AI
| Followers | 71 |
| Posts | 12229 |
| Boards Moderated | 1 |
| Alias Born | 04/01/2000 |
Thursday, May 05, 2005 11:06:58 PM
From Briefing.com: 5:37PM Swing Trader: CTRP, AFFX, PNRA, DOW : -Technical- Tough tape leading into tomorrow's employment data. Market Breadth was barely positive as Advancers squeaked out a win over Decliners and New Highs managed to outpace New Lows for the first time in a long time. The SPY has been in an uptrend since last Friday's low (113.97) and looks to be stalling out between its 50-day ema and sma between 117.40/118.15 forming a relatively sloppy candlestick known as a Hanging Man....(continued)
4:58PM Corning Director buys 71,600 shares at $13.93 (GLW) 13.81 +0.12:
4:39PM Sina misses by $0.02, revs slightly below consensus; guides Q2 below consensus (SINA) 28.30 -0.19:Reports Q1 (Mar) earnings of $0.20 per share, excluding non-recurring items, $0.02 worse than the Reuters Estimates consensus of $0.22; revenues rose 10.7% year/year to $45.8 mln vs the $46.2 mln consensus. Co issues downside guidance for Q2, sees Q2 revs of $44-48 mln vs. $49.05 mln consensus. Co expects income to be approx $11-13 mln.
4:35PM CalAmp beats by a penny; guides Q1 below consensus (CAMP) :Reports Q4 (Feb) earnings of $0.14 per share, $0.01 better than the Reuters Estimates consensus of $0.13; revenues rose 61.3% year/year to $67.1 mln vs the $62.5 mln consensus. Co issues downside guidance for Q1, sees EPS of $0.06-0.10 vs. $0.11 consensus; sees Q1 revs of $42-48 mln vs. $57.40 mln consensus.
Close Dow -44.26 at 10340.38, S&P -3.02 at 1172.63, Nasdaq -0.43 at 1961.80: Stocks closed lower in the wake of corporate debt downgrades, but late-day buying efforts minimized losses heading into the close... The notion that the market may have overreacted somewhat to S&P's sooner-than-expected downgrade of General Motors' (GM 30.86 -1.94) credit rating to junk status that rattled stocks around lunch, coupled with news that Tracinda Corp. remains committed to its increased stake in GM, arguably improved sentiment...
However, once investors' confidence was shaken, the renewed buying efforts were not enough to prevent nine out of ten economic sectors from closing lower... Just as GM was a catalyst to the upside yesterday that helped the Dow close at a three-week high, it was the main driver of stocks to the downside today after its debt was cut to junk - just minutes before its rival Ford Motor's (F 9.70 -0.46) debt was also downgraded - due to competitive disadvantages, aging SUV line-ups and legacy costs... The market had been range-bound all morning, as mixed April retail comps and some reluctance ahead of tomorrow's employment data prevented much follow through buying interest in stocks...
Meanwhile, Telecom Services paced the way to the downside, led lower by a 1.1% sell-off in Verizon (VZ 34.30 -0.40), while Financial and Industrials lost ground following the GM/F news... Technology was weak across the board, as Disk Drive (-1.9%) paced the way lower amid a worse than expected Q1 loss at Maxtor (MXO 4.61 -0.36)... Networking (-1.0%) was also under pressure, amid news that China may delay 3G licenses to end of year, while even Semiconductor struggled to turn positive despite strength in Intel (INTC 24.26 +0.15) ahead of its analyst meeting after the bell...
Utility was under pressure after TXU Corp. (TXU 79.10 -3.32) missed Q1 forecasts by a penny while recovery efforts in Retail amid April comps failed to close Consumer Discretionary in positive territory... April same-store sales checked in at their weakest pace since November, but even though the market largely anticipated the soft numbers, strong growth from teen retailers (i.e. ANF, AEOS and BEBE) and dept. stores (i.e. FD, MAY) kept Retail in focus all day... The only economic sector to close higher was Energy, which took advantage of a 1.4% surge in oil prices ($50.83/bbl +$0.70)...
Treasurys also closed higher, catching a flight-to-quality bid on the heels of the S&P's corporate debt downgrades, as the 10-year note finished up 4 ticks to yield 4.16%... Earlier, investors got a preliminary read on Q1 productivity, which grew 2.6% (consensus +1.8%), while jobless claims rose 11K to 333K (consensus 324K), as the trend in claims remains steady at fairly low levels... But the data had little impact on either stocks or bonds, due in large part to the significance of tomorrow's influential jobs report... DJTA +0.3, DJUA -0.8, DOT -0.3, Nasdaq 100 -0.1, Russell 2000 +0.1, S&P Midcap 400 +0.2, XOI +1.0, NYSE Adv/Dec 1744/1542, Nasdaq Adv/Dec 1532/1492
3:30PM : Renewed buying interest lifts the indices off their lows, but the market continues to chalk up widespread losses... Recently closing to the upside, however, have been Treasurys, as the 10-year note finished up 4 ticks to yield 4.16% ahead of April payrolls data - a focal point tomorrow morning (8:30 ET) for both bond traders and stock investors...
While special emphasis will be placed on Non-farm Payrolls (consensus 175K), as well as Hourly Earnings (consensus +0.2%), a gain of even 125K (payrolls) should ease fears of a sharp economic slowdown while a gain of 175K or more would suggest that the economy is on a steady track for 3% real GDP growth...NYSE Adv/Dec 1591/1671, Nasdaq Adv/Dec 1304/1692
3:00PM : While the Nasdaq lags its blue chip counterparts to the downside, technology weakness remains prevalent across the board... Pacing the way lower has been Disk Drive (-2.6%), dragged lower by a 7.9% drubbing in Maxtor (MXO 4.58 -0.39), which missed analysts' forecasts last night with a loss of $0.10 a share... Networking (-1.2%) has also been under pressure, led lower by a 1.8% decline in Qualcomm (QCOM 35.00 -0.65) after China said it may delay 3G licenses to end of year...
Even Semiconductor (-0.2%) has struggled to turn positive despite strength in Intel (INTC 24.24 +0.13), which hosts its Spring Analyst Meeting after the bell (4:00 ET)... NYSE Adv/Dec 1564/1679, Nasdaq Adv/Dec 1321/1663
9:49AM Teekay LNG Partners IPO prices at high end of range (TGP) 24.26 +2.26:Teekay LNG Partners opens at $24.90 after pricing its IPO at $22, at the high end of the expected $20-$22 range. The co is a provider of liquefied natural gas (or LNG) and crude oil marine transportation services. It was formed by Teekay Shipping (TK), the world's largest owner and operator of medium-sized crude oil tankers, to expand its operations in the LNG shipping sector. TK will own a 79.4% limited partner interest in TGP. The co has a fleet of seven LNG carriers and five Suezmax class crude oil tankers. Natural gas is the fastest-growing primary energy source, according to the U.S. Dept of Energy.... The stock has exposure to two hot sectors, energy and tankers and the strong pricing shows there is fairly strong interest in this deal. This IPO is being led by Citigroup.
9:35AM Lazard IPO prices at low end of range; largest inv bank IPO since Goldman (LAZ) 25.00 :Investment bank Lazard prices its IPO at $25, at the low end of the expected $25-$27 range, but the deal size increased by 3.7 mln shares to 34.2 mln. The co focuses primarily on two business segments: Financial Advisory (M&A and Restructurings) and Asset Management. Chairman Michel David-Weill is the great-grandson of a cousin of the three brothers who started Lazard. He and the founding families, who are currently entitled to 36% of the bank's profits, will be bought out in part via the IPO for $1.6 bln. This is largest IPO by an investment bank since Goldman Sachs (GS) went public in 1999, according to Reuters. Corporate finance boutique Greenhill & Co's (GHL) IPO one year ago has almost doubled since then... Perhaps hurting the pricing is the confusing details of the prospectus and how to Lazard accordingly as it will continue to be taxed as a partnership. The deal is being led by Goldman Sachs.
9:15AM Gapping Down :Gapping down on disappointing earnings/guidance: GPRO -8.1% (also Baird downgrade), FWHT -20% (also CFO resigns), TTEC -19% (also Baird downgrade), GTIV -18.4% (also Raymond James downgrade), IVIL -15% (also Jefferies downgrade), PGIC -8%, QLGC -7%, GNSS -2.6%, SYMC -1.8%... Gapping down on disappointing April comps/guidance: PSUN -6%, ROST -4.5%... Other News: RNVS -4.3% (profit taking after 94% move yesterday).
9:05AM Gapping Up :Gapping up on strong earnings/guidance: IVII +20% (also Google deal), BOOM +16%, EDMC +11% (also Jefferies upgrade), GT +7.1%, WFMI +5%, ECIL +4.7%, WLDA +3.5%... Retailers gapping up on strong April comps/guidance: WTSLA +6.5%, AEOS +2.7%, PLCE +2.5%, SBUX +2%... Other News: RIMM +2.9% (positive CNBC segment), IBM +1.2% (announces restructuring plans), PARL +5.5% (extension of 28% move yesterday), NGEN +6.5% (extension of 21% move yesterday), TSRA +4.2% (extension of 8% move yesterday), STEM +5%... Under $3: CYTR +11% (FDA grants orphan drug status).
9:04AM Sprint and Intel to explore WiMAX broadband technologies (FON) 22.23 :Sprint (FON) and Intel (INTC) announce joint efforts to advance the development of standards-based 802.16e WiMAX mobile technology, which can provide high-capacity wireless broadband coverage and services. Cos to collaborate on technical specifications, perform equipment trials and conduct interoperability testing.
7:59AM ECI Telecom Earnings correction (ECIL) 7.23 :-Update- Earlier we reported that ECIL earnings of $0.08, in-line with the Reuters Estimates consensus, this was incorrect. ECIL reported $0.09 EPS, beating the Reuters consensus by a penny. We have corrected the original comment.
5:48PM The Clorox Company (CLX) 60.60 -3.08 -4.8%: Higher raw material costs weighed on the consumer products company Clorox reporting its third quarter results below expectations. Even though the company issued inline forward guidance and raised its sales forecasts for next quarter, the market turned its cheek sending shares down almost 5%. Profits fell to $118 mln, or $0.76 per diluted share down from net earnings of $126 mln last year. On a comparable basis, excluding discontinued operations and including two cents from performance unit accruals, tax adjustments and other charges, an actual of $0.75 per share came in below the Reuters estimates of $0.77 per share.
Sales grew at the slowest pace in over a year up only 3.3% year/year to $1.09 bln vs. the $1.1 bln consensus. Volumes gained 3% with shipments up across all segments. The strongest areas were Latin America, home care, cat litter, and Glad products. Its seasonally affected businesses were notably weaker including charcoal brands, salad dressings, and auto-care products. Year-to-date sales are up 5% to $3.13 bln.
Commodity prices weighed heavily on the company severely cutting into its profitability. Gross margins tumbled 260 basis points to 41.8%. CLX noted cost savings did offset some of the raw material pressures. On the operating line, lower overhead expenses were able to limit the impact resulting in margins expanding 30 bps to 17.2%.
Sales were flat within its Household unit as volumes rose 1% and pretax earnings fell the same. The decline was due to lower consumer-promotion spending and an unfavorable product mix. Although the brightest spot came from its home-care business, which generated record growth with its new Clorox ToiletWand and disposable toilet-cleaning system. The Specialty Group, which includes plastic bags, cat litter, containers, and wrap enjoyed 5% sales and 2% volume growth. However, pretax earnings fell 4% resulting from increased raw material costs and charges related to closing a Glad manufacturing facility. The strongest sales came out of its International segment up 8% on volume growth of +9%. Yet once again, commodity costs ate away at its profits, along with the impact from a joint venture, resulting in pretax earnings decline of 19%.
The market did not take any comfort in Clorox's guidance, nor did it wash away the stains from today's miss with shares breaking a year-long uptrend. It issued in-line guidance for Q4 reaffirming earnings of $0.91-0.97 per share vs. $0.95 consensus. For the full year, it expects EPS to range between $2.80-2.86 vs. $2.85 consensus. Looking further out into FY06, it forecasts EPS of $3.11-3.24, excluding $0.11-0.13 in option expense vs. $3.20 consensus. The fourth quarter, which will be released on May 5th, is historically strong with higher sales of seasonal items such as charcoal. CLX did raise its sales forecasts for this period from 3-5% to 4-6%.
Considering the severe sell off in shares following the result, the market is not convinced of any sales recovery in the fourth quarter. Prices increases, particularly the long-awaited hikes in its Clorox bleach products, will make some headway against the commodity costs. The stock is trading at 21.0x forward earnings in-line with its 5-year historical average, but a premium to the group. We suggest investors shy away from shares for the near-term even though the Staples stocks due offers defensive characteristics in this choppy market environment. However, Clorox will continue to be challenged on the margin by high raw material costs and slower growth trends.-----Kimberly DuBord, Briefing.com
1:46PM General Motors (GM) 31.22, -1.58: Today Standard & Poor's announced that it is cutting its rating on the debt of GM and GMAC to junk. The rating agency also affixed a negative outlook to the downgrade, which was attributed mainly to concerns at this juncture about the company's SUV sales not being as profitable as they have been in past years.
The knee-jerk response to this news by GM shareholders - and the broader market - has been understandably negative as the "junk" label doesn't carry any positive connotations. In that vein, there is strong potential that a flood of GM debt will be dumped on the junk bond market by portfolio managers who aren't allowed to own debt below investment grade.
In reporting on S&P's action, CNBC reminded its viewers that it will take a downgrade to junk by one of the other ratings agencies (i.e. Fitch or Moody's) to get GM kicked out of the Lehman Bros. Bond Index. While neither agency has made a similar determination on GM's debt just yet, there does tend to be a herd mentality on matters such as this, so it is being presumed that it is only a matter of time before one of the other ratings firms - if not both - also cuts GM's debt to junk status.
The concerns surrounding the ratings action have been reflected in the Treasury market, which has benefitted from a safe-haven bid that has dropped the yield on the 10-yr note to 4.16%.
The ratings action by S&P, of course, is negative; however, it isn't a complete surprise. That's why the stock market didn't suffer an expeditious slide when the news crossed the wires. On that note, it wasn't until S&P announced that it was cutting Ford's (0) debt to junk status, too, that selling efforts started to accelerate. That action wasn't a complete surprise either which, again, provides support for why the stock market hasn't completely tanked following these announcements.
GM, for its part, has reassured investors that it has adequate liquidity to run its business. That point notwithstanding, the combined downgrades to junk of these two giant issuers of debt still carries a shock effect that can't be treated with a complete sense of aplomb by investors. It will make their turnaround efforts even more difficult as it will increase their borrowing costs. At the same time, it also creates an increased risk that their dividend payments will be cut. --Patrick J. O'Hare, Briefing.com
11:35AM MCI (MCIP) $25.38 +0.09 (+0.4%) MCI's quarterly report this morning is a fitting end to the three-month long battle for who would own the company. The comparison of the -$0.28 per share loss to the consensus Reuters estimate of $0.14 is complicated. Some estimates appear to have included the income from discontinued operations from operations from their projections, while others appear to have "excluded" an expected non-recurring charge that was not present in the report. At this time, we would feel uncomfortable making a broad comparison of the earnings results to the consensus estimate without carefully analyzing each of the five full analyst projections for MCI this quarter.
However, such an analysis is not necessary. The entire operating expense structure for MCI is likely to be completely altered when integrated with Verizon (VZ), so carefully analyzing operating margins to discern trends is of little use. The more important metrics to look at are revenue trends, particularly in the enterprise segment. The enterprise segment of MCI's business is about 25% of MCI's overall business, but it is the most important segment for Verizon.
That enterprise segment showed good strength sequentially this quarter. Although the enterprise segment revenue total was down -3.3% sequentially ($1.157 billion versus $1.196b), that was in-line with the total MCI revenue declines of -3.7% from the December 31, 2004 quarter ($4.789 billion versus $4.974 billion). However, the voice and internet components were up sequentially. The enterprise data component declined 7.7%. Although there are also corporate customers in the other segments that MCI reports, US Sales, and International and Wholesale Sales, the enterprise segment represents the largest global corporate customers that MCI has.
Within that large global enterprise segment, the internet segment is the most important element. That segment represents services provided to enterprises that are deeply entrenched in the customer's technical infrastructure. Although it includes high-speed basic internet access (which is a commodity), the segment also includes wholesale leasing of virtual private networks (VPNs), private internet protocol networks (PIPs), and multi-protocol label switching networks (MPLS). The networks that MCI provides to these customers are deeply integrated into a customer's corporate network and, in some cases, may provide 100% of that customer's corporate networking platform.
The best aspect of the enterprise internet segment at MCI is that MCI is already providing integrated telecom services to those customers using a single network platform. An integrated package of voice, data, and video-conferencing is provided to customers under a single billing contract. In some cases, MCI even provides web-site hosting and system management for the client's network and intranet services. This segment is something that Verizon does not have and it will be the best fertile ground for developing the integrated "single-source" telecom products of the next era. The stability of this segment ($158 million in Q1 versus $155 million in 04Q4) is undoubtedly reassuring to Verizon today.
Also today, there is some discussion that some MCI shareholders are urging Qwest (Q) to "try again," meaning the MCI shareholders want Qwest to submit a revised bid. We don't think they really want MCI to be sold to Qwest, however. What those MCI shareholders are trying to do is get Qwest to offer another, higher bid, that will force Verizon to again increase their own bid for MCI. It amounts to using Qwest as a crowbar to get more out of Verizon. We don't think it will work, mostly because Qwest probably doesn't have the financial strength to put together a bid in the $32-$33 range that would be required.
As we have said repeatedly throughout this long battle for MCI, the best way to invest in the future of MCI is to buy VZ shares and take a three year perspective. While there may be some short-term trading opportunities with MCIP, the depressed price of VZ currently makes an investment in the future VZ/MCIP combination a real bargain. Not only is the downside fairly low, you get a 4.7% dividend while you wait ($0.405 per share per quarter). - Robert V. Green
10:46AM Jones Apparel Group, Inc. (JNY) 32.74 +0.7, 2.3%: This was not a great start to the year for the multi-brand, multi-channel fashion company Jones Apparel Group. The owner of such brands as Nine West, Anne Kline, Joan & David, Easy Spirit, Anzo Angiolini, Judith Jack, and Evan-Picone saw first quarter earnings fall almost 8% from last year. Net income came in at $87 mln, or $0.71 per share down from $94.4 mln, or $0.73 per share last year. On the surface it looks like the results were in-line with consensus estimates, however, earnings were assisted by a lower share count and pull-through sales. The latter of which added six cents to EPS, which would have brought earnings well below expectations. On the top line, revenues rose 10.8% year/year to $1.35 bln vs. the $1.39 bln consensus.
JNY also reduced its full year guidance, what it called "tightening" the bottom end of the range from its prior estimates released back in February of $2.75-2.90. It now forecasts EPS of $2.75-$2.85 vs. $2.78 consensus on revenues of $5.20-$5.25 bln vs. $5.31 bln consensus. Management stated, "We feel it is prudent to maintain a cautious outlook for the remainder of the year with customer consolidation and macroeconomic issues potentially creating consumer concerns". Shares have been trading in a downward spiral since peaking back in the summer. Despite revised guidance, shares traded up with the rest of the Retailing stocks following Thursday's release of April same-store sales.
Same-store sales including footwear and ready-to-wear stores, excluding Barneys NY, declined 3.7%. JNY was going up a difficult year over year comparisons with sales up 13% in the Q1 FY04. Additionally, management noted $27 mln in second quarter sales were pulled through to the first quarter, therefore excluding the pull-forward, organic sales fell 6.3%. Trends at its newly acquired Barneys New York continue to show strong growth up 10.7% even against a challenging comp of +18.7% last year. Its Achilles' heel came from its wholesale footwear, accessories, and junior denim units. By segment, Wholesale Better Apparel rose 4.8%, Wholesale Moderate Apparel declined 10.2%, Wholesale Footwear & Accessories gained 16.0%, and Retail Sales grew 67%.
Gross margins in footwear, accessories, and junior denim hurt overall profitability. Gross margins shrank 150 basis points to 36.5%. On the operating level, margins tumbled 160 basis points from 13.3% last year to 11.7%. Yet, excluding the pull-through sales, which tacked on another 80 basis points, operating margins were 10.9%.
JNY went on a buying spree during the third and fourth quarters of 2004 acquiring Maxwell Shoe and Barneys New York. These brands added $180.7 mln in revenues - roughly 13% of total. It ended the quarter with inventory totaling $645.8 mln up 13% y/y, excluding acquisitions inventory levels declined by 3% to $552 mln. The Bristol-PA fashion company repurchased 1.4 mln shares at a cost of $45.3 mln, or $33.16 per share. It has authorized another $150 mln in buybacks.
The bright spots for the quarter were within its apparel group, but surprisingly despite strong fashion trends in denim and accessories these units delivered lackluster sales. The lowered full year guidance will cause analysts to trim their estimates as well. This coupled with Q1's lackluster sales and declining profitability will put further pressure on shares. We would suggest investors shy away from the Retailers for the moment, as there are a lot of macro pressures, including high gasoline prices and rising interest rates that may curb consumer spending. -----Kimberly DuBord, Briefing.com
9:06AM Page One - Not a One-Way Market : The market surged yesterday as fears subsided. Futures indicate some profit-taking will occur this morning.
There are plenty of reasons to which the rally yesterday can be ascribed - the movement in oil prices, the GM news, good earnings, whatever. But none of that really caused the rally. Not even the Fed's re-statement about long-term inflation expectations being well contained was enough. Rather, is was simply a case of value coming through.
The market had formed a decent base, and some good news brought out the buyers that had held back during the recent turbulence. The rally isn't the start of something big, as this morning's futures sell-off indicates, but it does show that there are buyers looking to capture value when the opportunity presents itself. The broad-based nature of the rally shows that it was a macro move rather than company or sector driven.
Same-store sales data this morning is mixed. The April numbers are soft, but that was to be expected. They aren't horrible. Wal-Mart had a 0.9% increase, CostCo an 8.0% increase, and Limited was down 5.0%. Specialty stores reported widely disparate numbers. Combined with the increase in April auto sales, these numbers suggest that consumer spending in April posted a moderate increase. It gets second quarter GDP off to an OK start.
The employment data tomorrow will have a big impact on economic perceptions. If payrolls manage a gain of even 125,000, it would suggest that fears of a sharp economic slowdown are not justified. A gain of 175,000 or more would suggest that the economy is on a steady track for 3% real GDP growth and would be supportive to the underlying market tone.
Oil prices today are up a bit, hovering just above $50 a barrel. There are a lot of earnings reports, but few major ones, and the focus now is on the macro-economic data, particularly the employment release tomorrow. Choppy action is likely to continue, with yesterday's action reminding the bears that the fundamentals are good enough to prevent this from being a one-way market.--Dick Green, Briefing.com
9:48AM Eaton (ETN) Lehman Brothers downgrades Overweight to EQUAL-WEIGHT. Target $78. While downside risk is moderate, firm says upside potential depends on the co's ability to grow EPS through 2007 -- when both the truck (15% of sales) and auto (20+% of sales) end markets are expected to be weak. Firm says the near-term issue is that the expected catalyst is 1-1/2 years away, which may hang over the stock for the foreseeable future.
9:48AM Inland Real Estate (IRC) Wachovia downgrades Outperform to MKT PERFORM. Wachovia downgrades IRC, following Q1 results, based on weak core growth and reduced confidence in the co's ability to deliver and communicate future performance. Firm says while they believe the valuation of the co remains relatively cheap for real estate of this quality, they see no catalyst to realize this value in the very near term.
9:45AM Gentiva Health Svcs (GTIV) Raymond James downgrades Outperform to MKT PERFORM. Raymond James downgrades GTIV based following lackluster 1Q05 results, disappointing 2005 guidance, and a premium valuation. They say the upside in mgmt's 2005 guidance was primarily due to mgmt's decision to delay the implementation of SFAS 123R until 2006, which adds some $0.06-$0.08 to 2H05 results. Thus, on an apples-to-apples basis, they believe operating earnings guidance falls some 5.3% to a range of $0.68-$0.76 (mgmt guided $0.75-$0.83).
9:44AM Aeropostale (ARO) Prudential downgrades Neutral to UNDERWEIGHT . Target $33 to $24. Prudential downgrades ARO saying the co's April comps were disappointing and quite a bit worse than any of the ests. Firm thinks the numbers have room to go down given the co is starting from a historically high operating margin and the highest sales per square foot in the group, despite having the lowest A.U.R., comparisons are tough.
9:44AM NeoPharm (NEOL) Wedbush Morgan initiates BUY. Target $13. Firm believes the key value driver for NEOL is Phase III brain cancer drug IL13-PE38QQR, which has received Fast-Track Status, Orphan Drug Status, and designation as the only cancer biologic in the FDA's Pilot-2 program. Given the drug's encouraging performance in previous Phase I/II trials and the desperate need for new therapies for brain cancer, they believe it is likely to meet its primary efficacy endpoint and gain FDA approval. They also think the newly revamped board will resolve turbulence relating to sr. mgmt turnover, allowing investors to focus on the clinical progress of NEOL's multiple late-stage cancer drugs.
9:43AM Anteon (ANT) IRG Research initiates BUY. Target $49. IRG initiates ANT as they believe the co is evolving into a top tier provider. They think the expected passage of the FY06 budget this govt fiscal year (ending in Sept) will act as a catalyst. They also believe the co is well insulated from the ebb and flow of shifts in federal spending priorities.
9:42AM Sonus Pharm (SNUS) Wedbush Morgan initiates BUY. Target $5. Firm believes the chances for TOCOSOL paclitaxel approval are strong based on 1) the excellent safety profile and substantial activity seen in four Phase II trials, 2) a validated and low-risk 505b2 filing strategy, and 3) a realistic and achievable Phase III primary endpoint. They find the co's current market capitalization of $57 mln values the it at a steep discount to the $200-500 mln range typically awarded to a biotechnology company developing a lead drug in Phase II trials.
9:41AM Ferro (FOE) Morgan Stanley upgrades Equal-weight to OVERWEIGHT. Target $25. With a number of the Asian producers as well as Vishay and Kemet -- two of the larger U.S. ceramic capacitor producers (and FOE customers) -- indicating on their earnings calls that inventories have been worked down and the book to bills have been picking up, firm now has the data points indicating that FOE is seeing a pick-up in the electronics business.
4:58PM Corning Director buys 71,600 shares at $13.93 (GLW) 13.81 +0.12:
4:39PM Sina misses by $0.02, revs slightly below consensus; guides Q2 below consensus (SINA) 28.30 -0.19:Reports Q1 (Mar) earnings of $0.20 per share, excluding non-recurring items, $0.02 worse than the Reuters Estimates consensus of $0.22; revenues rose 10.7% year/year to $45.8 mln vs the $46.2 mln consensus. Co issues downside guidance for Q2, sees Q2 revs of $44-48 mln vs. $49.05 mln consensus. Co expects income to be approx $11-13 mln.
4:35PM CalAmp beats by a penny; guides Q1 below consensus (CAMP) :Reports Q4 (Feb) earnings of $0.14 per share, $0.01 better than the Reuters Estimates consensus of $0.13; revenues rose 61.3% year/year to $67.1 mln vs the $62.5 mln consensus. Co issues downside guidance for Q1, sees EPS of $0.06-0.10 vs. $0.11 consensus; sees Q1 revs of $42-48 mln vs. $57.40 mln consensus.
Close Dow -44.26 at 10340.38, S&P -3.02 at 1172.63, Nasdaq -0.43 at 1961.80: Stocks closed lower in the wake of corporate debt downgrades, but late-day buying efforts minimized losses heading into the close... The notion that the market may have overreacted somewhat to S&P's sooner-than-expected downgrade of General Motors' (GM 30.86 -1.94) credit rating to junk status that rattled stocks around lunch, coupled with news that Tracinda Corp. remains committed to its increased stake in GM, arguably improved sentiment...
However, once investors' confidence was shaken, the renewed buying efforts were not enough to prevent nine out of ten economic sectors from closing lower... Just as GM was a catalyst to the upside yesterday that helped the Dow close at a three-week high, it was the main driver of stocks to the downside today after its debt was cut to junk - just minutes before its rival Ford Motor's (F 9.70 -0.46) debt was also downgraded - due to competitive disadvantages, aging SUV line-ups and legacy costs... The market had been range-bound all morning, as mixed April retail comps and some reluctance ahead of tomorrow's employment data prevented much follow through buying interest in stocks...
Meanwhile, Telecom Services paced the way to the downside, led lower by a 1.1% sell-off in Verizon (VZ 34.30 -0.40), while Financial and Industrials lost ground following the GM/F news... Technology was weak across the board, as Disk Drive (-1.9%) paced the way lower amid a worse than expected Q1 loss at Maxtor (MXO 4.61 -0.36)... Networking (-1.0%) was also under pressure, amid news that China may delay 3G licenses to end of year, while even Semiconductor struggled to turn positive despite strength in Intel (INTC 24.26 +0.15) ahead of its analyst meeting after the bell...
Utility was under pressure after TXU Corp. (TXU 79.10 -3.32) missed Q1 forecasts by a penny while recovery efforts in Retail amid April comps failed to close Consumer Discretionary in positive territory... April same-store sales checked in at their weakest pace since November, but even though the market largely anticipated the soft numbers, strong growth from teen retailers (i.e. ANF, AEOS and BEBE) and dept. stores (i.e. FD, MAY) kept Retail in focus all day... The only economic sector to close higher was Energy, which took advantage of a 1.4% surge in oil prices ($50.83/bbl +$0.70)...
Treasurys also closed higher, catching a flight-to-quality bid on the heels of the S&P's corporate debt downgrades, as the 10-year note finished up 4 ticks to yield 4.16%... Earlier, investors got a preliminary read on Q1 productivity, which grew 2.6% (consensus +1.8%), while jobless claims rose 11K to 333K (consensus 324K), as the trend in claims remains steady at fairly low levels... But the data had little impact on either stocks or bonds, due in large part to the significance of tomorrow's influential jobs report... DJTA +0.3, DJUA -0.8, DOT -0.3, Nasdaq 100 -0.1, Russell 2000 +0.1, S&P Midcap 400 +0.2, XOI +1.0, NYSE Adv/Dec 1744/1542, Nasdaq Adv/Dec 1532/1492
3:30PM : Renewed buying interest lifts the indices off their lows, but the market continues to chalk up widespread losses... Recently closing to the upside, however, have been Treasurys, as the 10-year note finished up 4 ticks to yield 4.16% ahead of April payrolls data - a focal point tomorrow morning (8:30 ET) for both bond traders and stock investors...
While special emphasis will be placed on Non-farm Payrolls (consensus 175K), as well as Hourly Earnings (consensus +0.2%), a gain of even 125K (payrolls) should ease fears of a sharp economic slowdown while a gain of 175K or more would suggest that the economy is on a steady track for 3% real GDP growth...NYSE Adv/Dec 1591/1671, Nasdaq Adv/Dec 1304/1692
3:00PM : While the Nasdaq lags its blue chip counterparts to the downside, technology weakness remains prevalent across the board... Pacing the way lower has been Disk Drive (-2.6%), dragged lower by a 7.9% drubbing in Maxtor (MXO 4.58 -0.39), which missed analysts' forecasts last night with a loss of $0.10 a share... Networking (-1.2%) has also been under pressure, led lower by a 1.8% decline in Qualcomm (QCOM 35.00 -0.65) after China said it may delay 3G licenses to end of year...
Even Semiconductor (-0.2%) has struggled to turn positive despite strength in Intel (INTC 24.24 +0.13), which hosts its Spring Analyst Meeting after the bell (4:00 ET)... NYSE Adv/Dec 1564/1679, Nasdaq Adv/Dec 1321/1663
9:49AM Teekay LNG Partners IPO prices at high end of range (TGP) 24.26 +2.26:Teekay LNG Partners opens at $24.90 after pricing its IPO at $22, at the high end of the expected $20-$22 range. The co is a provider of liquefied natural gas (or LNG) and crude oil marine transportation services. It was formed by Teekay Shipping (TK), the world's largest owner and operator of medium-sized crude oil tankers, to expand its operations in the LNG shipping sector. TK will own a 79.4% limited partner interest in TGP. The co has a fleet of seven LNG carriers and five Suezmax class crude oil tankers. Natural gas is the fastest-growing primary energy source, according to the U.S. Dept of Energy.... The stock has exposure to two hot sectors, energy and tankers and the strong pricing shows there is fairly strong interest in this deal. This IPO is being led by Citigroup.
9:35AM Lazard IPO prices at low end of range; largest inv bank IPO since Goldman (LAZ) 25.00 :Investment bank Lazard prices its IPO at $25, at the low end of the expected $25-$27 range, but the deal size increased by 3.7 mln shares to 34.2 mln. The co focuses primarily on two business segments: Financial Advisory (M&A and Restructurings) and Asset Management. Chairman Michel David-Weill is the great-grandson of a cousin of the three brothers who started Lazard. He and the founding families, who are currently entitled to 36% of the bank's profits, will be bought out in part via the IPO for $1.6 bln. This is largest IPO by an investment bank since Goldman Sachs (GS) went public in 1999, according to Reuters. Corporate finance boutique Greenhill & Co's (GHL) IPO one year ago has almost doubled since then... Perhaps hurting the pricing is the confusing details of the prospectus and how to Lazard accordingly as it will continue to be taxed as a partnership. The deal is being led by Goldman Sachs.
9:15AM Gapping Down :Gapping down on disappointing earnings/guidance: GPRO -8.1% (also Baird downgrade), FWHT -20% (also CFO resigns), TTEC -19% (also Baird downgrade), GTIV -18.4% (also Raymond James downgrade), IVIL -15% (also Jefferies downgrade), PGIC -8%, QLGC -7%, GNSS -2.6%, SYMC -1.8%... Gapping down on disappointing April comps/guidance: PSUN -6%, ROST -4.5%... Other News: RNVS -4.3% (profit taking after 94% move yesterday).
9:05AM Gapping Up :Gapping up on strong earnings/guidance: IVII +20% (also Google deal), BOOM +16%, EDMC +11% (also Jefferies upgrade), GT +7.1%, WFMI +5%, ECIL +4.7%, WLDA +3.5%... Retailers gapping up on strong April comps/guidance: WTSLA +6.5%, AEOS +2.7%, PLCE +2.5%, SBUX +2%... Other News: RIMM +2.9% (positive CNBC segment), IBM +1.2% (announces restructuring plans), PARL +5.5% (extension of 28% move yesterday), NGEN +6.5% (extension of 21% move yesterday), TSRA +4.2% (extension of 8% move yesterday), STEM +5%... Under $3: CYTR +11% (FDA grants orphan drug status).
9:04AM Sprint and Intel to explore WiMAX broadband technologies (FON) 22.23 :Sprint (FON) and Intel (INTC) announce joint efforts to advance the development of standards-based 802.16e WiMAX mobile technology, which can provide high-capacity wireless broadband coverage and services. Cos to collaborate on technical specifications, perform equipment trials and conduct interoperability testing.
7:59AM ECI Telecom Earnings correction (ECIL) 7.23 :-Update- Earlier we reported that ECIL earnings of $0.08, in-line with the Reuters Estimates consensus, this was incorrect. ECIL reported $0.09 EPS, beating the Reuters consensus by a penny. We have corrected the original comment.
5:48PM The Clorox Company (CLX) 60.60 -3.08 -4.8%: Higher raw material costs weighed on the consumer products company Clorox reporting its third quarter results below expectations. Even though the company issued inline forward guidance and raised its sales forecasts for next quarter, the market turned its cheek sending shares down almost 5%. Profits fell to $118 mln, or $0.76 per diluted share down from net earnings of $126 mln last year. On a comparable basis, excluding discontinued operations and including two cents from performance unit accruals, tax adjustments and other charges, an actual of $0.75 per share came in below the Reuters estimates of $0.77 per share.
Sales grew at the slowest pace in over a year up only 3.3% year/year to $1.09 bln vs. the $1.1 bln consensus. Volumes gained 3% with shipments up across all segments. The strongest areas were Latin America, home care, cat litter, and Glad products. Its seasonally affected businesses were notably weaker including charcoal brands, salad dressings, and auto-care products. Year-to-date sales are up 5% to $3.13 bln.
Commodity prices weighed heavily on the company severely cutting into its profitability. Gross margins tumbled 260 basis points to 41.8%. CLX noted cost savings did offset some of the raw material pressures. On the operating line, lower overhead expenses were able to limit the impact resulting in margins expanding 30 bps to 17.2%.
Sales were flat within its Household unit as volumes rose 1% and pretax earnings fell the same. The decline was due to lower consumer-promotion spending and an unfavorable product mix. Although the brightest spot came from its home-care business, which generated record growth with its new Clorox ToiletWand and disposable toilet-cleaning system. The Specialty Group, which includes plastic bags, cat litter, containers, and wrap enjoyed 5% sales and 2% volume growth. However, pretax earnings fell 4% resulting from increased raw material costs and charges related to closing a Glad manufacturing facility. The strongest sales came out of its International segment up 8% on volume growth of +9%. Yet once again, commodity costs ate away at its profits, along with the impact from a joint venture, resulting in pretax earnings decline of 19%.
The market did not take any comfort in Clorox's guidance, nor did it wash away the stains from today's miss with shares breaking a year-long uptrend. It issued in-line guidance for Q4 reaffirming earnings of $0.91-0.97 per share vs. $0.95 consensus. For the full year, it expects EPS to range between $2.80-2.86 vs. $2.85 consensus. Looking further out into FY06, it forecasts EPS of $3.11-3.24, excluding $0.11-0.13 in option expense vs. $3.20 consensus. The fourth quarter, which will be released on May 5th, is historically strong with higher sales of seasonal items such as charcoal. CLX did raise its sales forecasts for this period from 3-5% to 4-6%.
Considering the severe sell off in shares following the result, the market is not convinced of any sales recovery in the fourth quarter. Prices increases, particularly the long-awaited hikes in its Clorox bleach products, will make some headway against the commodity costs. The stock is trading at 21.0x forward earnings in-line with its 5-year historical average, but a premium to the group. We suggest investors shy away from shares for the near-term even though the Staples stocks due offers defensive characteristics in this choppy market environment. However, Clorox will continue to be challenged on the margin by high raw material costs and slower growth trends.-----Kimberly DuBord, Briefing.com
1:46PM General Motors (GM) 31.22, -1.58: Today Standard & Poor's announced that it is cutting its rating on the debt of GM and GMAC to junk. The rating agency also affixed a negative outlook to the downgrade, which was attributed mainly to concerns at this juncture about the company's SUV sales not being as profitable as they have been in past years.
The knee-jerk response to this news by GM shareholders - and the broader market - has been understandably negative as the "junk" label doesn't carry any positive connotations. In that vein, there is strong potential that a flood of GM debt will be dumped on the junk bond market by portfolio managers who aren't allowed to own debt below investment grade.
In reporting on S&P's action, CNBC reminded its viewers that it will take a downgrade to junk by one of the other ratings agencies (i.e. Fitch or Moody's) to get GM kicked out of the Lehman Bros. Bond Index. While neither agency has made a similar determination on GM's debt just yet, there does tend to be a herd mentality on matters such as this, so it is being presumed that it is only a matter of time before one of the other ratings firms - if not both - also cuts GM's debt to junk status.
The concerns surrounding the ratings action have been reflected in the Treasury market, which has benefitted from a safe-haven bid that has dropped the yield on the 10-yr note to 4.16%.
The ratings action by S&P, of course, is negative; however, it isn't a complete surprise. That's why the stock market didn't suffer an expeditious slide when the news crossed the wires. On that note, it wasn't until S&P announced that it was cutting Ford's (0) debt to junk status, too, that selling efforts started to accelerate. That action wasn't a complete surprise either which, again, provides support for why the stock market hasn't completely tanked following these announcements.
GM, for its part, has reassured investors that it has adequate liquidity to run its business. That point notwithstanding, the combined downgrades to junk of these two giant issuers of debt still carries a shock effect that can't be treated with a complete sense of aplomb by investors. It will make their turnaround efforts even more difficult as it will increase their borrowing costs. At the same time, it also creates an increased risk that their dividend payments will be cut. --Patrick J. O'Hare, Briefing.com
11:35AM MCI (MCIP) $25.38 +0.09 (+0.4%) MCI's quarterly report this morning is a fitting end to the three-month long battle for who would own the company. The comparison of the -$0.28 per share loss to the consensus Reuters estimate of $0.14 is complicated. Some estimates appear to have included the income from discontinued operations from operations from their projections, while others appear to have "excluded" an expected non-recurring charge that was not present in the report. At this time, we would feel uncomfortable making a broad comparison of the earnings results to the consensus estimate without carefully analyzing each of the five full analyst projections for MCI this quarter.
However, such an analysis is not necessary. The entire operating expense structure for MCI is likely to be completely altered when integrated with Verizon (VZ), so carefully analyzing operating margins to discern trends is of little use. The more important metrics to look at are revenue trends, particularly in the enterprise segment. The enterprise segment of MCI's business is about 25% of MCI's overall business, but it is the most important segment for Verizon.
That enterprise segment showed good strength sequentially this quarter. Although the enterprise segment revenue total was down -3.3% sequentially ($1.157 billion versus $1.196b), that was in-line with the total MCI revenue declines of -3.7% from the December 31, 2004 quarter ($4.789 billion versus $4.974 billion). However, the voice and internet components were up sequentially. The enterprise data component declined 7.7%. Although there are also corporate customers in the other segments that MCI reports, US Sales, and International and Wholesale Sales, the enterprise segment represents the largest global corporate customers that MCI has.
Within that large global enterprise segment, the internet segment is the most important element. That segment represents services provided to enterprises that are deeply entrenched in the customer's technical infrastructure. Although it includes high-speed basic internet access (which is a commodity), the segment also includes wholesale leasing of virtual private networks (VPNs), private internet protocol networks (PIPs), and multi-protocol label switching networks (MPLS). The networks that MCI provides to these customers are deeply integrated into a customer's corporate network and, in some cases, may provide 100% of that customer's corporate networking platform.
The best aspect of the enterprise internet segment at MCI is that MCI is already providing integrated telecom services to those customers using a single network platform. An integrated package of voice, data, and video-conferencing is provided to customers under a single billing contract. In some cases, MCI even provides web-site hosting and system management for the client's network and intranet services. This segment is something that Verizon does not have and it will be the best fertile ground for developing the integrated "single-source" telecom products of the next era. The stability of this segment ($158 million in Q1 versus $155 million in 04Q4) is undoubtedly reassuring to Verizon today.
Also today, there is some discussion that some MCI shareholders are urging Qwest (Q) to "try again," meaning the MCI shareholders want Qwest to submit a revised bid. We don't think they really want MCI to be sold to Qwest, however. What those MCI shareholders are trying to do is get Qwest to offer another, higher bid, that will force Verizon to again increase their own bid for MCI. It amounts to using Qwest as a crowbar to get more out of Verizon. We don't think it will work, mostly because Qwest probably doesn't have the financial strength to put together a bid in the $32-$33 range that would be required.
As we have said repeatedly throughout this long battle for MCI, the best way to invest in the future of MCI is to buy VZ shares and take a three year perspective. While there may be some short-term trading opportunities with MCIP, the depressed price of VZ currently makes an investment in the future VZ/MCIP combination a real bargain. Not only is the downside fairly low, you get a 4.7% dividend while you wait ($0.405 per share per quarter). - Robert V. Green
10:46AM Jones Apparel Group, Inc. (JNY) 32.74 +0.7, 2.3%: This was not a great start to the year for the multi-brand, multi-channel fashion company Jones Apparel Group. The owner of such brands as Nine West, Anne Kline, Joan & David, Easy Spirit, Anzo Angiolini, Judith Jack, and Evan-Picone saw first quarter earnings fall almost 8% from last year. Net income came in at $87 mln, or $0.71 per share down from $94.4 mln, or $0.73 per share last year. On the surface it looks like the results were in-line with consensus estimates, however, earnings were assisted by a lower share count and pull-through sales. The latter of which added six cents to EPS, which would have brought earnings well below expectations. On the top line, revenues rose 10.8% year/year to $1.35 bln vs. the $1.39 bln consensus.
JNY also reduced its full year guidance, what it called "tightening" the bottom end of the range from its prior estimates released back in February of $2.75-2.90. It now forecasts EPS of $2.75-$2.85 vs. $2.78 consensus on revenues of $5.20-$5.25 bln vs. $5.31 bln consensus. Management stated, "We feel it is prudent to maintain a cautious outlook for the remainder of the year with customer consolidation and macroeconomic issues potentially creating consumer concerns". Shares have been trading in a downward spiral since peaking back in the summer. Despite revised guidance, shares traded up with the rest of the Retailing stocks following Thursday's release of April same-store sales.
Same-store sales including footwear and ready-to-wear stores, excluding Barneys NY, declined 3.7%. JNY was going up a difficult year over year comparisons with sales up 13% in the Q1 FY04. Additionally, management noted $27 mln in second quarter sales were pulled through to the first quarter, therefore excluding the pull-forward, organic sales fell 6.3%. Trends at its newly acquired Barneys New York continue to show strong growth up 10.7% even against a challenging comp of +18.7% last year. Its Achilles' heel came from its wholesale footwear, accessories, and junior denim units. By segment, Wholesale Better Apparel rose 4.8%, Wholesale Moderate Apparel declined 10.2%, Wholesale Footwear & Accessories gained 16.0%, and Retail Sales grew 67%.
Gross margins in footwear, accessories, and junior denim hurt overall profitability. Gross margins shrank 150 basis points to 36.5%. On the operating level, margins tumbled 160 basis points from 13.3% last year to 11.7%. Yet, excluding the pull-through sales, which tacked on another 80 basis points, operating margins were 10.9%.
JNY went on a buying spree during the third and fourth quarters of 2004 acquiring Maxwell Shoe and Barneys New York. These brands added $180.7 mln in revenues - roughly 13% of total. It ended the quarter with inventory totaling $645.8 mln up 13% y/y, excluding acquisitions inventory levels declined by 3% to $552 mln. The Bristol-PA fashion company repurchased 1.4 mln shares at a cost of $45.3 mln, or $33.16 per share. It has authorized another $150 mln in buybacks.
The bright spots for the quarter were within its apparel group, but surprisingly despite strong fashion trends in denim and accessories these units delivered lackluster sales. The lowered full year guidance will cause analysts to trim their estimates as well. This coupled with Q1's lackluster sales and declining profitability will put further pressure on shares. We would suggest investors shy away from the Retailers for the moment, as there are a lot of macro pressures, including high gasoline prices and rising interest rates that may curb consumer spending. -----Kimberly DuBord, Briefing.com
9:06AM Page One - Not a One-Way Market : The market surged yesterday as fears subsided. Futures indicate some profit-taking will occur this morning.
There are plenty of reasons to which the rally yesterday can be ascribed - the movement in oil prices, the GM news, good earnings, whatever. But none of that really caused the rally. Not even the Fed's re-statement about long-term inflation expectations being well contained was enough. Rather, is was simply a case of value coming through.
The market had formed a decent base, and some good news brought out the buyers that had held back during the recent turbulence. The rally isn't the start of something big, as this morning's futures sell-off indicates, but it does show that there are buyers looking to capture value when the opportunity presents itself. The broad-based nature of the rally shows that it was a macro move rather than company or sector driven.
Same-store sales data this morning is mixed. The April numbers are soft, but that was to be expected. They aren't horrible. Wal-Mart had a 0.9% increase, CostCo an 8.0% increase, and Limited was down 5.0%. Specialty stores reported widely disparate numbers. Combined with the increase in April auto sales, these numbers suggest that consumer spending in April posted a moderate increase. It gets second quarter GDP off to an OK start.
The employment data tomorrow will have a big impact on economic perceptions. If payrolls manage a gain of even 125,000, it would suggest that fears of a sharp economic slowdown are not justified. A gain of 175,000 or more would suggest that the economy is on a steady track for 3% real GDP growth and would be supportive to the underlying market tone.
Oil prices today are up a bit, hovering just above $50 a barrel. There are a lot of earnings reports, but few major ones, and the focus now is on the macro-economic data, particularly the employment release tomorrow. Choppy action is likely to continue, with yesterday's action reminding the bears that the fundamentals are good enough to prevent this from being a one-way market.--Dick Green, Briefing.com
9:48AM Eaton (ETN) Lehman Brothers downgrades Overweight to EQUAL-WEIGHT. Target $78. While downside risk is moderate, firm says upside potential depends on the co's ability to grow EPS through 2007 -- when both the truck (15% of sales) and auto (20+% of sales) end markets are expected to be weak. Firm says the near-term issue is that the expected catalyst is 1-1/2 years away, which may hang over the stock for the foreseeable future.
9:48AM Inland Real Estate (IRC) Wachovia downgrades Outperform to MKT PERFORM. Wachovia downgrades IRC, following Q1 results, based on weak core growth and reduced confidence in the co's ability to deliver and communicate future performance. Firm says while they believe the valuation of the co remains relatively cheap for real estate of this quality, they see no catalyst to realize this value in the very near term.
9:45AM Gentiva Health Svcs (GTIV) Raymond James downgrades Outperform to MKT PERFORM. Raymond James downgrades GTIV based following lackluster 1Q05 results, disappointing 2005 guidance, and a premium valuation. They say the upside in mgmt's 2005 guidance was primarily due to mgmt's decision to delay the implementation of SFAS 123R until 2006, which adds some $0.06-$0.08 to 2H05 results. Thus, on an apples-to-apples basis, they believe operating earnings guidance falls some 5.3% to a range of $0.68-$0.76 (mgmt guided $0.75-$0.83).
9:44AM Aeropostale (ARO) Prudential downgrades Neutral to UNDERWEIGHT . Target $33 to $24. Prudential downgrades ARO saying the co's April comps were disappointing and quite a bit worse than any of the ests. Firm thinks the numbers have room to go down given the co is starting from a historically high operating margin and the highest sales per square foot in the group, despite having the lowest A.U.R., comparisons are tough.
9:44AM NeoPharm (NEOL) Wedbush Morgan initiates BUY. Target $13. Firm believes the key value driver for NEOL is Phase III brain cancer drug IL13-PE38QQR, which has received Fast-Track Status, Orphan Drug Status, and designation as the only cancer biologic in the FDA's Pilot-2 program. Given the drug's encouraging performance in previous Phase I/II trials and the desperate need for new therapies for brain cancer, they believe it is likely to meet its primary efficacy endpoint and gain FDA approval. They also think the newly revamped board will resolve turbulence relating to sr. mgmt turnover, allowing investors to focus on the clinical progress of NEOL's multiple late-stage cancer drugs.
9:43AM Anteon (ANT) IRG Research initiates BUY. Target $49. IRG initiates ANT as they believe the co is evolving into a top tier provider. They think the expected passage of the FY06 budget this govt fiscal year (ending in Sept) will act as a catalyst. They also believe the co is well insulated from the ebb and flow of shifts in federal spending priorities.
9:42AM Sonus Pharm (SNUS) Wedbush Morgan initiates BUY. Target $5. Firm believes the chances for TOCOSOL paclitaxel approval are strong based on 1) the excellent safety profile and substantial activity seen in four Phase II trials, 2) a validated and low-risk 505b2 filing strategy, and 3) a realistic and achievable Phase III primary endpoint. They find the co's current market capitalization of $57 mln values the it at a steep discount to the $200-500 mln range typically awarded to a biotechnology company developing a lead drug in Phase II trials.
9:41AM Ferro (FOE) Morgan Stanley upgrades Equal-weight to OVERWEIGHT. Target $25. With a number of the Asian producers as well as Vishay and Kemet -- two of the larger U.S. ceramic capacitor producers (and FOE customers) -- indicating on their earnings calls that inventories have been worked down and the book to bills have been picking up, firm now has the data points indicating that FOE is seeing a pick-up in the electronics business.
Trade Smarter with Thousands
Leverage decades of market experience shared openly.
