From Briefing.com: 4:01PM Bell Micro announces acquisition of MCE (BELM) :Co announces that it has signed a definitive purchase agreement for the acquisition of select assets and assumption of select liabilities of MCE, based in Munich, Germany. MCE is a European distributor of disk drives and components, and also has a substantial IBM enterprise business in its home market in Germany. MCE has annual revs of around euro 270 mln, of which around euro 170 mln is in Germany. The remaining business is in the major markets of the UK, France and USA. It is expected to be accretive with additional annual EPS of $0.04-$0.06.
9:31AM Skyworks and Motorola sign development agreement for the Helios DigRF Radio Solution for Next-Generation EDGE Platforms (SWKS) 5.31 0.05:Motorola and the co announce a development agreement that would allow production of complete EDGE radios based on the co's Helios DigRF Radio solution. The new chipset will be designed to support next-generation mobile handsets featuring high-speed Web browsing, music downloads and streaming video and would be the co's first solution to deliver transceiver functionality for Motorola wireless devices, creating an opportunity for the co to more than double its addressable semiconductor content per mobile handset.
10:11AM Andrx (ADRX) Piper Jaffray upgrades Market Perform to OUTPERFORM. Target $14 to $20. Upgrade follows firm's analysis of Andrx's May 2005 Form 483. They now believe that the manufacturing issues, while serious enough for the FDA to halt new product approvals, do not appear to signal something darker on the horizon. The firm believes ADRX's ability to get new product approvals is a matter of time. Firm says additional 2006 catalysts include potential launches of Toprol XL 50mg, $540 mln and Concerta $790 mln.
10:10AM Apple Computer (AAPL) Piper Jaffray reiterates OUTPERFORM. Target $68 to $79. Firm is saying their checks with Apple stores and third-party retailers over the holiday weekend indicate that iPod demand remains very strong, but iPod supply at non-Apple retailers is tight, given Apple is holding inventory for its own stores. The firm is currently modeling for total iPod shipments of 9.0 mln. Firm says while they do believe slight upside to their estimate is achievable, they do not expect Apple will be able to ship the number of units that are already anticipated in some Street models. The firm sees a continuation of strong demand for both iPod and Mac. Additionally, they believe 2006 will be a more robust product year than 2005.
10:09AM Redback Networks (RBAK) Morgan Joseph reiterates BUY. Target $12 to $15. Firm believes the worldwide B.R.A.S. (broadband remote access server) market is reaching an inflection point, as several major carriers move from vendor selection to deployments. They expect the B.R.A.S. market to grow from $430 mln in 2004 to approximately $1.5-$2.0 bln by 2008, representing a CAGR of 37%. They think RBAK is well positioned to benefit from this market growth, given that it is 100% focused on this market, and has numerous high profile customer wins under its belt. They believe that new customer wins and revenue recognition from current BRAS customers will act as catalysts for the stock.
10:08AM Chicago Mercantile (CME) Keefe Bruyette downgrades Mkt Perform to UNDERPERFORM . Downgrade is based on valuation. Keefe says there has been significant momentum and visibility in the exchange/trade execution group broadly, but they tend to believe that much of it is simply short term momentum, rather than a permanent revaluation of the group or some meaningful change in the growth outlook for the industry or the company specifically... Separately, CSFB initiates CME with a Neutral and $375 tgt, as they think the stock is fairly valued at 37x their 2006 and 30x their 2007 EPS ests.
10:07AM Energizer (ENR) Prudential upgrades Underweight to NEUTRAL. Upgrade is based on valuation and the prospect of sequential operating growth after an expected decline in Q1.
10:07AM NDS Group (NNDS) Ferris Baker Watts initiates BUY. Target $46. Firm believes the co is benefiting from the proliferation of digital television and advanced set-tops, which generally require conditional access solutions and middleware. They believe NNDS is well-positioned for sustainable growth.
10:06AM Trident Microsystems (TRID) Am Tech/JSA Research initiates BUY. Target $22. Firm is saying that using the same timeframe as we have for ESLR, they believe SPWR could trade at $40+ in 2008, a 33x multiple against earnings in the $1.20 range in 2009. Using a 25% discount, they believe that SPWR could be trading around $30 in the next 1-2 years. While they like SPWR's potential and believe it will prove to be an important part of an energy technology portfolio, they believe that the value is priced into the stock at current levels.
10:05AM Tiffany & Co (TIF) Fulcrum reiterates BUY. Target $42 to $47. Firm believes US strength and margin gains should outweigh Japan concerns. They remain comfortable with their thesis that the co will not only begin to experience gross margin expansion beginning in Q3, but also that its sales in Japan will continue to improve.
10:04AM Blyth Industries (BTH) CL King upgrades Underperform to NEUTRAL. Firm suspects most of the news regarding challenging fundamentals should be obvious to shareholders and should therefore be largely reflected in the current stock price. While they think BTH is likely to lower its full-year earnings guidance of $2.00-$2.05 in earnings and $100 mln in free cash flow, they think the shares are inexpensive if mgmt comes anywhere close to its guidance.
9:14AM Federated Investors (FII)
36.46: Federated, which manages more than $200 bln in assets, has agreed to pay at least $80 mln to settle allegations over improper mutual fund trading. New York Attorney General Eliot Spitzer and the SEC are expected to announce the settlement agreement as soon as today. Federated allegedly allowed traders to buy and sell its mutual funds, which hurt long-term investors. Federated will have to pay restitution to fund investors and cut fees. Federated is the fourteenth investment firm to resolve allegations over improper trading dating back to 2003, according to Bloomberg. All told, the investigations have resulted in $3.2 bln in settlements and concessions from the likes of Putnam Investments and Bank of America (BAC).
The issue at hand includes the practice of late day trading, wherein some investors are allowed to purchase funds at preferential prices. This is a form of market timing and short-term trading, which can ramp up costs for longer-term fund investors. By law, trades submitted after the 4pm eastern deadline must receive the next day's closing price in order to stop investors from taking advantage of late-breaking news on stocks.
The anticipated announcement is good news for Federated, but the market has already discounted the pending investigation into shares. The asset managers have enjoyed vaulting share prices over the last month as investors flocked to the Financial sector. As the largest weighted sector in the S&P 500, the financials carries the heavy burden of leading the market into the green. Performance to date has been lackluster, as rising interest rates kept investors at bay. But, the recent dramatic rise in shares may be signaling that the market sees the end to rate hikes on the horizon. The Financial sector is trading at price to earnings multiple of 21.9x, gaining almost 15% year-to-date.
---Kimberly DuBord, Briefing.com
9:08AM Merck (MRK)
30.98: As part of a major restructuring, Merck & Co. said it plans to cut 7,000 jobs, or about 11% of its staff worldwide, and close or sell five of its 31 manufacturing plants. Recently suggesting major changes will be needed in order to turn Merck around, CEO Richard Clark hopes that restructuring costs of about $350-$400 mln in 2005 and $800 mln to $1.0 bln in 2006 can generate pretax savings of $3.5 to $4.0 bln from 2006 through 2010.
Clark, who replaced Raymond Gilmartin as CEO on May 5th, said this initiative is an "important first step" in repositioning the nation's third-largest drug maker to meet today's and tomorrow's challenges. Aside from the $2.5 bln in lost annual revenue related to the withdrawal of Vioxx, Merck's patent on Zocor, the world's No. 2 selling cholesterol drug behind Pfizer's (PFE) Lipitor, expires in 2006. Last year Zocor generated $5.2 bln in sales, nearly 25% of Merck's $22.94 bln total revenue but less than half of the $11.9 bln rival Pfizer generated from Lipitor. More details about enhancing company-wide efficiencies and improving approaches to R&D, and marketing and sales will be revealed during Merck's Annual Business Briefing on December 15.
While Merck reaffirmed its FY05 EPS outlook of $2.47-2.51, versus the Reuters Estimates consensus of $2.50, the company warned that fiscal 2006 earnings guidance would miss Wall Street forecasts. Merck now sees FY06 EPS of $2.28-2.36, excluding charges but including $0.07 in stock option expenses, below consensus of $2.38. Before Vioxx problems began to impact Merck's bottom line, the company generated earnings of $2.92 per share in 2003.
---Brian Duhn, Briefing.com
8:35AM Holiday Sales Start Strong
It was a weekend filled with turkey, dressing, and shopping! According to the National Retail Federation (NRF), retailers saw green this holiday weekend as sales surged 22%. Shoppers navigated through the crowds taking advantage of early store openings and special deals. As always, the market had worried holiday sales would not live up to expectations, but we expected the American consumer came through to the tune of $27.9 bln. The NRF called this weekend's tally, which included Black Friday, a "blockbuster." To wit, with this weekend's tally in Santa's bag so to speak, this season is shaping up to be the second-biggest selling season since 1999, according to the NRF.
Total sales included a large portion of on-line sales, which are expected to continue as consumers arrive at work Monday taking advantage of high-speed Internet connections. The retail federation stated there were 145 mln shoppers in stores, while one in three shoppers choosing to navigate the web instead of fighting the dreaded lines. Discounters attracted the most shoppers, roughly 61%, including Wal-Mart (WMT). The world's largest retailer opened its doors in the early hours and offered early bird specials on electronics and other gadgets including $398 laptops. WMT estimated that 2 mln customers visited stores in the first two hours of shopping on Black Friday. Its same-store sales target for the month is a gain of 3-5%. Best Buy (BBY) did suffer outages on its website, but consumers flocked to stores buying up everything from digital cameras to its advertised 27-inch Magna TV for $122.99.
We have long held the view that holiday sales will be solid this year despite headwinds caused by higher heating-oil prices. According to the NRF, retailers will continue to reduce prices to draw in shoppers helping to generate holiday sales growth of 6%. This compares to a 6.7% rise last year. This weekend, the average consumer spent $302.81, hopefully making a dent in their holidays list. According to Visa USA, retail spending on credit and debit cards rose 11% to $3.7 bln. The strong opening for the holiday season is a welcomed sign for the market. Many of the retailing stocks ran up in anticipation of the strong numbers. WMT reversed its losing streak, gaining almost 19% since the lows back in late September. The stock now trades a current multiple of 19.7x- a premium to the S&P 500 Index at 18.6x.
---Kimberly DuBord, Briefing.com
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