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From Briefing.com: 6:29PM Swing Trader: ARO, ADSK, GYI, EMC, IVGN : -Technical- A relatively choppy Wednesday as earnings season gets underway. Market breadth was mixed as Decliners outpaced Advancers (1.2 to 1) on 1.34 Up to Down Volume while New Highs exceed New Lows (8 to 1). The SPY formed an inside day as its 4-session run-up narrows it range. That type of action is indicative of ...(continued)

4:48PM Advanced Micro trades up to $20.00 upon resumption of trading; INTC lifts $0.13 in sympathy (AMD) 19.25 -0.12:-Update-

4:22PM Advanced Micro beats by 9 cents, beats on top line (AMD) :Reports Q2 (Jun) earnings of $0.03 per share, $0.09 better than the Reuters Estimates consensus of ($0.06); revenues fell 0.2% year/year to $1.26 bln vs the $1.21 bln consensus. Co reports gross margin 39% vs 36.7% Briefing.com consensus. Co says gross margin improvement was largely due to record Computation Products Group gross margins. Co expects microprocessor sales growth to exceed normal seasonal patterns. Because of Spansion's SEC Form S-1 filing, AMD is not providing guidance for the Flash memory business.

Close Dow +43.50 at 10557.39, S&P +1.08 at 1223.29, Nasdaq +0.96 at 2144.11: The market opened with little fanfare and closed in similar fashion, as split industry leadership and limited participation confined the market to a narrow trading range all day ahead of more influential reports... Sure, a solid report from Harley-Davidson (HDI 50.38 +0.68), which beat analysts' Q2 forecasts and raised EPS growth guidance to 10-13% (from 5-8%), helped validate the likelihood that Q2 aggregate earnings growth for the S&P 500 may in fact come in better (i.e. 9-10%) than the 7% expected...
And certainly, the May trade deficit unexpectedly narrowing by 2.8% to $55.3 bln (consensus $57.0 bln), as exports rose to a new record, also improved underlying sentiment... However, market gains were modest at best, restricted almost exclusively to the Dow, as investors prepared to sift through earnings from large tech names - such as Apple Computer (AAPL 38.35 +0.11) and Advanced Micro Devices (AMD 19.25 -0.12) after the close - and the latest reads on inflation and consumption patterns in tomorrow's CPI and retail sales data... Meanwhile, six of ten economic sectors closed higher, as Technology paced the way to the upside...

Shares of IBM (IBM 81.45 +1.41) surged after Bernstein upgraded the stock to Outperform and raised their price target to $95 (from $92) due to valuation and improved earnings visibility, which also afforded competitors like HPQ (+1.3%) and DELL (+1.5%) with strong gains of their own... A 1.4% surge in Yahoo (YHOO 36.73 +0.50), after Legg Mason initiated coverage with a Buy rating and $42.50 target, also provided a boost, as did decent follow-through buying in chip stocks, as the PHLX Semi Index hit another 52-week high...

Also providing some leadership was Financial, which got a boost after Bank of America (BAC 45.75 +0.44) was upgraded to Overweight at Morgan Stanley... Upbeat comments from BB&T Corp (BBT 41.95 +0.74) management, after the bank reported Q2 earnings of $0.75 a share in line with consensus estimates, also provided some support and helped offset another rise in bond yields... Bonds were weak all day heading into tomorrow's CPI report and following a weaker than expected 5-yr note auction, as the benchmark 10-year note closed down 4 ticks to yield 4.15%...

Another interest-rate sensitive sector showing relative strength was Utilities, as investors seeking income helped the Dow Jones Utilities Average hit another new 52-week earlier in the session... Telecom Services - in focus as former WorldCom CEO Bernard Ebbers was sentenced to 25 years in prison - posted a solid gain after shareholders approved Sprint's (FON 25.51 +0.19) $35 bln acquisition of Nextel (NXTL 32.96 +0.16)... The Industrials sector also traded higher, benefiting from a rebound in transportation, record exports in May and an analyst upgrade on Robert Half International (RHI 28.42 +1.76)... Health Care, however, paced the way lower...

Abbott Labs (ABT 47.65 -2.06) beat analysts' Q2 expectations but issued downside Q3 guidance while HCA Inc. (HCA 50.05 -4.86) also warned, guiding Q2 earnings below consensus estimates... Reports of ongoing problems with recalled stents made by Boston Scientific (BSX 27.48 -0.38) also weighed on the sector... Materials closed lower as the greenback surged more than 1.0% against the euro (1.2086) and yen (111.86) following the unexpected drop in the U.S. trade deficit... Consumer Discretionary also finished to the downside amid analyst downgrades on Reebok (RBK 42.52 -0.67) and Dow Jones (DJ 36.48 -0.71) as well as profit-taking throughout the retail group...

Yesterday, the S&P Retail Index (RLX 461.02 -2.94) closed at a historic high... Energy closed lower, in sympathy with a 1.0% decline in oil prices ($60.01/bbl -$0.61) following mixed inventories data... Crude supplies fell 3.9 mln barrels (consensus -2.8 mln) and gasoline stockpiles fell 2.6 mln barrels (consensus -1.0 mln) while distillates rose by 3.2 mln barrels (consensus +2.0 mln)... Only two of the Energy sector's 29 components closed higher, with Unocal (UCL 66.75 +0.84) turning in a strong performance amid reports that China's CNOOC may increase its $18.5 bln for UCL... DJTA +0.4, DJUA +0.1, DOT +0.3, Nasdaq 100 +0.1, Russell 2000 -0.5, SOX +0.5, S&P Midcap 400 -0.3, XOI -0.3, NYSE Adv/Dec 1431/1829, Nasdaq Adv/Dec 1345/1706

1:56PM HCA Inc. (HCA) 50.00 -4.91: Shares of HCA tumbled nearly 9% following the company's less-than-clear guidance for the fiscal second quarter. Although the outlook for the full year of $3.05-3.20 per share was in-line with expectations, projected results for the second quarter were skewed by numerous special items. The company said that it expects EPS for the quarter to be in the range of $0.88-0.92, compared to $0.72 per share in the year ago period. This seems relatively optimistic. However, after considering a favorable tax gain of $0.11 per share, a deferred gain of $0.04 per share, a reduction in insurance reserves of $0.05, and an additional depreciation of $0.04 per share, earnings will be approximately $0.68-0.72 per share. This figure is more indicative of the company's recent performance.

After backing out the special items, the earnings results do not appear as favorable relative to the consensus estimate of $0.77 per share. Agreeably, the market has digested the misleading news in negative fashion.

Exacerbating investors' confusion, HCA stated that same-facility admissions for the quarter are expected to decline 0.3% from the same quarter last year, while same-facility equivalent admissions are expected to increase 1.2%. The provision for doubtful accounts should fall around $541 million, or 8.9% of revenues, compared to $661 million, or 11.3% year/year. The company also said that uninsured admissions rose by 5%, reflecting an increase in bad debt expense to 11.6%.

Digging deeper into today's guidance, it is apparent why the market has reacted in such a manner. Although HCA has lagged its peer group in terms of earnings growth, it appeared poised for an upturn. Trading in sympathy, Triad Hospitals (TRI), Tenet Healthcare (00C), Universal Health Services (UHS), and Health Management Associates (HMA) have all moved substantially lower. The news from HCA conflicts with the perception that most hospital companies are well positioned to deliver healthy performances. With this in mind, investors should be wary of HCA's outlook, at least in the near-term. ---Richard Jahnke, Briefing.com
1:38PM Harley-Davidson Inc. (HDI) 51.27 +1.54: The cacophony of tail pipe sounds came to a screeching halt on April 15th after the Milwaukee-based company reduced its full year production levels. Wednesday, this hundred year old motorcycle manufacturer surpassed expectations with its second quarter results, but the road ahead remains rocky.

Profits declined year over year from record levels to $237.4 mln, or 84 cents per share from $247.2 mln or 82 cents last year - topping consensus by a nickel. Yet, earnings quality was lower as part of the upside was driven by share repurchases equally 7% of float over last two quarters, although this is positive for shareholder value. On the top line, revenues rose 0.4% year/year to $1.33 bln right in-line with expectations. As forecasted, HDI shipped 77,128 units down 1.4% from a record high reached in the second quarter of 2004 of over 82k units. Retail sales rose 3.2% lower than the industry up over 4%. Despite lower sales, Harley was able to raise revenue per unit with margins slipping only slightly to 37.5%. Looking forward, it raised earnings guidance from 5-8% growth to 10-13%, but again, share repurchases certainly playing a big role in the revision.

International growth propelled growth led by retail sales in Europe and Japan up 23.6% and 10.4%, respectively. Helping to support gains in Europe were price adjustments enacted to account for fluctuations in the euro, along with product mix. The US business raced against record y/y figures. As such, retail sales rose a modest 3.2%. Harley's sales year-to-date have risen 1.6% vs. the industry up 2.7%. The heavyweight motorcycle market finished up 4.4%. A quarter of Harley's revenues are derived from ancillary businesses including parts, financing, apparel and collectibles. All these business performed quite well in Q2 with apparel up over 20%. Harley-Davidson Financial Services' (HDFS) operating income gained 4.1%, but margins continue to be squeezed as interest rates rise. HDFS continues to gain market share, only growth has come at a price as credit losses increased.

Motorcycle shipments have averaged 11.5% growth over the last five years; therefore, when the company reduced its 2005 guidance to flat to up one percent, shares took a nose dive. The stock dropped 20% in one day. The aftermath resulted in class action lawsuit filed by its shareholders. The company released a statement Wed stating U.S. regulators have set an inquiry into its April announcement of plans to limit short-term production. Harley said the SEC's enforcement division is also looking into allegations made by shareholders in lawsuits filed following that announcement. In a press release, the company said in light of the pending shareholder litigation, the investigation was not surprising. Today, Harley retained its guidance of 320k units shipped this year compared to 2004 of 317k and its original target of 339k.

Today's conference call focused less on the SEC investigation which HDI says is without merit, but on supply and demand. The debate is over the current inventory levels and what it signifies about demand trends. The concern is considering the second half typically adds more bikes (new launches etc) into the mix, what will these levels look like going further. HDI states demand still exceeds supply. As evidence, Harley remarked sales of used and new bikes are selling at or near MSRP indicating solid demand trends. In the past, dealers were charging well above MSRP resulting in waiting lists and poor customer service as there were just too few bikes on the market. As a result, Harley said it raised output to narrow the gap between supply and demand. Currently, however, considering moderating sales growth, if inventory levels continue to move higher Harley may have to cut production targets or operate at these levels which could hurt its brand. This debate is likely to continue. Meanwhile the market has taken hold of today's surprise beat and raised guidance, sending shares up over two dollars. The longer-term growth outlook for Harley-Davidson rests on its customer base. The average age of its riders is 46 years. Considering this generation's vast numbers, large discretionary spending base, and the fact people living longer, Harley's growth prospects are well intact. Over the longer-term, however, it does need to draw in younger riders considering its existing owners account for half of sales. We suggested investors back in April take advantage over exaggerated selling, shares now up 13% from their lows. We feel that while Harley does offer a solid growth story over the longer-term, considering the moderating pace of growth, the stock should not be purchased at a premium to the luxury group, which is currently the case. ----Kimberly DuBord, Briefing.com

----Kimberly DuBord, Briefing.com

11:45AM Gannett Co. (GCI) 72.39 -1.02: Extra! Extra! Read all about it! Gannett, the largest U.S. newspaper publisher, reported that net income for the fiscal second quarter fell to $338.6 million versus $354.4 million for the same period last year, as newsprint prices and other expenses rose. On a per share basis, however, earnings increased to $1.37 from $1.30, as the company repurchased approximately 5.3 million shares. Total operating revenues climbed 3.4% to $1.9 billion year/year, with newspaper segment revenues up 4.7% to $1.7 billion. The newspaper business benefited from a rise in local and employment classified advertising, despite languishing national revenues. At USA Today, the company's flagship publication, advertising revenues for the quarter declined by 1.4%.

Higher costs continue to weigh on results. For the quarter, total newspaper expenses increased by 6.7 % and newsprint expenses by 7.2%, on a year/year basis. In addition, the company recorded higher interest expenses and costs associated with a new press project in Detroit. Although the company has taken initiatives to control expenses in face of a challenging advertising market, high newsprint and labor costs remain a hinderance on operations.

The volatile advertising environment has continued to be an overhang on the company. In a June earnings pre-announcement, Gannett painted a cautious picture of the advertising landscape when it warned that Q2 results would fall short of analysts' expectations. With the advertising market remaining uncertain and circulation revenues trending flat, earnings were guided to the downside. Since the company depends on advertising sources for the majority of its revenues, the overall health of the advertising market has a significant impact on results. In turn, the advertising market is reliant on strong economic conditions and tends to fluctuate with economic cycles. As advertising remains choppy and trends shift to new media platforms, particularly the Internet, the company is presented with a number of challenges to regain revenue share.

Given the ongoing weakness in the advertising market, greater investment opportunities exist outside the newspaper industry. Although Gannet's PE multiple of 14.3x trailing earnings looks favorable compared to average level of 18.4x over the past five years, ongoing difficulties undermine the current value proposition. Until business conditions allow for more meaningful top-line growth and Gannett continues to diversify its revenue stream, increases on-line exposure, and mitigates recurring costs, investors should remain cautious about the stock in the near-term. ---Richard Jahnke, Briefing.com

8:54AM Page One - Earnings: the Bottom Line : The S&P managed its fourth straight winning session yesterday despite higher oil prices. Futures indicate a modest up open this morning.

The market momentum may be related to expectations of good earnings reports. The early numbers are indeed encouraging.

This morning, Abbott Labs, Fastenal, and Harley-Davidson all reported earnings above Wall Street expectations. So far, just about every report has been good. Apple Computer, Advanced Micro Devices and Yum! Brands report after the close.

Oil prices are up about $0.10 this morning ahead of the weekly inventory report. That carries some risk today, as any discouraging data could push the price higher. The potential for another storm in the Gulf of Mexico has traders looking to run the price on any bad news.

The May trade deficit was reported at $55.3 billion. This was a bit lower than the expected $57.0 billion, and the $56.9 billion April figure. It is mildly positive from an economic standpoint but won't have much market impact.

The recent market action is encouraging. Oil and other indirect factors may be of concern, but ultimately it is earnings (and the discount impact of interest rates on future earnings) that determine the value of a stock and a company. There are plenty of earnings reports yet to come, but so far the news has been upbeat.Dick Green, Briefing.com

9:57AM Xenoport (XNPT) Morgan Stanley initiates OVERWEIGHT. Target $19. Deutsche Bank initiates XNPT saying it completed Ph IIa in PHN, the co's lead product candidate, XP13512, which is a proprietary, extended release formulation of gabapentin, in Phase IIb clinical studies for R.L.S. which has also completed Phase IIa in PHN. They believe that the co has another significant product opportunity with XP19986, for use in gastroesophageal reflux disease and spasticity which will enter Phase II clinical trials shortly, after a recent positive Phase I study. They expect a major US corporate partnership for XP13512 in next 12 months.
9:56AM Vodafone PLC (VOD) Goldman Sachs upgrades In-Line to OUTPERFORM. Firm says the co trades on multiples that position it around the lower quartile of the European telecoms sector, despite being the leading scale player which is now demonstrating ability to leverage its scale more convincingly. They believe the news flow outlook from here is set to improve and the discount should reduce on a 12-month view.

9:55AM Buffalo Wild Wings (BWLD) KeyBanc Capital Mkts / McDonald upgrades Buy to AGGRESSIVE BUY. Target $40. KeyBanc upgrades BWLD following the co's Q2 preliminary report. Firm believes that shares have priced in a lower expectation of capacity growth and/or margin degradation than what the co will likely deliver.

9:55AM Bank of America (BAC) Morgan Stanley upgrades Equal-weight to OVERWEIGHT. Morgan Stanley upgrades BAC saying their residual income model indicates an intrinsic value of $52 for the stock 12 months from now, which implies 20% total-return. Firm thinks the co's risk reward looks attractive, as shares seem to discount a very bearish outlook.

9:53AM Nature's Sunshine (NATR) Seidler initiates STRONG BUY. Target $37. Seidler initiates NATR saying they believe that all of the major initiatives are tracking at or above investors' expectations, which should become evident as the co reports its financial results over the next several quarters (starting with 2Q05 in the upcoming weeks). As a result, they feel that there is a wide disconnect between where shares of NATR are currently trading and the progress that continues to be made in the turnaround. Additionally, using several different valuation methods and comparing NATR to its peer group, the analysis suggests that the co is highly undervalued versus its peers.

9:52AM Chemical Financial Corp. (CHFC) Sandler O'Neill downgrades Hold to SELL . Target $33. Firm does not believe the premium valuation is sustainable given their projected year over year EPS decline and considering CHFC's slower growth franchise relative to those of other small cap banks located in higher growth markets with better EPS growth prospects that trade at similar or lower P/E multiples.

9:51AM Axsys Technologies (AXYS) Kaufman Bros initiates BUY. Target $24. Firm believes the optics mkt will be increasingly robust over the foreseeable future as the United States and its allies seek to gather timely and actionable information on foes or potential threats. They expect that the co will benefit from the transformation process at the Pentagon, which is expected to yield a more effective networked war-making capability.

9:49AM SuperGen (SUPG) Wedbush Morgan initiates BUY. Target $8. Wedbush initiates SUPG saying that presently, the pivotal factor for SUPG's valuation is the potential approval of Dacogen, a novel treatment for myelodysplastic syndromes (M.D.S.) currently under review at the FDA. They believe that the FDA will approve Dacogen for M.D.S. by September, and that Dacogen will establish dominant market share, based on its greater potency, improved dosing schedule, and the proven marketing prowess of its commercialization partner, MGI Pharma (MOGN).

9:47AM Pixelworks (PXLW) WR Hambrecht upgrades Hold to BUY. Target $13. WR Hambrecht upgrades PXLW as they believe the story is set to see further appreciation into a solid digital TV environment in 2H05. In addition, firm believes that the projector business is bottoming out and should begin to improve somewhat over the balance of the year, reducing the offset that it has applied to the relatively strong growth in the advanced TV segment. While they remain somewhat concerned over the longer term about both the co's trailing position versus Genesis (GNSS) and Trident (TRID) in product development and major OEM volume traction, as well as the risks of the Equator acquisition and thin net cash position, they believe that investors looking to play the digital TV trends in 2H05 will find favor with the co.

9:45AM Hewlett-Packard (HPQ) Am Tech/JSA Research initiates BUY. Target $31. They believe that given new CEO Mark Hurd's track record of driving efficiency and cost savings, HPQ could see its operating margin expand to 7-8% and potentially as high as 10% from its current level of around 6%. They say a 15x multiple is conservative given HPQ's potential for greater than 15% EPS growth and valuation that is the most inexpensive in its peer group including AAPL, DELL, and CSCO.

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