From Briefing.com: 4:25PM Xilinx reduces Q2 revenue guidanace (XLNX) 21.54 -0.22 : Co issues downside guidance for Q2 (Sep), sees revs to decline 4-7% sequentially, down from previous guidance of flat to 5% decline. New guidance equates to revs of approx $448-462 mln vs. $472.57 mln Reuters Estimates consensus. Co says says downside guidance is a result of lower than anticipated sales from the Asia Pac region.
4:20 pm : For a fourth straight day, investors continued to see the value of owning equities as more confidence in corporate profitability helped offset a rebound in oil prices.
Before the market opened, Lehman Brothers Holdings (LEH 70.10 +2.08) became the latest brokerage firm to beat analysts' expectations, as surprising equity trading gains in a seasonally weak third quarter and management saying Lehman's pipeline of new deals remains at record levels overshadowed a slowdown in investment banking activity. That news, in addition to another decline in borrowing costs, provided some notable support for the S&P 500's most influential sector -- Financials -- which we recently upgraded to Overweight from Market Weight. The 10-year yield closed at 4.76% as the absence of any economic data to potentially disrupt the ongoing belief that the Fed will remain on hold when it meets again one week from today kept bond traders in buying mode.
As has been the case over the last several weeks, with money rotating out of oil stocks and into underperforming areas like semiconductors, the bulls most aggressively revisited the Energy sector (+1.7%), which paced the way higher Wednesday as a sense that oil was oversold offset a larger than expected build in weekly distillate inventories.
Fortunately for the bulls, oil's rebound was merely a technical bounce following seven straight days of declines including yesterday's 2.8% sell-off. Also, such maneuvering back into beaten-down Drillers (+3.1%) and Explorers (+2.4%) -- two of today's top ten performers -- did not result in the Technology sector sacrificing much in the way of leadership. The latter sector finished flat but that was largely due to a 1.5% pullback in Dow component Hewlett-Packard (HPQ 36.37 -0.55) after California's attorney general said he has sufficient evidence to indict company officials while investigating whether or not H-P illegally obtained private phone records.
The Industrials sector was another influential leader to the upside as transportation stocks shrugged off the rebound in oil and tacked a 1.9% gain onto Tuesday's 3.3% surge. Railroads turned in the day's best performance (+3.4%).
Among the only two sectors losing ground Wednesday, Consumer Staples paced the way lower as its defensive characteristics became less favorable in light of the market's more optimistic underlying tone. Health Care was also weak as drug stocks came under pressure after two medical studies found that Merck's (MRK 41.08 -1.07) Vioxx poses increased kidney and arrhythmia risks. BTK +0.4% DJ30 +45.23 DJTA +1.9% DJUA +0.4% DOT +0.6% NASDAQ +11.85 NQ100 +0.5% R2K +0.7% SOX -0.8% SP400 +0.9% SP500 +4.96 XOI +1.4% NASDAQ Dec/Adv/Vol 1120/1870/1.87 bln NYSE Dec/Adv/Vol 1078/2191/1.56 bln
3:58PM Trident Microsystems files to delay their 10-K (TRID) 21.98 +0.12 : Inside today's 10-K the co discloses "Trident Microsystems, is unable to file its annual report on Form 10-K for the fiscal year ended June 30, 2006by the prescribed filing date of Sept 13, 2006, without unreasonable expense or effort, as a result of the following. In May, 2006, the co commenced a review, through independent counsel, of the co's practices in administering stock option grants and related accounting....The special committee is continuing its investigation and has not yet determined the exact magnitude of the additional expenses to be incurred or the specific periods affected. However based on the preliminary findings, the Company expects to record additional non-cash charges for stock-based compensation expense and believes, but has not yet concluded, that it is likely that the Company will need to restate its historic GAAP financial statements..."
09:47 am Taiwan Semi: Banc of America Sec reiterates Buy. Target $12.4 to $11.85. BofA cuts their tgt on TSM to $11.85 from $12.40 and Y06 and Y07 EPS to $0.79 from $0.82 (consensus $0.78 for Y06 & Y07). Firm says further patience is required after the stock's move off its July lows. Firm now thinks TSM's wafer shipments in the December quarter will decline 3-4% sequentially vs. prior expectations of flat Q/Q, particularly given their channel checks in Taiwan. Firm says Dec rev is now expected to decline 3% Q/Q. Firm says wafer shipments for the following customers likely to decline more than 10% in the Dec quarter- ALTR, ADI, NVDA, and QCOM. Firm says TXN wafer starts to decline in the 5-10% range. Firm says these five customers are among the top ten customers for TSM. Firm says TSM's customers continue to adjust inventories. Firm says investors will now have to wait for June'07 to see evidence of higher wafer shipments Q/Q.
09:44 am Celestica: Cowen & Co upgrades Neutral to Outperform. Cowen and Co upgrades CLS to Outperform from Neutral based on valuation. The firm says they have increased confidence in business trends and in the co's turnaround effort - and are raising their ests accordingly. The firm believes the shares can outperform the market by over 20% in the next 12 months.
10:00 am Lehman Brothers (LEH)
68.02 +2.72: Shares in Lehman Brothers got a major boost Tuesday after Goldman Sachs (GS) kicked off the brokers' third quarter earnings season with a bang. Yes, it's that time of year again, the twilight before and after earnings season when the investment banks and brokers report interim results. Like Goldman, Lehman's quarter was buoyed by stock and bond trading as the fourth largest securities firm surpassed expectations by eight cents.
Net income rose 4.2% to $916 mln or $1.57 per share. Revenues widened 8.5% year/year to $4.18 bln despite difficult market conditions in the quarter. Activity levels typically slow in the third quarter during the summer months. Sequentially, revenues fell 5% from Q2, but have gained over 19% for the nine-month period to a record $13.1 bln.
Investment Banking declined 11% to $726 mln, reflecting lower completed M&A transactions. However, management noted its deal pipeline is at a record level. Capital Market revenues rose 13% to $2.8 bln, while Equities Capital Markets generated 31% top line growth to $837 mln. Fixed Income net revenues rose 6% to $2.0 bln as real estate and foreign exchange products offset weakness in mortgages, high yield, and interest rate products. Net profit margins contracted slightly to 21.9% due to lower revenues as compensation costs were kept steady at 49.3% of revenues.
Overall, it was a solid quarter for Lehman. The market has already discounted seasonal weakness in the third quarter looking towards Q4. Anticipation that the Fed has reached the end of its tightening schedule, coupled with compelling market valuations and solid earnings growth, underscore the recent upward revision of our Market View to Moderately Bullish. The brokers remain one of the best ways to play a bullish market outlook, not to mention the fevered pace of M&A activity spawned from flush corporate balance sheets. LEH trades at 10.4x forward earnings.
--Kimberly DuBord, Briefing.com
09:22 am Merck (MRK)
42.18: According to The Wall Street Journal, a recent study identified kidney-related risks for Merck's withdrawn painkiller Vioxx, while another study confirmed findings of an increased risk of heart problems with the drug that could be found during the first 30 days of treatment. Both studies were analyses of previous clinical trials, and were published online Tuesday by the Journal of the American Medical Association, the Journal reported.
Merck pulled Vioxx from the market in September 2004, after a study showed that the drug increased the risk of heart attacks and strokes in long-term users. Since that time, more than 16,000 lawsuits have been filed against the beleaguered drug maker. The company, however, has repeatedly denied any wrongdoing and has vowed to defend each case individually. So far, it is leading the courtroom battle with five victories against four losses.
The two studies further demonstrate the risks of Vioxx, adding kidney problems to heart concerns already associated with the drug, and provide additional support for the thousands of plaintiffs alleging that Vioxx caused heart attacks and strokes.
Nevertheless, as noted on our Sector View page, Merck remains one of our favorite names in the Health Care sector. While the Vioxx liability is unquantifiable considering the sheer number of lawsuits, the market appears to have already figured a $30 billion discount into its stock price. Furthermore, the company's outlook is bolstered by a strong commercial pipeline and the prospects for cancer treatment Gardisil and Januvia, Merck's treatment for type 2 diabetes.
--Richard Jahnke, Briefing.com
09:08 am Ford Motor Co. (F)
9.06: It appears that number two car company Ford Motor Co. is continuing a massive near-term turnaround effort. According to a story in The Wall Street Journal, Ford will undertake a dramatic restructuring effort, cutting jobs and benefits and reducing white-collar costs by 30%. It's believed the move could include a new pricing strategy.
According to the publication, the company's board of directors will announce the plan at a scheduled meeting. The plan is expected to be formally announced to the public later this month. This follows Ford's already-announced plan to cut 30,000 factory jobs and close 14 plants by 2012 and changes in its executive staff.
On Sep 6, the company appointed Alan Mulally, Executive VP of Boeing (BA) to become the company's President and CEO. The news sent shares up materially higher in the after-market following the release.
Ford is desperate to turn around its North American operations after losing $1.4 billion in the first half of the year; however even with the changes, it's unlikely there will be immediate gratification for the company.
Ford needs to cut costs exponentially in the near-term while redesigning its product lines. It's likely that creating change in Ford's product cycle and an ability to sell more automobiles could take years. After posting a profit of $3.49 billion in 2004, net income tumbled to $2 billion last year as losses at its North American unit mounted.
--Christine Marie Nielsen, Briefing.com
09:00 am Apple Computer (AAPL)
73.13: The migration towards "everything portable, everything digital" has been the cornerstone of our sector view on technology. On Tuesday, Apple held a special event in San Francisco displaying its latest and brightest products aimed at the digital lifestyle. Chief among them where updates to all three iPods: the nano, the shuffle, and the 5th generation video. Also, don't forgot the popcorn because users can now not only watch TV shows on their iPod, but movies as well. Users can download movies from Disney's (DIS) four major studios on the same day as a movie's DVD release. We anticipate other movie studios will follow suit as iTunes becomes the leader in online movie distribution.
However, the most important announcement was the introduction of the new iTV - Apple's integrated solution and central hub for digital content and playback in the living room. The whole idea of digital seamless connectivity has been a pie-in-the-sky dream for many years. Apple's new product, to be released in Q1, will retail for $299 and connect wirelessly to the Mac and (via cables) to the TV/and or set-top box. Any content that is viewed on Macs or iPods will instantly become viewable on any TV.
Others have tried and failed at the same idea, using the PC as the hub, but Apple has instead created a user-friendly approach using its new platform. This is a substantial new market opportunity for Apple and supports long-term growth. The marriage between great technology and great content also supports our positive outlook on arguably one of the best content generators, Disney, a suggested holding in our Active Portfolio.
The three families of iPods all received a facelift. The new enhanced iPod, on which users can watch movies and TV shows, can now play games. It is also 60% brighter, has 75% more battery life, offers gapless playback, and has new software features. Apple also released a new thinner 2nd generation nano. The new match-book-sized shuffle comes with a built-in clip, and is the world's smallest MP3 player. Apple's new products will set the stage for the holiday season and will be a huge presence in the family entertainment realm.
--Kimberly DuBord, Briefing.com |
