From Briefing.com: 4:36PM O2Micro recevies favorable verdict in patent case (OIIM) 9.99 +0.52 : Co announced that the jury in the U.S. District Court of the Eastern District of Texas returned a verdict favorable to O2Micro in its patent infringement action against Beyond Innovation Technology Co., SPI Electronic Co., FSP Group, and Lien Chang Electronic Enterprise. The jury found that BiTEK, SPI, FSP and Lien Chang induced infringement by supplying certain inverter controllers and inverter modules to Samsung Electronics Co., Ltd. and others for sale in the U.S. The jury also found contributory infringement by Lien Chang of the claims of the O2Micro's patents and that infringement by BiTEK, SPI, FSP and Lien Chang was willful. The Court previously issued judgments as a matter of law that BiTEK, SPI, FSP and Lien Chang failed to present sufficient evidence for a jury to invalidate any of the asserted patents under 35 U.S.C. No. 101, 102, 103 or 112 and invalidity issues were not presented to the jury. A judgment has not been entered and O2Micro expects that BiTEK, SPI, FSP and/or Lien Chang may file post-trial motions with the Court seeking to overturn the jury's decision.
4:32PM Photronics beats on top and bottom line (PLAB) 17.81 +0.12 : Reports Q2 (Apr) earnings of $0.30 per share, excluding $0.22 charge and a $0.04 gain, $0.09 better than the Reuters Estimates consensus of $0.21; revenues rose 5.8% year/year to $119.5 mln vs the $115.9 mln consensus. "We are very pleased with our second quarter performance which builds on the momentum we started in Q1. Revenue growth coupled with continued cost control discipline resulted in solid bottom line performance despite the restructuring charges we incurred as a result of our decision to close our Austin facility".
4:21PM Western Digital adopts majority voting for Director elections (WDC) 19.03 -0.62 : Co announces its board of directors has amended the co's bylaws to adopt a majority voting standard for the election of directors. Under the new majority voting standard, which replaces plurality voting for uncontested elections, a director nominee will be elected to the co's board only if the director receives a majority of the total votes cast with respect to the director. In contested elections, directors will continue to be elected by a plurality vote.
4:07PM LTX Corp beats by $0.04; guides above consensus (LTXX) : Reports Q3 (Apr) earnings of $0.13 per share, $0.04 better than the Reuters Estimates consensus of $0.09; revenues rose 120.6% year/year to $56.3 mln vs the $53.3 mln consensus. Co issues upside guidance for Q4, sees EPS of $0.22-0.24 vs. $0.13 consensus; sees Q4 revs of $68-70 mln vs. $57.44 mln consensus.
4:00PM Linear Tech buys back 5.7 mln shares of its common stock for $202 mln (LLTC) 33.53 -0.49 :
4:20 pm : The market closed modestly lower as mixed economic and earnings data left investors waiting for tomorrow's CPI report to set a more definitive tone to trading.
With the market very concerned about any signs of inflation, a smaller than expected increase in prices at the wholesale level helped alleviate some worries of more rate hikes taking steam out of the economy and slowing the pace of earnings growth. The Labor Dept. showed that producer prices outside of energy remain under control, as the core PPI rose just 0.1% for a second straight month to leave the year/year increase at 1.5%.
Data showing that higher interest rates are clearly curtailing housing activity also added to the argument that the Fed should pause at the June 29 policy meeting. April Housing Starts checked in at the lowest level since Nov. 2004 and Building Permits also showed a third month of decline. The latter news knocked the PHLX Housing Sector Index (HGX -1.1%) to its worst levels since late November and prevented the rate-sensitive group to take advantage of another pullback in bond yields. To wit, the Treasury market rallied to its best two-day gain since January after sifting through proof that inflation remains well contained, knocking the yield on the 10-yr note down to 5.10%.
Be that as it may, concerns that an uptick in the core rate of inflation at the consumer level could roil the stock market acted as an overhang on equities throughout most of the day. Economists are currently forecasting the core CPI to rise 0.2%, but should April's data show a gain similar to the 0.3% in March, the financial markets could pick up where they left off last week, trading much lower. Also keeping market gains in check was the fact that Industrial Production jumped a stronger than expected 0.8% in April. While the push further into record territory reflects the strength in manufacturing, playing into our bullish outlook towards late-cycle stocks and Overweight ratings on Industrials and Basic Materials, the absence of leadership from two of this year's best performing sectors also kept buyers on the sidelines. It is also worth noting that Capacity Utilization rose to 81.9%, suggestive of increasing risk of production bottlenecks which could lead to pricing pressures.
As was the case last week, the Nasdaq continued to lead the way lower among the major averages since the tech-heavy index remains apt to bear the brunt of selling efforts as the jump in interest rates of late continues to spark valuation concerns, especially in growth stocks. Technology turned in the day's worst performance, extending its reach into negative territory for the year as concerns continued to mount for Hewlett-Packard (HPQ 31.16 -0.47), which was scheduled to report Q2 (Apr) earnings after the bell and just a week after rival Dell (DELL 23.78 -0.57) warned Wall Street that Q1 sales and profits would miss forecasts. Concerns that Apple Computer's (AAPL 64.98 -2.81) business may also be slowing also took a toll on tech.
Consumer Discretionary was another drag on stocks Tuesday, led by weakness in homebuilding, autos and retail. With regard to the latter, Home Depot (HD 38.45 -2.05) beat expectations but revenues checking in a bit light and signs of a cooling housing market resurfacing shaved more than 5% off of HD's market cap. Target (TGT 49.33 -0.69) being downgraded to Neutral at Merrill Lynch and General Motors (GM 25.53 -0.67) hitting its worst levels in more than a week after UAW members voted "overwhelmingly" to authorize a strike at Delphi if it voids contracts also weighed on the sector.
Two underperforming sectors -- Health Care and Consumer Staples -- however, garnered renewed enthusiasm based in part on their defensive-characteristics. The latter sector benefited from a 1.4% surge in Wal-Mart (WMT 48.07 +0.64), which beat expectations by two cents, while a rebound in Managed Health, Health Care Services and modest strength in Pharmaceutical helped Health Care chip away at its sector worst 3.0% year-to-date decline. BTK -1.2% DJ30 -8.88 DJTA -1.0% DJUA -0.4% DOT -0.8% NASDAQ -9.39 SOX -0.6% SP500 -2.42 XOI +0.4% NASDAQ Dec/Adv/Vol 1502/1551/2.04 bln NYSE Dec/Adv/Vol 1559/1665/1.69 bln
10:29 am Emmis Comms: Banc of America Sec reiterates Neutral. Target $14.5 to $16.5. Firm ups target saying they believe a floor has been set (@ $15.25) as to some extent the co has been put "in-play". By making a bid for the company, the co says CEO Smulyan has to some extent put EMMS "in play". According to their legal contacts, the board likely has "heightened duties" that could extend to soliciting other offers to ensure that shareholder value is maximized. Should a higher offer appear, the firm says it now appears more difficult for the board to reject it. The firm says although the board could vote down both Smulyan's $15.25 offer and a second higher bid (if made), their contacts tell us that the board is more vulnerable to litigation under this scenario as they could appear to be favoring the interests of the CEO.
10:26 am Crosstex Energy: RBC Capital Mkts downgrades Sector Perform to Underperform . Target $39 to $41. Firm lowers rating, but increases target saying WHIT shares are currently trading at 2.2x their 2007 cash flow estimate, compared to the typical acquisition-oriented-company multiple of 3.5x. The firm says given Whittier's relatively small size, they believe a small discount is warranted; however, in view of the co's demonstrated ability to make accretive acquisitions and the superior growth prospects projected for the company, they believe that a discount of 37% is excessive.
10:19 am Whittier Energy: Ferris Baker Watts initiates Buy. Target $10. Firm initiates coverage saying WHIT shares are currently trading at 2.2x their 2007 cash flow estimate, compared to the typical acquisition-oriented-company multiple of 3.5x. The firm says given Whittier's relatively small size, they believe a small discount is warranted; however, in view of the co's demonstrated ability to make accretive acquisitions and the superior growth prospects projected for the company, they believe that a discount of 37% is excessive.
10:17 am Thermogenesis: Jefferies & Co initiates Buy. Target $8. Firm initiates coverage saying the co appears to be on the verge of an inflection point driven by a handful of near-term product launches. They are buyers at current levels in front of numerous catalysts.
10:12 am Global Sources: WR Hambrecht reiterates Buy. Target $14 to $17. Firm raises target saying Global Sources served up strong Q1 results. The firm says last week's results revealed two other engines now firing-print and online segments, which accounted for 87% of 2005 rev, but had been meandering along at single digit annual growth rates. The firm says both segments chalked up 15% growth YoY in Q1:06-a significant development they feel the market has overlooked.
10:09 am Broadcom: Needham & Co upgrades Hold to Buy. Target $41. Firm increases rating saying they believe the recent sell-off on the stock has given a new opportunity for investor to be more aggressive in BRCM. The firm believes BRCM has so many strong growth engines, differentiated by its breath and integration capabilities, that investors need to own BRCM stock as a core position for 2006-07.
10:01 am Sterling Fincl: Ferris Baker Watts upgrades Neutral to Buy. Target $23. Firm ups rating saying that given the recent drop in the price of SLFI shares, investors have an opportunity to buy stock in what the firm sees as a well-run co with a history of stable earnings growth that is located in markets with attractive demographic trends.
09:54 am Wild Oats Mkts: Banc of America Sec reiterates Neutral. Target $13 to $18. Firm ups target saying they are reducing their F06E to 38c from 48c. The firm says '07E remains 35c given they believe operating performance will be pressured by rising costs, price competition, Safeway's aggressive rollout of its Lifestyle concept in S. Cal. and an ambitious new store opening plan in the back half of the year. The firm says target price rises due to the involvement of investor Ron Burkle, preventing them from getting more negative on the equity value.
09:42 am Wabtec upgraded to Buy from Hold at BB&T- tgt $45: . Firm ups rating saying that they believe the co will continue to aggressively grow its revs and margins going forward and that their are a number of potential catalysts to move the stock even higher from here.
09:33 am Aqua America: Brean Murray upgrades Hold to Strong Buy. Target $28. Firm ups rating following the New York Water Service acquisition. The firm says the acquisition of New York Water Service will significantly boost 2007 results. The firm says adding New York Water Service's 135,000 customers increases Aqua America's customer count by 5%. The system, the firm says, spread across several counties in New York State will complement the co's existing presence in the region.
3:38 pm American Eagle Outfitters (AEOS)
33.29 +0.12: Last December, American Eagle Outfitters issued an earnings warning for its fourth quarter on the heels of a disappointing sales performance in November. At the time, we said the warning, which followed a warning for its third quarter, fed into our cautious view of the stock as we felt the market would be re-setting its growth expectations for the company. Quite frankly, our cautious view was way off the mark. All AEOS has done since then is gain close to 50% amid a series of better than expected earnings results and sales updates from the company.
Holding true to form, the specialty retailer this morning reported a first quarter profit of $0.42 per share that was a penny above the Reuters Estimates consensus estimate and the high end of the company's guidance range of $0.40-0.41. The EPS result, which included $0.02 per share of stock option expense, marked a 20% improvement from the prior year. Additionally, American Eagle posted a 14.0% increase in total sales to $522.4 million and achieved a 9.0% gain in comparable store sales on top of a 27% increase during the same period last year.
The retailer's gross margin rate, however, dipped slightly to 48.6% from 48.7% due to a lower merchandise margin versus a record high last year. Operating margins, in turn, slipped to 18.9% from 19.2% as the stock option expense contributed to a boost in SG&A expense, as a percent of sales, to 26.0% from 25.5% in 2005.
American Eagle said it expects second quarter EPS to be in the range of $0.39-0.41 versus $0.37 per share last year. The guidance includes stock option expense of approximately $0.01 per share and compares favorably to the Reuters Estimates consensus estimate of $0.38. As one might expect, the reassuring guidance has overshadowed the margin pressures seen in the first quarter, as AEOS is trading modestly higher following the report.
There is no denying that we didn't make the right call on AEOS roughly six months ago, and despite the ensuing rally, AEOS still trades at only 15.6x estimated FY06 earnings. Nonetheless, the fact also remains that comparisons for American Eagle are going to continue to be difficult while margin expansion will be harder to achieve in what should be a more challenging macro environment in the months ahead. Although its stock has been flying high, those factors are keeping us grounded for now in our cautious view.
--Patrick J. O'Hare, Briefing.com
1:42 pm BJ's Wholesale Club (BJ)
29.37 -0.23: BJ's Wholesale Club Inc. - one of the nation's largest discount warehouse retailers - has reported first quarter net income of $15.4 million, or $0.23 per diluted share. Results for the first quarter included $0.03 per diluted share for bankruptcy recoveries and expense of $0.04 per diluted share for stock-based compensation expense.
Earnings of $0.20 per share excluding non-recurring items but including stock based compensation expenses were $0.01 better than a Reuters Estimates consensus.
California-based home furnishing retailer House2Home filed for Chapter 11 protection in November 2001. BJ is liable for some House2Home store leases through a 1997 agreement.
The company, which has a market cap of about $1.98 billion and operates 165 BJ's clubs and two ProFoods Restaurant supply clubs, said sales at stores open at least a year increased 2%, with gasoline sales contributing 1.4%. In the previous year, first-quarter same-store sales grew 5.8%.
The company also said that it repurchased 658,500 shares of BJ's common stock during the first quarter at an average cost of $30.58 per share, for a total of approximately $20.1 million.
--Christine Marie Nielsen, Briefing.com
12:13 pm Neurocrine Biosciences Inc. (NBIX)
25.62 -32.01: Shares of Neurocrine Biosciences Inc. have lost more than 50% of their value in today's session alone. The company's shares are continuing a pre-market plunge which began after the Food and Drug Administration refused to approve the highest dose of the biotech company's sleeping pill candidate.
The ruling has come as a shock to Wall Street as most analysts had anticipated that the agency would okay a version of a proposal for the drug and that there would be more competition in the already-crowded market for prescription insomnia drugs. The FDA has so far said only that 5 milligram and 10 milligram capsules of the drug - indiplon - are "approvable." The FDA said it could not yet approve a 15 milligram extended-release tablet, requesting more information from the company.
Officials of the San Diego-based company told analysts on a conference call this morning that the company will move quickly to answer the FDA's outstanding questions regarding its applications. They said they're not sure what impact the FDA's decision may have on the company's financial guidance for the year. The company recently said it expected to break even during 2006 with revenue between $165 million and $175 million excluding royalty revenues.
--Christine Marie Nielsen, Briefing.com
12:02 pm Agilent Technologies (A)
35.36 -2.61: Agilent Technologies said late Monday that net income rose 21% in the second quarter on a double-digit increase in revenue, and guided in-line for the third quarter. Specifically, the Palo Alto-based maker of scientific test equipment posted earnings of $115 million, or $0.26 per share, up from $95 million, or $0.19 per share, in the year ago period. Excluding stock options expenses of $25 million and charges of $22 million largely related to the spin-off of its semiconductor testing business, earnings were $0.40 per share. On that basis, analysts were expecting earnings of $0.37 per share, according to Thomson Financial.
Sales for the period rose 12% year/year to $1.43 billion, while new orders orders increased 21% to $1.59 billion. By segment, Bio-Analytical Measurement orders of $401 million were up 4%, driven by life sciences orders and demand for proteomics and genomics products, the company said. In Electronic Measurement, orders grew 5% to $875 million. Communications test orders were up 2%, with strength in wireless partially offset by a 9% decline in wireline test orders.
During the quarter, Agilent continued to demonstrate solid growth, and delivered on its operating and strategic commitments. The company noted that gross margins remained at the highest level in five years, that inventories were below 100 days on hand for the first time, and that that it achieved a 24% return on invested capital during the period. Despite ongoing restructuring costs, Agilent continues to show improved growth and is well positioned to leverage its operating model to continue its momentum.
Looking to the fiscal third quarter, Agilent said it expects revenue in the range of $1.37 to $1.43 billion. That represents about 10% to 15% growth from the year ago period. It also sees adjusted earnings between $0.37 and $0.40 per share, roughly double last year's comparable earnings. According to Reuters Estimates, analysts are projecting earnings of $0.38 per share on revenue of $1.43 billion.
--Richard Jahnke, Briefing.com
11:49 am Deere & Co. (DE)
89.30 +1.78: The world's largest agricultural equipment manufacturer, Deere & Co., Tuesday reported income for continuing operations of $2.17 per share, which excluded the company's discontinued health-care operations. This result, however, included an after-tax charge of $44.2 million related to the completion of a cash tender offer to repurchase outstanding debt securities. Reuters Estimates is telling us that when the latter is also excluded, an EPS figure of $2.36 is comparable to the consensus estimate of $2.31.
The company, which has a market cap of about $20.53 billion, forecasted 2007 net income of around $1.7 billion, up from previous guidance of about $1.65 billion. For the third quarter, net income should be in a range of $400 million to $425 million.
Robert Lane, chairman and chief executive officer of Deere, said in a press release that the company's efforts are receiving strong support from growing worldwide prospects for renewable fuels, such as ethanol, biodiesel and wind energy. Rising demand for renewables holds "great promise" for John Deere and for the global agricultural sector, he said.
Lane added that at the same time, Deere is strongly positioned to serve an expanding worldwide customer base with advanced equipment and innovative services. As a result of these factors, he said, the company has confidence in the company's ability to deliver strong financial results and solid investor value over the long term.
The Moline, Illinois-based company has seen a gain of close to 30% in its shares in 2006.
--Christine Marie Nielsen, Briefing.com
10:13 am Carnival Corp. (CCL)
43.80 -2.74: Shares of Carnival Corp. opened sharply lower Tuesday after the world's largest cruise operator lowered its full year earnings outlook, citing a number of factors including lower revenue yields, higher fuel costs, and a change in accounting. Amid a weaker than expected wave season and continued cost pressures, the stock is down more than 17% since the beginning of the year.
For the fiscal year, Miami-based Carnival now expects to earn between $2.65 and $2.75 per share, down from its prior guidance of $2.90 to $3.00 per share. Analysts on average are predicting earnings of $2.92 per share, according to Reuters Estimates. The company also expects second quarter earnings of $0.43 to $0.45 per share, versus the consensus estimate of $0.46 per share. It had previously forecast earnings in the range of $0.48 to $0.50 per share.
With respect to the revised earnings guidance, Carnival said it reduced its outlook for net revenue yield improvement on a local currency basis due to further weakness in bookings. Net revenue yields for the year are now expected to increase by 1% to 2%, compared with its prior guidance of 2% to 3%. This will reduce earnings by about $0.10, the company said. Furthermore, it noted since its previous forecast, fuel costs have increased considerably and are expected to impact earnings per share by $0.07 for the year.
While we continue to like the longer-term prospects for Carnival given its solid fundamentals and strategies for growth, disappointing cruise trends, along with elevated fuel costs and rising interest rates, dampen our current outlook for the company. In light of Carnival's weaker than expected guidance, we would be reluctant to commit new money to the stock at this time.
--Richard Jahnke, Briefing.com
09:30 am Home Depot (HD)
40.50: Home Depot on Tuesday reported a 19% increase in first quarter profits, helped by strong growth in its supply business. Based in Atlanta, Georgia, the nation's largest home improvement store chain earned $1.48 billion, or $0.70 per share, compared with $1.25 billion, or $0.57 per share, in the year ago period. The result topped the Reuters Estimates consensus of $0.67 per share.
Revenue climbed 13.1% to $21.46 billion from $18.97 billion a year earlier, helped by strength in Home Depot Supply, as well as average ticket growth. During the quarter, Home Depot acquired Hughes Supply. The transaction more than doubled its supply business, which now has more than 20,000 associates operating in more than 900 locations with projected fiscal 2006 sales of approximately $12 billion, the company said. As a result, Home Depot's supply business saw its revenue increase 224.5% year/year to $2.13 billion, with operating income up 432.1% to $149 million.
Meanwhile, Home Depot's retail business grew by 5.1% to $19.38 billion in the first quarter, while the average ticket increased by 4.3% to a record $60.75, with growth across all merchandise categories. Growth was also helped by continued store expansion, as Home Depot opened 23 new stores during the quarter, bringing its total store count to 2,051.
Overall, the latest results underscore Home Depot' strength. Given the steady performance in its retail business, combined with its recent acquisition of Hughes Supply, the company continues to demonstrate solid growth. As it expands its presence in the $400 billion professional contractor market by growing Home Depot Supply, which currently represents about 10% of total sales, the outlook for the company remains encouraging. However, while we would continue to hold the stock if we owned it, we are reluctant to commit new money at this juncture given the possibility of the Fed moving to a more restrictive policy stance and the direct implications for the housing sector.
--Richard Jahnke, Briefing.com
08:45 am Wal-Mart (WMT)
47.43: As the world's largest retailer, Wal-Mart's performance is closely watched as a gauge of consumer spending. With that in mind, the retailer's first quarter report made it clear that consumer spending continues to be solid, if not strong.
For the period ended April 30, Wal-Mart reported record sales and earnings. Specifically, net sales increased 12.3% to $79.613 billion, comparable sales were up 3.8%, and net earnings jumped 6.3% to $2.615 billion. The EPS figure of $0.63 was two cents ahead of the consensus estimate and up from $0.58 in the year-ago period, which was boosted by two special items that added $0.03 per share. The company's core U.S. operation was the driving force behind the record results as operating income at the Wal-Mart Store segment surged 20.4%.
Additionally, it was noted that the success in the quarter was a by-product of the company's focus on three goals: driving sales, reducing costs, and improving inventory management. The latter was plain to see, as inventories grew just 2.7% versus the 12.3% sales increase. Wal-Mart has said in the past that its aim is to see inventories grow at a rate that is no more than half the sales rate. Separately, gross margins improved 53 basis points to 23.57% as the company's cost of sales dropped as a percentage of sales versus what was seen last year.
Wal-Mart's guidance, however, has mitigated the market's enthusiasm for the record first quarter performance. Although there was no specific mention of gas prices in the press release, Wal-Mart's CFO said in a CNBC interview that the company is trying to be "cautious and conservative with providing our estimate" for the second quarter since it did see a direct impact on its business from the increase in gas prices as the first quarter progressed. Accordingly, Wal-Mart expects EPS to range from $0.70-0.74 versus $0.67 last year and a consensus estimate of $0.74, according to Reuters Estimates. The company reaffirmed its FY07 EPS outlook of $2.88-2.95 (consensus $2.93).
Overall, this was a solid report from Wal-Mart. While the Q2 guidance will act as an overhang on the stock, it is our view that Wal-Mart is delivering the goods that underscore its long-term investment appeal at current prices.
--Patrick J. O'Hare, Briefing.com |
