From Briefing.com: 5:05PM Advanced Micro resumes trading... now trading 35.80 after-hours (AMD) 34.15 +1.29 :
4:41PM Advanced Micro beats by 19 cents, issues Q1 guidance (AMD) : Reports Q4 (Dec) earnings of $0.45 per share, excluding non-recurring items, $0.19 better than the Reuters Estimates consensus of $0.26; revenues rose 45.4% year/year to $1.84 bln vs the $1.65 bln consensus. AMD reports Q4 gross margin 46.4% vs 42.9% street expectations. Co expects Q1 sales to be "flat to slightly down" seasonally from 4Q05 (Q1 consensus $1.404 bln); if achieved, this would approach a 70% increase from comparable sales in 1Q05.
4:56PM Lam Research beats on top and bottom lines (LRCX) 38.32 +0.70 : Reports Q2 (Dec) earnings of $0.55 per share, $0.17 better than the Reuters Estimates consensus of $0.38; revenues rose 11.6% year/year to $358.2 mln vs the $342.7 mln consensus. New orders recorded in backlog increased 24 percent sequentially to $403 mln.
4:36PM QLogic beats by $0.03 (QLGC) 36.06 : Reports Q3 (Dec) earnings of $0.38 per share, excluding non-recurring items, $0.03 better than the Reuters Estimates consensus of $0.35; revenues rose 11.4% year/year to $129.2 mln vs the $124.6 mln consensus.
4:15PM NVE Corp reports Q3 results (NVEC) : Reports Q3 (Dec) earnings of $0.13 per share before taxes, may not be comparable to the single analyst estimate of $0.07; earnings after taxes were $0.09. Revenues rose 2.0% year/year to $2.6 mln vs the $2.7 mln single analyst estimate.
4:11PM Seagate Tech reports; guides Q3 & FY06 above consensus (STX) : Reports Q2 (Dec) earnings of $0.57 per share, including $20 mln for stock based compensation and a $6 mln charge, may not be comparable to the Reuters Estimates consensus of $0.56; revenues rose 24.5% year/year to $2.3 bln vs the $2.2 bln consensus. Co issues upside guidance for Q3, sees EPS of $0.55, excluding stock based compensation vs. $0.45 consensus; sees Q3 revs of $2.25 bln vs. $2.06 bln consensus. Co issues upside guidance for FY06, sees EPS of $2.20-2.25, excluding stock based compensation vs. $1.98 consensus.
4:15 pm : From start to finish, Wednesday's stock market languished in negative territory. Despite several recovery attempts, the indices were unable to survive the effects of disappointing Q4 reports - and Q1 guidance - from tech titans Intel (INTC 22.54 -2.98) and Yahoo (YHOO 35.19 -4.92). A 3% drop in Japan's Nikkei exacerbated the early bearish sentiment that pervaded today's session, and a pullback in crude catalyzed a sharp, market-dragging drop in the Energy sector.
Leadership failed to emerge, and seven of the ten economic sectors levied losses. Twelve percent declines in both Intel and Yahoo shoved the Tech sector nearly 2% lower in the early going and fostered the Nasdaq's underperformance. With respect to their reports, the former checked in below Wall Street's profit and revenue expectations and simultaneously issued downside revenue guidance for the current quarter. Yahoo also fell short of analysts' estimates, and its in-line outlook proved a disappointment. While those reports will not determine the outcome of the current earnings season, the disappointing results and accompanying outlooks feed concerns over the earnings growth rate deceleration that will likely occur during 2006.
IBM (IBM 83.83 +0.83) offered some countering support following its better than expected earnings, gross margin, and bookings results. Optimism ahead of Intel rival Advanced Micro's (AMD 34.34 +1.48) report helped send semiconductors back toward the unchanged mark. Just when the Tech sector started to improve, though, an 0.8% reversal in the price of crude futures incited aggressive selling across the Energy sector. Commodities in general experienced consolidation: Gold futures lost 1.8%. Respective declines of 3.4% in diversified metals and 2.8% in steel left the Materials sector 1.1% lower. The crude action did benefit one area of the market, though. Underpinning the effect of Southwest Airlines' (LUV 16.77 +0.90) solid earnings report upon the airlines industry, lower oil prices helped send the Dow Jones Transportation Average 1.0% higher.
The influential Financial sector lent muscle to the challenges posed by Energy and Tech. With earnings season in focus, some uninspiring reports from banks weighed heavily. In particular, J.P. Morgan's (JPM 39.28 -0.43) light revenues bogged down the sector as well as the Dow; Northern Trust's (NTRS 51.14 -1.40) lower than expected earnings contributed to weakness in the space. With the narrowing interest rate spread drawing increased attention, today's yield curve, which vacillated between flat and slightly inverted, served as a further overhang. Separately, Charles Schwab's (SCHW 14.68 -0.30) disappointing results and some nervousness ahead of Merrill Lynch's (MER 69.50 -0.64) report left brokers as an additional sore spot.
On the economic front, this morning's CPI report garnered the most attention. With the 0.2% rise in December's core rate expected, there was little impact on either the stock or bond markets. Further, the up-tick is essentially ambiguous in terms of its implication on the Fed's tightening proclivities. In one sense, the increase signifies a firming trend because December marked the third consecutive 0.2% rise following five straight 0.1% increases. That increase is not substantial enough, though, to cause alarm and is in-line with 2005's year-over-year gain. The market also received November net foreign purchases data (which checked in at $89.1 billion) and the Fed's Beige Book, but both went largely overlooked by equity and Treasury traders alike.DJ30 -41.46 NASDAQ -23.05 SP500 -5.00 NASDAQ Dec/Adv/Vol 1592/1448/2.29 bln NYSE Dec/Adv/Vol 1837/1475/1.69 bln
10:53 am JP Morgan Chase (JPM)
39.52 -0.19: The Financial sector maintained the spotlight on Wednesday as a host of banks, led by JP Morgan Chase, reported seemingly respectable results. Specifically, the nation's third largest bank said fourth quarter earnings rose 62% as investment banking fees and gains in commercial lending, retail banking and wealth management offset weaker trading revenue and the impact of higher bankruptcy filings.
Before Wednesday's open, JPM reported quarterly earnings increased to $2.7 billion, or $0.76 per share, compared with $1.67 billion, or $0.46 per share, in the same period last year. On an operating basis, which excluded a $208 million litigation-related charge and $77 million for merger expenses, the company earned $2.6 billion, or $0.73 per share. Analysts expected JPM to earn $0.72 per share, excluding non-recurring items.
Revenue, meanwhile, fell short of expectations. In the fourth quarter, total revenue increased 5.6% to $13.68 billion, but missed the Reuters Estimates consensus of $14.35 billion. Furthermore, a 5% decline from the $14.5 billion recorded in the third quarter has amplified the softer than expected top line performance.
By segment, investment banking earnings were up a modest 1%, and down 38% sequentially, at $664 million, as lower trading results offset higher investment banking fees. Investment banking fees rose 8% during the quarter to $1.2 billion - the highest level in 5 years - led by stock underwriting and advisory fees. Net revenue of $3.2 billion was flat year/year, while equity underwriting revenues of $458 million were up 88% from last year, driven by strength in Asia and Europe. In contrast, fixed income markets revenue was down 28% versus last year to $1.1 billion, due to weak trading results. Overall, trading revenue declined 24% to $851 million, resulting from poor positioning in U.S. interest rate and commodities markets.
In other segments, retail financial services earnings rose 4% to $803 million; card services earnings fell 41% to $302 million - due in large part to increased bankruptcies; commercial banking earnings rose 14% to $289 million; treasury and security services earnings rose 107% to $300 million, and asset and wealth management earnings rose 30% to $342 million.
Despite the soft top line results, fueled by weaker than expected trading results, JPM's fourth quarter performance was respectable and continues to reflect the broad strength of its businesses. Although the narrowing spread between short and long term interest rates has pressured profits, particularly in the company's deposit and lending operations, JPM's diversified business model continues to position it, and other larger banks, well in the current business climate, as noted in our Market Weight rating on the Financial sector.
--Richard Jahnke, Briefing.com
10:37 am Charles Schwab (SCHW)
14.95 -0.03: On November 15, 2005, Charles Schwab warned, saying its fourth-quarter results would be two cents lower than third-quarter earnings of $0.16 per share, as management eliminated fees, boosted advertising spending and recorded charges for job cuts at U.S. Trust. The news sent shares 3.5% lower, shaving $722 mln from the largest U.S. discount brokerage's market cap. This morning, the company reported Q4 (Dec) earnings of $0.14 per share, in line with previously lowered forecasts and the First Call consensus, but a penny shy of an adjusted Reuters Estimates consensus of $0.15. Nonetheless, net income for the quarter was $187 mln, an impressive 253% increase from a year ago as disciplined expense management led to margin improvements, marking the fourth best quarter in Schwab's history.
Total revenues rose 11.3% year/year to $1.18 bln, exceeding the $1.17 bln consensus, as clients brought $9.0 bln in net new assets to the company in December alone -- the seventh straight month of net new assets in excess of $6.0 bln. Net new client assets during the quarter were $15.5 bln while total assets reached a record $592 bln, up 15% from a year ago; the total number of accounts equaled 1.7 mln with the number of clients enrolled in Schwab Private Client and Schwab Advised Investing hitting 60,000, up 8% sequentially. For fiscal 2005, net new assets totaled $75 billion, 49% higher than 2004, while total client assets reached a record $1.199 trillion by year-end, up 11% from year-end 2004.
While SCHW shares are up 2.1% on the year, hitting a 52-week high on January 9th, the stock has underperformed its online brethren so far in 2006. E*Trade Financial (ET) and Ameritrade (AMTD) are up 6.2% and 6.8%, respectively, having provided more of a punch behind the AMEX Securities Broker/Dealer Index's (XBD) 4.2% year-to-date advance. We currently have a Market Weight rating on Financial, but view diversified banks (i.e. BAC, C and JPM) and components within the investment bank & brokerage group (i.e. GS and MS) as being well-positioned to benefit from an increase in M&A activity.
Among the online brokers, we believe E*Trade, which trades at a lower multiple of 20.5x forward earnings, versus loftier forward P/E multiples of 26.5x and 27.6x for SCHW and AMTD, respectively, presents a compelling value proposition. E*Trade is expected to grow earnings an industry-leading 14%, as it gains economies of scale (e.g. via acquisitions) to lower costs and offset the impact of falling commissions, and executes on the aggressive pursuit of gathering assets and diversifying revenue streams from a more affluent clientele. To wit, E*Trade's price/earnings-to-growth ratio stands at a more attractive 1.49 versus PEG ratios of 2.11 and 3.98 for SCHW and AMTD, respectively.
(Disclosure: Briefing.com has a business relationship with Charles Schwab, E*Trade, and Ameritrade).
--Brian Duhn, Briefing.com
09:28 am Southwest Airlines (LUV)
15:87: Despite a totally unexpected TSA security fee assessment and a 38.8% increase in hedged fuel costs per gallon, Southwest Airlines posted its 33rd consecutive year of profitability. For the fourth quarter, the nation's No. 6 airline said net income rose 54% year/year to $86 mln, or $0.10 a share, which included unrealized losses associated with derivative instruments. The inclusion of $24 mln in additional 2005 federal airport security expenses due to a retroactive evaluation by the Transportation Security Administration (TSA) -- an assessment management believes is improper and plans to vigorously contest -- also raises questions as to whether Q4 EPS of $0.10 is comparable to the Reuters Estimates consensus of $0.13.
Total operating revenue rose 20% to a record $1.99 bln, exceeding the $1.92 bln consensus, as Southwest benefited from aggressive expansion and strong demand for travel. Revenue passenger miles (RPMs) increased 15.3% as compared to a 7.6% rise in available seat miles (ASMs), resulting in a 4.6 point increase in load factor to 69.6%. Unit revenues grew 11.7% with only modest fare increases, reaffirming the leading U.S. low-cost air carrier's Low Fare Leadership
Based on current strong traffic and revenue trends, Southwest expects January's load factor and unit revenue to exceed year ago levels but notes that a shift in the Easter holiday to April (from March last year) will have an impact on Q1. Management also said its 2006 outlook is "favorable" and that they remain poised to add over 30 aircraft in 2006 for an estimated 8% available seat mile growth.
According to the Air Transport Association, the U.S. airline industry posted $32.3 bln in cumulative net losses from 2001 through 2004, amid high fuel prices, low fares and a surplus of seats, and expects a $10 bln net loss for 2005. Fortunately, Southwest is over 75% hedged with fuel prices capped at $36 per barrel for Q106, over 70% hedged for the rest of 2006 at $36 per barrel and over 60% hedged in 2007 at $39 per barrel, positioning the company for continued profitability.
Southwest shares are down 3.4% in 2006, with the bulk of this year's decline coming Tuesday as oil prices soared 3.7% to over $66 per barrel. Faring much worse, however, has been the Amex Airlines index (XAL), which is down 11.9% for the year and which has closed lower in six consecutive sessions.
--Brian Duhn, Briefing.com
09:18 am IBM (IBM)
83.00: To everyone's surprise it wasn't Intel that beat, but Big Blue. Still reeling from a heightened SEC investigation, IBM took the lead from Intel (INTC) and Yahoo! (YHOO), posting a better than expected profit figure despite missing on revenues. IBM, the world's largest seller of computer services and the number two software company behind Microsoft (MSFT), reported a 13% rise in profits to a record $3.19 bln, or $2.01 per share. Sales declined 12% to $24.4 bln - missing analysts' projections of $25.6 bln. Excluding a ten cent charge, earnings came in 17 cents better than the Reuters Estimate consensus.
The upside in earnings was achieved not on the revenue line, but through cost savings, restructuring, and product mix. In a move IBM hopes will save $3 bln through 2010, the company froze pension benefits for its 320,000 workers. This was the second consecutive quarter IBM disappointed on the top line. However, IBM did state mid-year its focus was on cost cutting and expense management, rather than sales growth. Gross margins came in at 44.1% - well above the consensus of 41.5%.
Global Services revenues, the key organic growth engine for IBM, declined 5% (1% on a constant currency basis) to $12 bln on falling demand in Europe. Standouts were the 16% sequential revenue growth in Integrated Technology Services. IBM Service gross margins widened by 310 basis points to 27.4%. Backlog was flat year/year, but declined by $2 bln (-1.8%) sequentially to $111 bln. The Hardware segment reported revenues of $6.9 bln (ex-PC), which were up 6% year/year, with gross margins expanding to 42.1% from 37.1% last quarter. The Microelectronics business saw the strongest growth, up 48% year/year on the back of the zSeries, pSeries, and total storage product sales. Global service booking were slightly ahead at $11.5 bln. Software revenues were flat year/year, but up 3% quarter/quarter to $4.6 bln.
With IBM's fourth quarter - seasonally its strongest - now under its belt, there are few catalysts for shares in the near-term. The highlight from the quarter was the strength in the Middleware business, with solid regional growth coming from the Americas and 20% growth from Emerging Markets - similar to what Oracle (ORCL) reported in its November quarter. Management did not provide guidance for the March quarter, but targets double-digit earnings growth. Considering the restrained top line growth rates, the outlook for IBM rests on its ability to drive margins. We continue to prefer technology-related stocks with exposure to the consumer product market integrated into the theme of everything digital, everything portable - the basis for our Overweight rating on the Technology sector.
--Kimberly DuBord, Briefing.com
09:09 am Yahoo! (YHOO)
40.11: Shares of Yahoo slipped in pre-market action, falling more than 11%, after the Internet search giant reported lower than expected fourth quarter earnings and issued first quarter guidance that disappointed some investors. After the close on Tuesday, Sunnyvale, California-based Yahoo said net income for the fourth quarter was $683 million, or $0.46 per share, compared to $373 million, or $0.25 per share, in the year ago period. Excluding special items, earnings were $247 million, or $0.16 per share - a penny lower than the consensus EPS estimate of $0.17.
Revenues, excluding traffic acquisition costs, climbed 36% year/year to $1.07 billion, in line with the average analyst estimate. By segment, Yahoo's marketing services business accounted for 88% of gross revenue, with sales up 40% during the quarter at $1.3 billion. Conversely, the company's search-advertising business grew at a slower rate, due in part to higher traffic acquisition costs, or fees paid out to distribution partners. Those fees, which are often seen as a gauge of the company's search-advertising business, increased 9% from the previous quarter.
For the current quarter, Yahoo forecasted sales, ex-TAC, between $1.04 and $1.1 billion, versus the consensus estimate of $1.09 billion. In addition, the company expects to earn between $410 and $440 million in operating income before depreciation and amortization. For the full year, the company expects to earn $1.92 to $2.06 billion in operating income on sales between $4.6 and $4.85 billion. According to Reuters Estimates, analysts are expecting the company to earn $0.76 per share on sales of $4.8 billion.
All in all, the results from Yahoo weren't as bad as the market reaction suggests. Instead, they simply didn't live up to expectations that had gotten too high. As a result, the technology stock is getting punished by short-term selling interest that has been exacerbated by Intel's disappointing report. We wouldn't necessarily rush to buy today's dip in Yahoo given the current sentiment in the marketplace, but if you are a long-term investor who owns Yahoo, there isn't any alarming reason in the latest results to abandon the position.
(Disclosure: Briefing.com has a business relationship with Yahoo)
--Richard Jahnke, Briefing.com
08:46 am Intel (INTC)
23.15: A trifecta of technology-related earnings results hit the wires after the bell on Tuesday. The market went in expecting a record revenue quarter from Intel, but instead the chip giant not only missed estimates by three cents, but also lowered forecasts. The market reacted swiftly to this clearly disappointing quarter, with the entire Street taking down estimates and several firms lowering expectations. Intel's debased forecasts cast a shadow over the entire semiconductor industry, sending tech stocks lower from Asia to Europe.
Intel, which makes 80% of the world's processors, posted quarterly profits and revenues below expectations, as the chipmaker suffered from weaker demand for desktop processors. This news also sent shares of the number one PC manufacturer and Intel's largest customer, Dell (DELL), lower, along with Apple Computer (AAPL). Intel acknowledged it lost market share to rival Advanced Micro Devices (AMD) in the quarter, punctuated by weaker than expected holiday demand. The bright spot was the continued robust growth in servers with the Opteron. Net income rose 16% to $2.45 bln, or $0.40 per share, from $2.12 bln, or $0.33 a year earlier. Sales rose 6.3% to $10.2 bln. Analysts had expected a profit of $0.43 and revenues of $10.56 bln.
Intel magnified the downside by lowering guidance, which is sure to cause an abrupt halt to the recent rally in the SOX Index, which is up 8.1% to date. Intel's forecasts included higher expenses and a higher tax rate. It anticipates first quarter revenues of $9.1-$9.7 bln - the midpoint of the guidance would represent an 8% sequential decline, which is more than the seasonal decline of 5%. Intel also stated it would no longer provide mid-quarter updates.
The market was anticipating a strong quarter for Intel. These results were a huge disappointment with a slew of issues from market share losses, lingering capacity constraints, and weaker PC demand, all playing their part. Shares will likely take a considerable hit. Still, don't count Intel out just yet. We'd argue longer-term investors should take advantage of considerable weakness (i.e. low $20s) as Intel now becomes a second half 2006 story. Intel's fate rests on the success of its new products, including new dual-core processors which are hoped to spark renewed demand for desktops, along with new digital consumer products, and Intel's new 65-nm process technology. Shares are trading at 15.6x forward earnings compared to AMD at 75.9x.
--Kimberly DuBord, Briefing.com
09:41 am Nationwide: Bernstein downgrades Outperform to Mkt Perform. Target $47. Downgrade is based on valuation. The firm sees limited upside to their $47 tgt. More importantly, they feel mgmt has been moving too slowly with respect to improving the co's ROE. The firm feels recent comments from mgmt suggest the co's action plans in both regards are too moderate to drive significant improvement in ROE, raising doubt that a meaningful share price catalyst will emerge. Separately, given industry trends, they feel NFS will eventually need to merge with another life insurer to take advantage of capital and expense efficiencies.
09:40 am Cynosure: Needham & Co initiates Buy. Target $25. The firm says that the co has the most complete line of light-based aesthetic therapy devices in the industry and offers innovative combination products that provide practitioners with greater treatment flexibility. In addition, the firm says the co has targeted the rapidly emerging aesthetic spa mkt by building a dedicated sales force to address it and by introducing new products that are especially appealing to these mkts. The firm believes that CYNO is still in rapid growth mode following a successful turnaround by its new mgmt team.
09:39 am Intel: Needham & Co downgrades Buy to Hold. Downgrade follows disappointing 4Q05 results. The firm finds it hard to identify enough high volume, high margin mkts for INTC to replace its traditional lucrative PC /server mkts that fueled its success since the 1980's. The firm says that in many ways, INTC is beginning a multi-year process to re-invent itself, and they think investors should avoid chasing INTC until some progress is evident.
09:38 am Genesis Microchip: Stanford Research downgrades Buy to Hold. Firm believes a loss of sales momentum, and the impact of upcoming seasonal-driven weakness, will produce a pullback in shares for the next quarter or two, adding that shares would likely trade near 15x, or as low as $15 and they would not commit new funds to GNSS shares until after results are out for Dec and the outlook for March is clearer.
09:38 am Restoration Hrdwr: Morgan Keegan downgrades Outperform to Mkt Perform. Downgrade follows co's cut of Q4 EPS guidance. Firm says the primary factor behind reduced Q4 EPS is deferred rev, which impacted Q4 EPS guidance by $0.06.
09:33 am Volterra Semi: CE Unterberg Towbin downgrades Market Perform to Underperform . While fundamentals for VLTR likely bottomed in the Sept qtr, going into the seasonally weaker Q1 and Q2 for computing and graphics, firm thinks the co's performance will likely be sub-par. Also, the stock currently trades at 45x 2006 EPS, and firm thinks it has priced in a scenario that is overly optimistic.
09:29 am Yahoo!: Am Tech/JSA Research downgrades Buy to Hold. Amtech transfers coverage and downgrades YHOO to Hold from Buy following a disappointing quarter with weak guidance, and based on: 1) downward earnings revision on guidance, 2) anticipated improvements in search monetization now later than expected, 3) expecting rapid decline in premium service ARPU and 4) valuation is fair based on growth outlook. They see limited upside to the stock in the near-term.
09:29 am Adolor: WR Hambrecht reiterates Buy. Target $18 to $18. The firm says that ADLR is one of their top biotech picks for 06, as they expect shares to be driven by a series of key catalysts that include: 1) positive Entereg data from study #314 for postoperative ileus in Feb/March; 2) submission of POI data to the F.D.A in June and potential approval by YE06; and 3) positive Phase 3 Entereg data for chronic opiod-induced bowel dysfunction in YE06.
09:25 am TETRA Tech: Ferris Baker Watts downgrades Buy to Neutral. Firm believes their revised 2006 earnings estimate could support a stock price of $38--$40 per share, which is only 1%--6% above TTI's current price.
09:22 am Salesforce.com: WR Hambrecht reiterates Buy. Target $34 to $34. Price target change is following co's Winter '06 product launch, as they came away from the event more bullish about the company's growth prospects. Despite their bullish outlook for the company, they would not be aggressively buying shares at current levels, but would recommend a buying on weakness approach. |
