S&P is Embarrased and Unfulfilled (Forbes & BW on MOT)
"Unfulfilled" S&P Reiterates and Comments on ASP Increase
Last week Motorola Champion (5 Stars and Strong Buy since October 03, 2005) S&P wrote ...
Nokia (NOK): Reiterates 2 STARS (sell)
Analyst: Inger Soderbom
Tuesday Nokia guided first quarter handset average selling prices to EURO 103, above prior guidance for flat-to-slightly down sequentially from the fourth quarter's EURO 99. While our expectations of pricing pressure in the first quarter went unfulfilled, we think this new pricing level indicates a loss of market share within low-end handsets. This leads us to reduce our first quarter market share forecast for Nokia from 34.0% to 32.2%, lower than the 34.4% it posted in the fourth quarter. Despite our reduced market share estimate, we are maintaining our earnings estimates for the company. Our 12-month target price remains $19.
I'm looking forward to their revised Nokia comments but they sure turned on Moto ...
• Least optimistic of the three [BofA's Tim Long, RBC's Mark Sue, S&P's KenLeon] was Standard & Poor's Equity Research analyst Ken Leon. In his view, strong handset sales did not make up for weak results at the company?s telecom network and connected home solutions units businesses. ... Leon downgraded his rating to "hold" from "strong buy" on Motorola shares and dropped his price target to $25 from $28.
• MOT Shares fell $1.59, or 6.6 percent, to close at $22.49 on the New York Stock Exchange yesterday after having risen 12 percent since late March, when Motorola announced its market share had increased.
• Banc of America's Long picks Nokia and Qualcomm over Motorola as his industry top picks..
>> Strong Q1 Handset Sales Not Enough For Motorola
Forbes
April 19, 2006
tinyurl.com
Despite strong first-quarter handset sales and market share gain, investors and analysts alike were disappointed with Motorola's overall results, reflected by the wireless company's lowered stock price in Wednesday trading.
The company reported a sales increase of 23%, accounting for two-thirds of Motorola ?s total sales, with record first-quarter sales of $10 billion, versus first-quarter sales last year of $8 billion.
"We are very pleased about our results, which set a record for first-quarter sales," said chief executive officer Ed Zander in a company statement. "The company continues to profitably grow revenue and market share."
Driving growth at Motorola is its handset sales -- a record 46.1 million units were shipped in the first quarter, a 61% increase from the same time last year. The company may have gained 200 basis points of share during the quarter, driven by demand for its RAZR, SLVR and PEBL handset models.
And according to the company?s first-quarter statement, brand strength is growing in the Americas, Europe, North Asia, and in high-growth emerging markets like the Middle East, Africa, India and Southeast Asia.
But many analysts were hoping for more from Motorola. Banc of America analyst Tim Long says that though Motorola enjoyed strong handset sales, weak average sales price and limited operating margin upside dragged on Motorola?s earnings.
"One out of three isn?t enough,"? says Long, who maintains a neutral rating on the stock until there are signs of more significant margin expansion. He also lowered his price target one dollar to $25.
RBC analyst Mark Sue was also disappointed in Motorola?s mixed earnings picture. While handset grow margins increased, he says a ramp in sales and marketing, as well as growth in emerging markets, equaled a sequential decline in average sales prices. Overall operating margins fell to 9% from 10.6% a year ago.
Still, despite the mixed results, Sue says the "long term solid fundamental story remains intact with healthy demand and lean channel inventories." He is more optimistic than Long on Motorola shares, maintaining an 'outperform' rating and his $26 price target.
Least optimistic of the three was Standard & Poor's Equity Research analyst Ken Leon. In his view, strong handset sales did not make up for weak results at the company?s telecom network and connected home solutions units businesses.
Network segment sales and operating earnings were down 14% from first-quarter sales last year, according to the Motorola's report. Home solutions sales were up 7% but operating earnings were down $4 million to $15 million compared to the last year's results.
Leon downgraded his rating to "hold" from "strong buy" on Motorola shares and dropped his price target to $25 from $28.
Banc of America's Long picks Nokia and Qualcomm over Motorola as his industry top picks. Copyright © 2006 Forbes.com <<
>> Motorola (MOT): Downgrades to 3 STARS (hold) from 5 STARS (strong buy)
BusinessWeek
April 19, 2006
tinyurl.com
Motorola posted first quarter EPS of 26 cents, vs. 22 cents one year earlier, before one-time items, one cent below our estimate. Sales rose 23%, driven by the mobile device unit, which accounted for two-thirds of total sales. Despite 45% higher handset sales with wider margins, we are disappointed by the weak results of Motorola's telecom network and connected home solutions units. These units had below-average sales growth, or declines, and weaker margins. Our 2006 EPS estimate remains $1.25, below the Street's. We are less confident in Motorola and, with the shares priced near its peers on a p-e basis, our target price falls to $25 from $28. - Analyst: Kenneth Leon, CPA -
- Eric - |
