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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Aitch who wrote (50236)	2/27/1999 4:07:00 AM
From: Aitch	Read Replies (3) \| Respond to of 97611

Last one for today... CPQ - LOWERING Q1 EPS DUE TO SOFTER JAN. SALES AND CURRENCY EXPOSURE 02:45pm EST 26-Feb-99 Robinson-Humphrey SUMMARY: * Reducing first quarter EPS estimate due to softer January sales and currency exposure. * We believe softer sales are largely due to build up of channel inventories in Q4 and the reduction in those inventories this quarter. Channel inventory build in Q4 believed to be related to slower growth in sales out for distributors and shortfalls from their projections. * 1999 EPS estimate unchanged at $1.70. EARNINGS: FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year Actual 12/97 EPS $0.27A $0.30A $0.36A $0.42A $1.34A Previous 12/98 EPS $0.01A $0.02A $0.07A $0.38A $0.48A Current 12/98 EPS $0.01A $0.02A $0.07A $0.38A $0.48A Previous 12/99 EPS $0.35E $0.38E $0.41E $0.56E $1.70E Current 12/99 EPS $0.32E $0.38E $0.41E $0.59E $1.70E FUNDAMENTALS: Short/Long Rating...:2/1 Price 02/26/99......:$35.38 Risk Rank...........:High Long Term Target Price...:$55.00 P/E 12/98...........:73.7X 52 Wk Price Range...:51.25 - 22.93 P/E 12/99...........:20.8X Proj. 5yr EPS Grth..:15.0% Technical Rating....:1/1 Book Value..........:$6.53 ROE/LT Dbt-to-Cp....:21.10%/0.00% Dividend/Yield......:$.08/.2% Revenue.............:$27636.00 mil Latest Report Date..:Oct 15 1997 Shares Outstanding..:1737.00 mil Convertible.........:No Mkt. Capitalization.:$61455.06 mil Hedge Clause(s).....: OPINION: Concern is building regarding Compaq's first quarter sales and EPS. The concern is that Compaq's sales to medium and small businesses are slowing. We are not surprised by this and attribute it largely to a fourth quarter build up in inventory among the major distributors that serve VARs and dealers, who in turn sell to large accounts. Our analysis of channel sales and inventory trends, published on February 18, highlighted an increase in channel inventory in the fourth quarter to 39 days from 35 days. Channel inventories had been falling for about a year from 49 days in Q3 1997 to a low of 35 days in Q3 1998. A combination of product shortages in August and September and slower channel sales in the fourth quarter caused channel inventory to rise in Q4, as shown below. We believe that channel inventory is now being worked down and that this is probably suppressing first quarter shipments for PC OEMs and eventually their suppliers. Since our analysis of channel inventory supports the concern of slower shipments from Compaq - - perhaps for different reasons - - we will lower our Q1 EPS estimate modestly to $0.32 from $0.35. Our 1999 EPS estimate remains at $1.70 versus a consensus figure of $1.80. Rated 2/2-H. CHANNEL INVENTORY 1996- --------1997---------- ------1998---------- Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4E Days Inv 49.1 49.8 46.8 48.7 47.8 45.0 37.9 35.1 39.3 COMPUTER DISTRIBUTORS & RESELLERS Sales Growth by Quarter DISTRIBUTORS CORPORATE RESELLERS Y/Y % CHG SEQ % CHG Y/Y %CHG SEQ % CHG Q1-96 29.3% 3.9% 31.7% 3.4% Q2-96 25.9% -0.2% 32.8% 9.4% Q3-96 25.1% 4.2% 30.0% 1.2% Q4-96 21.1% 13.5% 20.2% 5.3% Q1-97 17.0% 0.0% 16.2% -1.4% Q2-97 20.4% 2.3% 18.1% 11.1% Q3-97 16.5% 2.3% 20.2% 4.1% Q4-97 17.2% 11.7% 18.4% 3.2% Q1-98 20.1% 2.6% 18.0% -2.3% Q2-98 18.4% 1.0% 6.8% 1.6% Q3-98 19.8% 3.6% 5.0% 2.5% Q4-98E 15.2% 7.3% 8.0% 6.1%