From Briefing.com: 6:13PM Tuesday After Hours prices levels vs. 4 pm ET: Selling has continued in the extended session, although the catalyst for it - Intel's (INTC) somewhat problematic Q1 (Mar) report - is much different from the regular session. The semiconductor company fell short of the market's top-line expectation, and that has kept the bears in charge of the market action. Presently, the S&P futures, at 1125, are 3 points below fair value and the Nasdaq 100 futures, at 1472, are also 3 points below fair value.
The below table lays out Intel's news as well as the other notable news items of the evening:
After Hours Mover % Change Move Reason for Move
ADTRAN (00C0) +6% Mid-cap communications equipment company shows upside to the Reuters Research consensus top and bottom-line estimates in its Q1 (Mar) report; Declares an annual cash dividend of $0.32/share (dividend yield of 1.1%); Says it will issue guidance for Q2 (June) and FY04 (Dec) tomorrow morning during a 10:30 ET conference call
Intel (INTC) -2% World's largest chip company issues mixed Q1 (Mar) numbers and Q2 (June) outlook; Excluding a $0.017 charge, Intel beat by a penny with EPS of $0.28; Revenues missed the Street's expectation of $8.17 bln, rising 20% to $8.09 bln; Company guided Q2 revenues to the low-end of estimates at $7.6-8.2 bln; Gross margins were put at 60% (plus or minus a few points), near where they were in Q1
Linear Tech (LLTC) +3% Semiconductor name delivers a 42% increase in net income, to $0.27 per share, and a 36% increase in revenues, to $209.1 mln, in its Q1 (Mar) report; Both figures were ahead of Reuters Research estimates; In Briefing.com's preview on In-Play, a service for Platinum subscribers, we suggested the company would beat estimates; Conference call - where Linear should guide - is tomorrow at 11:30 ET
Maxim Integrated (MXIM) +1% Analog semiconductor company files a lawsuit against Qualcomm, claiming the company misused its extensive patent portfolio to squelch competition in the wireless market; According to Reuters, Qualcomm's CDMA code dominates the cellular market in the US and is growing in popularity in Asia and Latin America; QCOM is down 1% in the after hours
McDonald's (MCD) -3% Fast food chain preannounces Q1 (Mar) comparable store sales of 9.4% and issues above consensus EPS targets; Sees earnings at about $0.40 per share, representing a 38% increase over last year; Briefing.com has been positive on MCD in Story Stocks since July 29, and the stock has appreciated 23%; Traders are taking some profits from those gains tonight
Parker-Hannifin (PH) unch Industrial company raises its Q3 (Mar) EPS forecast to $0.80 from $0.55-0.65 citing volumes that increased 15% from last year; Parker plans to further revise its Q4 (Dec) projection when it reports Q3 earnings on April 19; Briefing.com has an Overweight position in Industrial on our Sector View page
Tomorrow, earnings reports from Bank of America (BAC) and Delta (DAL) await investors before the market open. Economic data in the form of the February Trade Balance and the March CPI are also due out. After the close, technology companies Advanced Micro Devices (AMD), Rambus (RMBS), and Texas Instruments (TXN) will release their Q1 (Mar) results.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
5:54PM Linear Tech beats by $0.02, beats on revs (LLTC) 39.25 -0.21: Reports Q3 (Mar) earnings of $0.27 per share, $0.02 better than the Reuters Research consensus of $0.25; revenues rose 36.0% year/year to $209.1 mln vs the $203.7 mln consensus.
5:53PM LLTC prelim $0.27, beats on revs :
5:08PM Maxim Integrated files claim against Qualcomm (MXIM) 49.11 -0.86: Co announced that it has filed a claim against Qualcomm in federal district court. MXIM's claim states that Qualcomm has violated U.S. antitrust laws and has misused its patents in maintaining dominance in the market for CDMA technology.
4:36PM Intel Fallout (INTC) 27.66 +0.06: --Update-- INTC bouncing around in reaction to mixed results, currently down 0.20 from its closing price and having traded in a range of $27.00 to $27.95 since the report hit. Secondary names include AMAT -0.01, KLAC -0.20, NVLS -0.20, AMD -0.05... As noted in earlier preview, market wasn't expecting fireworks from Intel, and pretty much got what it expected (mixed results with generally in-line guidance). As a result, the fallout from Intel's qtr has been minimal.
4:20PM INTC reaffirms 2004 gross margin forecast of 62% :
4:18PM INTC sees Q2 rev $7.6-$8.2 bln, consensus $8.11 bln; gross margin 60% :
4:17PM INTC Q1 gross margins 60.2% vs approx 60% guidance :
4:16PM INTC prelim $0.28 ex-items? vs $0.27 consensus; revs $8.09 vs $8.17 bln consensus :
4:30PM Dupont Photomask appoints Dr. Franklin Kalk to CTO (DPMI) 23.92 -0.64: Co announced the appointment of Franklin Kalk to the position of chief technology officer. Dr. Kalk will lead DuPont Photomasks' global research and development programs as well as coordinate co's research and development programs in DuPont Photomasks-Dresden/AMTC. Dr. Kalk joined DPMI in 1992, and has led several tool and material development programs and served as manager of the research and development group at the DPI Reticle Technology Center.
9:19AM MRVL target raised to $56-$58 at CE Unterberg 47.93: CE Unterberg maintains its Buy on Marvell (MRVL) and raises its target range to $56-$58 from $52. The firm believes Marvell's business is tracking well. The co should see strong revenue opportunities from microdrives, power management, and WLAN products. The new target is based on 30x-35x p/e multiple of FY06E EPS of $1.75.
11:24AM Johnson & Johnson (JNJ) 51.76 +0.56: By most accounts, Johnson & Johnson's (JNJ) Q1 (Mar) report was a great one. Net earnings rose 20% to a quarterly record - $2.5 bln, or $0.83 per share - and surpassed the Reuters Research consensus EPS estimate by $0.03. Total revenues increased 18% to $11.56 bln (consensus of $11.36 bln) with organic growth representing 12%. Citing the strong start to the year and the contribution from currency, management raised its FY04 (Dec) EPS guidance to 'as high as $3.00' from $2.95, the current consensus estimate.
The caveat to all of this, though, is that Johnson & Johnson regularly reports double-digit net income/sales growth... and it's done nothing for the stock. Shares have actually declined 10% in the past year - 21% over a two-year period - as investors have found various things to nitpick with the company. Encroaching competition, patent expiration, and a lack of exciting new products have overshadowed the good earnings news.
In the pharmaceutical segment (47% of net sales), two major products face patent expirations. Eprex, a member of the company's largest drug family, will lose market exclusivity in the next two years, and that should effectively cap sales with Amgen's (AMGN) products already dominating the anemia market. Duragesic, Johnson & Johnson's fourth largest drug, stands to lose its own patent on July 23 barring a six-month pediatric extension. Finally, a number of oral contraceptive products - like Ortho Tri-Cyclen, the nation's best selling birth control pill - have already gone off patent.
The medical devices and diagnostic division (36% of net sales) presents the other challenge to Johnson & Johnson. Cypher may never live up to expectations with Boston Scientific's (BSX) Taxus winning over accounts. The rival drug-eluting stent already claims 50% of the US market after a month on the market. Share outside of the US (where Taxus won approval earlier) appears to have stabilized, but this does not necessarily bode well for Johnson & Johnson at a disappointing 46%.
With all of these factors pointing to a slight slowdown in revenue growth, Briefing.com continues to see few upside catalysts needed to move JNJ out of its current rut. We remain confident that Johnson & Johnson will manage to overcome these problems - much as it has over its 100-plus year history - but believe better plays (Boston Scientific, Guidant, Pfizer) exist within the healthcare industry. Investors with a long time horizon are the only ones we would recommend JNJ to at this time, owing to the stock's reasonable valuation (at 17.5x estimated FY04 earnings) and 1.9% dividend yield, and the company's earnings track record. Heather Smith, Briefing.com
9:05AM Novatel Wireless (NVTL) 27.18: Novatel Wireless raised Q1 revenue guidance after the close on Monday. The provider of wireless data access solutions for portable computers and handheld devices forecast Q1 revenue of $14.8-15.1MM (+97.6-101.6% Y/Y). Q2 revenue is expected to come in at $17.0-18.0MM (+122.0-135.0% Y/Y).
Gross margin is expected to increase to over 28% in Q1 and 30% in Q2. Management expects the company to post higher operating income and positive GAAP net income in Q1 despite increases in R&D.
Reuters Research prints consensus Q1 EPS at $0.00 on $12.0MM and Q2 at $0.02 on $15.0MM. NVTL reports after the close on May 6.
Shares are, based on our inverted EVA / DCF model, priced for sustained upper teens revenue growth from C06 assuming steady Y/Y improvement to 15% operating margin.
The following table shows price multiples and Y/Y growth rates for NVTL compared against the communications equipment and computer systems & peripherals groups. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth
TTM 2004E 2005E TTM 2004E 2005E
Novatel Wireless (NVTL) 5.2 (34.6) 12.9 5.8 3.5 17.3% 121.2% 66.7%
Sierra Wireless (SWIR) 5.3 523.8 8.9 4.8 3.8 28.6% 85.5% 28.4%
Wavecom (WVCM) 0.8 (10.6) 0.5 0.6 0.5 (50.0%) (12.5%) 22.5%
Ericsson (ERICY) 2.9 (44.8) 3.1 2.9 2.7 (19.2%) 7.4% 8.0%
Motorola (MOT) 1.2 37.8 1.6 1.4 1.4 (0.8%) 8.0% 6.2%
Nokia (NOK) 1.6 11.6 2.2 2.2 2.1 (1.9%) 1.5% 7.9%
palmOne (PLMO) 0.8 30.2 1.2 1.1 1.0 6.4% 7.5% 15.8%
Research in Motion (RIMM) 7.6 (176.5) 14.5 7.3 5.7 65.3% 98.6% 29.0%
Communications Equipment 1.8 40.1 2.4 (5.1%)
Computer Systems & Peripherals 1.0 18.9 1.4 10.2%
Blended 1.3 27.4 1.8 3.4%
*P/SG Ratio: Trailing 12 month (Price / Sales) / Growth ratio as of April 08, 2004.
**P/OPG Ratio: Trailing 12 month (Price / Operating Income) / Growth ratio as of April 08, 2004.
NVTL has strong position in 3G UMTS. Carriers also demonstrating growing interest in NVTL's CDMA and GPRS solutions. UMTS products being deployed by multiple carriers in Asia and Europe during 2004. NVTL is the lead CDMA vendor to Sprint and a key EVDO vendor to Verizon. Carriers in Asia expressing interest in company's GPRS and CDMA solutions. Company will need to address challenge from embedded chip level solutions over the long-term.
Shares are attractively priced on a forward price-multiple-to-growth and on a discounted cash flow basis, particularly vs. direct competitor SWIR which is priced for sustained mid to upper 30% revenue growth assuming improvement to 18-19% operating margin. We would swap out of Sierra Wireless (SWIR 45.03) and Research in Motion (RIMM 109.06) into NVTL.--Ping Yu, Briefing.com
8:43AM Novellus Systems (NVLS) 35.30 Novellus Systems reported Q1 results after the close on Monday. The developer and manufacturer of CVD (chemical vapor deposition ), PVD (physical vapor deposition) and ECD (electrochemical deposition) equipment used for manufacturing semiconductors published EPS of $0.11 on revenue of $262.862MM (+10.3% Y/Y) vs. guidance of $0.08-0.10 on $245-255MM and Reuters Research consensus at $0.10 on $251.97MM. EPS, excluding $2.5MM of pre-tax litigation settlement, was $0.12.
Shipments came in at $311.0MM vs. forecast for shipments of $295-305MM on bookings of $330-340MM. Deferred revenue increased to $153.2MM.
Korea accounted for 25% of sales, the U.S. 22%, Taiwan 19%, Japan 13%, SE Asia 10%, Europe 8% and Greater China 3%.
Gross margin increased 134 bps Y/Y to 47.4%. Operating increased 457 bps Y/Y to 8.8%.
Market conditions remains strong and operating performance continues to improve. Management expects growth to continue to trend higher but at a more moderate, sustained pace. Bookings expected to be $375-390MM and shipments $340-360MM. Guided for EPS of $0.18-0.20 on revenue of $305-325MM (+27.6-36.0% Y/Y) vs. consensus at $0.18 on $292.91MM.
Shares are, based on our inverted EVA / DCF model, priced for sustained lower 30% revenue growth assuming steady Y/Y improvement to 25% operating margin.
The following table shows price multiples and Y/Y growth rates for NVLS compared against the semiconductor components group. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth
TTM 2004E 2005E TTM 2004E 2005E
Novellus Systems (NVLS) 3.6 (155.9) 5.7 4.3 3.4 4.5% 33.3% 27.9%
Applied Materials (AMAT) 5.7 (400.4) 7.7 4.9 4.0 (2.7%) 74.5% 22.4%
Axcelis Technologies (ACLS) 2.6 (24.5) 3.6 2.2 2.0 4.0% 67.4% 8.7%
Mattson Technology (MTSN) 3.1 (44.2) 4.0 3.1 2.4 (14.3%) 30.3% 26.2%
Semitool (SMTL) 2.7 (18.3) 3.2 2.5 1.5 (9.4%) 26.6% 68.8%
ASM International (ASMI) 1.1 60.4 1.7 1.3 1.0 12.2% 32.2% 27.6%
Semiconductor Capital Equipment 3.1 (242.8) 3.6 (10.5%)
*P/SG Ratio: Trailing 12 month (Price / Sales) / Growth ratio as of April 08, 2004.
**P/OPG Ratio: Trailing 12 month (Price / Operating Income) / Growth ratio as of April 08, 2004.
Management's upbeat comments likely to help float shares near-term. But we continue to view most of the semiconductor capital equipment group as offering very limited upside and would trade out of NVLS / the semiconductor capital equipment group given unsustainable growth and margin expectations, and above average relative valuations (see Novellus, Story Stocks, February 26, 2004).
NVLS shares are priced above fair value on a discounted cash flow basis and trade at a premium to peers on a relative value basis despite the 23% pullback since November 25, 2003, when we wrote that there is no justifiable upside even if NVLS grew revenue at 30% because the market is already pricing into NVLS shares sustained 30%+ revenue growth and factoring in over 2500 bps in gross and operating margin improvement.
For investors seeking a semiconductor capital equipment play, we would focus on ASM International (ASMI 23.92). ASMI has risen almost 40% since we first mentioned the company on the Tech Stocks page (October 14, 2003) but remains one of the most attractively priced names within the group.--Ping Yu, Briefing.com
biz.yahoo.com |
