Briefing.com
1:08PM ON Semi recognized in China for energy conservation products (ONNN) 4.83 +0.12: Co announces that it has become the first and only chipmaker to receive recognition two consecutive years running from the China Certification Center for Energy Conservation Products. CECP presented ON Semiconductor with a Partner of China Certification on Energy Conservation award yesterday in Beijing to recognize the co's support for China's push for standby power reduction in office automation products including printers and fax machines. The award comes just 14 months after CECP recognized co's efforts to reduce "leaky electricity" as a major source of wasted energy from color-television sets that continue to use power in standby mode.
12:52PM SanDisk needs additional time to compile 10-Q due to previously announced theft of shares (SNDK) 83.67 -1.32: --Update-- "The Registrant required additional time to compile the necessary information for its Form 10-Q for the quarter ended September 28, 2003 regarding the previously announced theft of certain of its shares of United Microelectronics Corporation by an employee of its Taiwan law firm."
12:17PM New 52-Week Highs : The number of new highs today is slightly larger than the past few days, led by gold and semi equipment stocks... Tallies so far today for new highs vs lows are 190-4 (NYSE) and 205-10 (Nasdaq). Sectors well-represented on the 52-week high list include Gold (ASL, AU, BGO, CDE, GG, GLG, GSS, MNG), Semi Equip (KLIC, LRCX, LTXX, MTSN, VECO), Airlines (BAB, KLM, XJT), Retail Apparel (FOSL, URBN)... Notable new lows include recent IPO Acusphere (ACUS 8.03 -0.52) which is well below its $14 offering price, Myogen (MYOG 12.00 -0.33), Trimeris (TRMS 23.93 -0.99).
10:21AM Micron: TWP comments on DRAM datapoints (MU) 13.40 -0.20: Thomas Weisel indicates that seasonal demand appears to remain strong, but seasonal build has probably peaked, so pricing is expected to trend lower.
10:15AM LSI Logic surges 8.8% after announcing spin-off of storage biz (LSI) 10.04 +0.81: LSI plans to separate its storage systems operations from its mainstream semiconductor business and create an independent storage systems company. In Q3, co's Storage Systems biz had revenues of $104 million, or 23 percent of the $450 million reported by LSI Logic.
9:38AM Tessera Technologies IPO prices above range, to begin trading today (TSRA) 13.00: Tessera Technologies, a developer of semiconductor packaging technology, prices its IPO at $13, well above its expected $9-$11 range. TSRA focuses on developing chip-scale packaging, or CSP, and multi-chip packaging technology. Its CSP technology allows customers to assemble semiconductors into packages that are almost the size of the chip itself, and its multi-chip packaging technology enables multiple chips to be vertically stacked in almost the same area as a CSP. Its technology is currently licensed to 44 companies, and has been incorporated into more than 2.5 bln semiconductors worldwide. In 2002, the co posted revenue of $28.3 mln and net income of $6.5 mln... This is a Lehman-led deal for 7.5 mln shares. The pricing indicates there is strong demand as technology IPOs are hot, especially if they are profitable like TSRA.
ChipPAC (CHPC) 7.98 -0.22: Company sees Q4 (Dec) revenues at the high-end of previous guidance of 10-15% growth over Q3 2003, when CHPC brought in revenues of $105.42 mln. Revenue growth of 15% implies revenues of $121.2 mln vs consensus of $118 mln.
LTX Corp (LTXX) 16.65 +0.88: Before the open, reported Q1 (Oct) loss of $0.19 per diluted share, $0.06 better than the Reuters Research consensus of ($0.25); revenues rose 55.3% year/year to $46.6 mln vs the $38.8 mln consensus. Co also guides Q2, sees loss of $0.09-0.11, vs the R.R. consensus of ($0.18), and revenues of $51-54 mln vs an estimate of $44.8 mln. |
