From Briefing.com: 6:17PM Wednesday After Hours prices levels vs. 4 pm ET: A bit more buying in the extended session after today's rally in the broader market. A number of encouraging earnings pronouncements from tech companies specifically, along with a slew of better than expected May same store sales results, has kept sentiment upbeat. Presently, the S&P futures, at 1125, are flat with fair value, and the Nasdaq 100 futures, at 1467, are 2 points above fair value.
The below table lists the night's relevant developments, as well as the stocks' reactions:
After Hours Mover % Change Move Reason for Move
Aeropostale (ARO) +6% Teen retailer delivers a May same store sales increase of 27% - well ahead of the Briefing.com estimate of +5.8%; Year-to-date, comparable store sales have jumped 20.7%, compared to 1.0% in the year-ago period; Briefing.com wrote a positive story on ARO in Story Stocks on May 21, and shares have appreciated 11% since then
Comverse Tech (CMVT) +4% Communications software supplier beats both the Q1 (Apr) top and bottom-line consensus estimates, and goes on to raise its FY05 (Oct) outlook on its conference call; Now sees EPS of $0.22 and sales of $917 mln versus the Reuters Research estimates of $0.17 and $872.93 mln; Company cited strong orders for the revision
Hovnanian Enterprises (00C) +1% Mid-cap homebuilder reports a 33% increase in Q2 (Apr) EPS, to $1.06 (consensus of $1.03), and a 35% rise in revenues, to $918.8 mln (consensus of $909.9 mln); Due to a 69% surge in the dollar value of its backlog, Hovnanian raised its FY04 (Oct) EPS projection 'to exceed $5.00 and revenue forecast to growth of 'more than 28% to $4.1 bln;' HOV has sold off 42% since March - when interest rates first started to rise
Seagate Tech (STX) +2% Maker of computer hard disk drives classifies seasonal demand as 'normal' for Q4 (June); Management did not give specific financial guidance but did note some negative pricing trends in the mobile phone market; Stock has not dropped, though, as Seagate did not have anything overly negative to say; The stock plunged 39% Jan-May after the company cut its Q3 (Mar) outlook 3x, and thus the tepid update (against that backdrop) has been well-received tonight
Ulticom (ULCM) +7% Service-enabling signaling software provider turns in Q1 (Apr) earnings of $0.05 per share, $0.02 better than the Reuters Research estimate, on revenues that rose 45% to $13.2 mln; Shares are down 20% from their Jan highs and were trading along their 52-week lows
Tomorrow, there are no earnings reports on the calendar, but there are several economic reports. The revision to Q1 productivity, initial claims for the week of May 29, April Factory Orders, and May ISM Services are all on tap and will provide the market with a good read on the labor, manufacturing, and service markets. There will also be more May same store sales that will be released before the market opens.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
5:55PM Integrated Device reaffirms 1Q05 rev guidance of growth of 6-10% (IDTI) 14.06 -0.49: Co reaffirmed its previously projected outlook for revenue growth in the current quarter of 6-10% from the previous quarter's revenues of $94.5 mln (approx $99.6-103.4 mln), Reuters consensus is $102.1 mln. In addition, co announced the closing of the ZettaCom acquisition in early May 2004 for approx $35 mln in cash.
4:35PM Brooks Automation names Edward Grady as CEO effective October 2004 (BRKS) 19.26 -1.20: Co announces that Chairman & CEO Robert Therrien would transition the position of CEO to President & COO Edward Grady effective Oct 1. Therrien will remain as Chairman of the Board of Directors and will serve as a consultant to the co following his retirement on Dec 31, 2004. Grady's appointment as CEO represents the completion of a process that was initiated with his being hired as BRKS's President and COO in Feb 2003 and named a Director in Sept 2003.
Close Dow +60.32 at 10,262.97, S&P +3.79 at 1,124.99, Nasdaq -1.79 at 1,988.98: It was another roller-coaster day for the market, which spent the first half of the session on a track of fresh session lows, but only to recover the entirety of its losses in an afternoon rally that saw the major averages close within a short reach of their respective session highs... The drift lower through the morning was largely the result of a lack of leadership to the upside and participants' hesitancy ahead of tomorrow's OPEC meeting and Friday's Employment report, reflected in the light volume totals ... Yet, at their worst, losses were only mild...
Accordingly, encouraged by a steady decline in the price of crude oil, the market rallied through the afternoon... The price of crude oil dropped over 5%, or $2.37 to $39.96/bbl as oil ministers from several countries, including Qatar, Saudi Arabia, Algeria, Kuwait, and United Arab Emirates reiterated their commitment to vote for increased supply of crude oil at tomorrow's OPEC meeting, with the Kuwaiti Minister saying he sees prices falling $6-8/bbl in 2-3 weeks...
Because of the drop in crude oil prices, sectors including transportation and airline rallied, with groups such as hardware, REIT, chemical manufacturing, and casino & gaming also being among the leaders to the upside... Laggards of note, in the meantime, included the semiconductor, disk drive, networking, oil & gas services, metal mining, and gold sectors... Elsewhere, the bond market closed with losses across its yield curve and the 10-year note down 9/32, bringing its yield up to 4.74%...NYSE Adv/Dec 1994/1303, Nasdaq Adv/Dec 1609/1493
10:02AM Sector Watch: Semi Index --SOX-- stabilizes near 50 day avg : -- Technical -- As noted in the 09:44 update the Semi sector has displayed relative weakness in the early going. The SOX index (477.02, -1.8%) has thus far, however, been able to stabilize above its 50 day averages (simple (475.44, exp 474.50)-- session low 476.27.
3:42PM Intel (INTC) 27.94 -0.39: Intel is scheduled to provide a mid-quarter business update after the close on Thursday. During the Q1 conference call, management pegged Q2 revenue at $7.6-8.2B, gross margin at 60% +/- a few points, and operating expenses (R&D plus MG&A) at $2.4B. Full year gross margin is expected to be 62% +/- a few points, full year R&D to be $4.8B, and capital spending to be $3.6-4.0B. Reuters Research prints consensus EPS at $0.26 on $8.010B.
Listen for management to at least narrow guidance to high end of range.
Prerequisites for shares to move higher include both positive sales momentum and expanding margins. Look for improving traction on new product introductions, recent design wins and for increased enterprise IT spending, and for expanding margins as the company ramps 90nm production, improves results in the flash business, gains economies of scale in the wireless business and maintains a tight rein on operating expenses.
Looking beyond the quarter, Intel is driving convergence of computing and communications by integrating computing, wireless, broadband and memory technologies into modular solutions that allow customers to accelerate product development while improving product performance by orders of magnitude.
Centrino is one example of how Intel is defining and building a WiFi-, WiMax- and 3G-enabled ecosystem around Intel architectures from network processors for infrastructure solutions to applications processors for client solutions. New Hermon communications processor is a monolithic solution that brings 3G to the mainstream.
This is a long-term market building process. To put into perspective the global opportunity, television penetration is estimated to be at the equivalent of approximately 80% of the worldwide population, cellular phones 20%, and PCs 15%. Less than 5% of the population is broadband-enabled.
On the operating front, look for a pickup in the pace of margin improvement as shipments of 90nm-based CPUs exceed 130nm-based units in Q3. Intel is developing 0.65nm with production expected to begin in 2005.
Intel shares, based on our inverted EVA/DCF model, priced for sustained lower 20% revenue growth from C06 assuming upper 30% operating margin.
The following table shows price multiples and Y/Y growth rates for INTC compared against direct comps and the semiconductor group. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth
TTM 2004E 2005E TTM 2004E 2005E
Intel (INTC) 3.2 14.3 5.9 5.4 4.8 17.8% 13.8% 11.1%
Advanced Micro Devices (AMD) 0.6 (73.7) 1.4 1.1 0.9 61.0% 48.4% 11.5%
ATI Technologies (ATYT) 1.8 22.5 2.4 2.2 1.9 0.3% 34.9% 13.2%
nVidia (NVDA) 1.5 45.7 2.1 1.9 1.7 9.1% 13.6% 7.6%
Applied Micro Circuits (AMCC) 6.4 60.6 12.8 4.9 4.1 29.1% 58.0% 21.7%
Broadcom (BRCM) 3.0 (17.9) 7.2 5.2 4.3 58.4% 60.3% 19.0%
PMC Sierra (PMCS) 4.5 293.9 12.3 9.0 7.2 22.8% 37.0% 24.9%
Qualcomm (QCOM) 6.7 18.8 13.3 11.8 10.9 14.0% 14.4% 8.7%
Intersil (ISIL) 3.0 37.8 6.4 5.4 4.6 18.4% 18.5% 16.8%
Marvell Technology Group (MRVL) 2.8 63.0 7.6 5.3 4.4 62.3% 42.1% 21.7%
Sun Microsystems (SUNW) 0.9 (20.3) 1.3 1.4 1.3 (6.9%) (3.5%) 10.1%
Semiconductor Components 2.7 31.5 4.5 18.9%
*P/SG Ratio: Normalized trailing 12 month (Price / Sales) / Growth ratio as of May 28, 2004.
**P/OPG Ratio: Normalized trailing 12 month (Price / Operating Income) / Growth ratio as of May 28, 2004.
Intel shares trade close to fair value on an EVA/DCF basis and at a premium to comps on a multiples basis, which reflects company's market dominance. Modest upside for the patient investor.--Ping Yu, Briefing.com
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