From Briefing.com: OPEC, the 11-country oil cartel, agreed to an immediate cut of 1.5mb/d in crude oil leakage (over-production) and to lower output quotas by 1mb/d to 23.5mb/d on April 1. The 10% cut in oil production had little impact on equities but prompted consternation at the White House which cautioned producers against taking actions that may undermine the U.S. economy. OPEC is seeking to pre-empt a drop in oil prices as the Northern Hemisphere exits winter into spring and then summer, when demand is expected to fall to under 23.3mb/d. According to the International Energy Agency, OPEC oil production averaged 27.9mb/d in December.
Investors generally stayed on the sidelines ahead of Greenspan's semi-annual report on monetary policy before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday.
The Dow (DJI 10613.85 +34.82) gained 0.33%, the S&P (SPX 1145.54 +5.73) rose 0.50% and the Nasdaq Composite (IXIC 2075.33 +14.76) increased 0.72%.
Tech shares generally mirrored the major indices. The Philadelphia Semiconductor Index (SOXX 516.94 +2.78) rose 0.54%. Advancers led decliners 1.6:1. The Briefing.com Tech Index (BTI) gained 0.9%. Advancers outnumbered decliners 1.8:1 with advancers adding on 2.6% and decliners shedding 2.1%.
Looking ahead to Wednesday, Brocade Communications (BRCD 6.64 -0.01) and Computer Sciences (CSC 46.17 +0.04) report after the close.--Ping Yu, Briefing.com
6:05PM Tuesday After Hours prices levels vs. 4 pm ET: After this afternoon's stealth rally, the market has settled down and resumed a more cautious stance. Presently, the S&P futures, at 1142, are 3 points below fair value, and the Nasdaq 100 futures, at 1498, are 4 points below fair value. Sellers have once again booked profits on a number of earnings reports this evening.
The below table lists tonight's most notable announcements, and the reasons behind the stock's resulting move.
After Hours Mover % Change Move Reason for Move
Auto (F and GM) F +2% GM unch New analyst at JP Morgan assumes coverage of the domestic autos and upgrades F to Overweight from Neutral & downgrades GM to Neutral from Overweight; Sees an accelerating product cycle and 'above GM' upside potential at F, and believes that GM's company fundamentals are priced in
Monster Worldwide (MNST) -4% Global provider of career solutions tops Reuters Research Q4 (Dec) EPS and revenues estimates, but issues cautious guidance for Q1 (Mar); Says EPS should be 'modestly higher than the $0.09 it reported in 1Q03' - versus the consensus estimate of $0.12; Traders sell into the stock's 7% 5-day rally
priceline.com (00C0) +7% After warning for Q4 (Dec) in Nov, the e-commerce pricing provider beats the revised Street EPS estimate by $0.02; priceline guides Q1 (Mar) and Q2 (June) EPS in line and adds that, for Q1, it is targeting a 25-30% y/y increase in gross travel bookings; Traders bid up the stock that has been down 26% since Nov
Prudential (PRU) unch Financial services giant reports Q4 (Dec) EPS of $0.64, which was $0.03 ahead of the consensus expectation; Board also authorizes a new stock repurchase program for up to $1.5 bln in shares; Newly public company has been on a steady climb (+64%) since last March
Sycamore Networks (SCMR) -8% Optical networking provider matches Wall Street's Q2 (Jan) forecast calling for a loss of $0.04 per share, but misses the consensus top-line estimate of $7.8 mln; Sycamore instead comes in at $6.9 mln; Related companies ALA, CIEN, LU, and NT are down tonight in sympathy
Tomorrow, traders should show more conviction as this week's headlining event - Alan Greenspan's testimony to Congress - commences tomorrow. The FOMC Chair will start first with the House Financial Services Committee (and end with the Senate Banking Committee on Thursday) and discuss his outlook on the economy. The market will be particularly attuned to any language that indicates when the FOMC will raise rates. For more perspective on how the market will react, visit Briefing.com's Looking Ahead column.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap.
-- Heather Smith, Briefing.com
4:44PM Genus Inc beats by 2 cents (GGNS) 4.32 -0.31: Co reports Q4 EPS of $0.01, $0.02 better than consensus of ($0.01); sales were $15.3 mln, vs consensus of $14.7 mln.
4:40PM GGNS prelim $0.01, 2 cents ahead :
4:14PM Metrologic Inst announces departure of president (MTLG) 25.79 -0.27: Co announces that President & COO Thomas Mills has given notice of his intention to take a year-long sabbatical of independent study and extended travel with his family effective Feb 27, 2004.
2:21PM OVTI Color 46.67 -2.17: As noted in 10:02 comment, OmniVision (OVTI) is a notable laggard today. Pacific Growth suggests that two separate events are pressuring the stock. Last night, shares of Nikon were down sharply in Japan, in response to comments made by the Company. Apparently, Nikon does not expect to hit its targets for the FY:04 ending in March due to price pressures and lens shortages. These comments sparked speculation by some Japanese analysts that the DSC market may be in a state of oversupply; to firm's knowledge, co does not sell into Nikon or any of the top 5 Japanese camera makers, and therefore firm believes the direct impact is somewhat muted... In addition to the negative comments from Nikon, Digitimes is reporting that three larger DSC makers saw January M/M declines of 14%, 50%, and 44% respectively. It was of course noted that the Chinese New Year fell completely in January, which is typically a seasonally soft period to begin with.
3:11PM Triquint Semiconductor (TQNT) 8.79 -0.06: Triquint published Q4 results last week in line with or above the company's guidance on December 10, 2003.
Revenue increased 22.4% Y/Y to $89.008MM, principally as a result of increased sales of wireless phones, WLAN and network infrastructure products. The optoelectronics business is stabilizing; achieved $10.2MM in revenue and positive gross margin but is not expected to break-even any time soon. Management pegs break-even at $15-18MM in revenue per quarter.
Gross margin declined 411 bps Y/Y to 32.5% but operating margin improved from a loss to 2.9% on cost reduction and volume efficiencies.
Company continues to see strong bookings for the company's products. Guided for Q1 revenue of $81-83M (+15.8% Y/Y) and gross margin of 31-33%. Operating expenses is expected to come in at $28-29MM (33.7-35.8% of sales). Full year 2004 revenue is forecast at $340-355MM (+8.9-13.7% Y/Y) and gross margin at 32-34%. Operating income is expected to be at or above break-even.
TQNT shares have risen over 15% since December 10. Shares are now, based on our inverted EVA / DCF model, priced for sustained low 20% annual revenue growth, assuming steady Y/Y improvement to 35% operating margin, up from 20% growth and 25% operating margin in December. Management has indicated the operating margin for most of the company's businesses will generally fall between 10-15%. We would take the opportunity to protect gains and swap into other more reasonably priced names including Intersil (ISIL 25.00 +0.24).--Ping Yu, Briefing.com
12:01PM ST Assembly Test Services (STTS) 11.14 -2.20: ST Assembly Test Services signed a definitive agreement to acquire ChipPAC (CHPC 8.75 +0.85). CHPC shareholders will receive 0.87 STTS share for each share of CHPC. The proposed name for the combined company is STATS ChipPAC.
Combination makes compelling strategic sense. It leverages the strengths and capabilities unique to each company to create a leading provider of end-to-end semiconductor testing and packing solutions with strong revenue synergies and very little overlap in revenue, customers (one 10%+ customer), R&D and facilities.
The combined firm will have a broad footprint covering the world's major foundry centers (China, Korea, Singapore, Taiwan) and annual revenue of over $1B, and is expected to generate annual cost savings of over $25-30MM.
Individually, CHPC and STTS are among the more attractively valued technology names. Both companies are growing above the industry average, improving capacity utilization and expanding margins. Combined, STATS ChipPAC is positioned to accelerate revenue growth and margins expansion.
We think revenue growth will accelerate, driven by cross-selling opportunities and CHPC's strong competitive position in China (CHPC's largest and fastest growing market with a CAGR (compound annual growth rate) of 45%), as well as continuing improvements in industry fundamentals.
We think the combination will yield incremental margin expansion opportunities, on top of the aggressive measures both management teams took to take costs out of their respective companies during the downturn, driven by revenue and cost synergies and improving capacity utilization. Testing and packaging services generally lag foundry services in a recovery. Note that capacity utilization at leading foundries is running at or above 100% vs. 72% at CHPC (up from 68% in Q2) and 73% at ST Assembly (up from 69% in Q3).
We would buy both CHPC and STTS as stand-alone businesses. CHPC shares are trading at a 12% discount to the offer, making it an attractive option on STTS.--Ping Yu, Briefing.com
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