AI
| Followers | 71 |
| Posts | 12229 |
| Boards Moderated | 1 |
| Alias Born | 04/01/2000 |
Tuesday, February 07, 2006 10:45:49 PM
From Briefing.com: 4:46PM Aeroflex beats by a penny, ex items; guides Q3 above consensus (ARXX) : Reports Q2 (Dec) earnings of $0.14 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.13; revenues rose 20.2% year/year to $135.2 mln vs the $132.8 mln consensus. Co issues upside guidance for Q3, sees EPS of $0.15, ex items vs. $0.14 consensus; sees Q3 revs of $140 mln vs. $138.33 mln consensus.
4:30PM Rambus C.F.O. to resign (RMBS) 28.71 -0.45 : Co announced that Robert K. Eulau, Sr V.P. and C.F.O., will resign from Rambus effective March 2, 2006 to pursue another opportunity. Harold Hughes, C.E.O., will serve as interim C.F.O. until a replacement has been found.
4:11PM Cisco Systems beats by a penny (CSCO) : Reports Q2 (Jan) earnings of $0.26 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.25; revenues rose 9.3% year/year to $6.63 bln vs the $6.62 bln consensus. CSCO reports gross margin 67.9% vs 67% co guidance.
4:43 pm Cisco Systems (CSCO)
18.09: Leading networking company Cisco Systems reported fiscal second quarter results that were slightly better than analysts' expectations. Specifically, its non-GAAP profit of $0.26 per share was a penny above the consensus estimate and revenues of $6.63 billion were a smidgen above the $6.62 billion expected by analysts. The top-line result translated to growth of 9.3% on a year-over-year basis and 1.2% versus the prior quarter.
On a pro-forma basis, Cisco's gross margins were 67.97% in the second quarter compared to 66.86% in the same period a year-ago and 67.33% in its fiscal first quarter.
The initial reaction to the report has been slightly positive, as Cisco didn't provide any blatant disappointments. The stock is trading at $18.61 in the after hours session. The company will be commenting on its business outlook on the conference call, which began a short time ago. Briefing.com, for its part, will be commenting further on the Cisco report, and its outlook, on our Story Stocks page Tuesday morning.
4:00PM FEI Company Terminates Discussions With Carl Zeiss SMT (FEIC) : Co announced that it has terminated discussions with Carl Zeiss SMT, a unit of Carl Zeiss AG regarding the potential acquisition of FEI by Carl Zeiss SMT. The discussions were initiated by Carl Zeiss. According to Vahe Sarkissian, chairman, president and CEO, "We are renewing our focus on generating improved operating results in 2006, building on our market focus and restructuring activities of 2005. Our potential as a leader in tools for nanotechnology is very large, and we are concentrating on taking advantage of that potential, generating positive shareholder returns in the process."
4:20 pm : The major averages were weak across the board as ongoing worries of slowing profit growth prompted broad-based consolidation, closing nine of ten economic sectors lower. For the first time this month, inflation fears weren't cited as a catalyst behind underlying market weakness. Instead, a huge decline in oil prices (-3.1%) actually alleviated some concern that rising energy prices will accelerate and potentially crimp consumer spending. Nonetheless, oil's drubbing incited sellers to lock in some of the profits that have lifted Energy to a sector-leading 11.5% gain, which continues to play into our Overweight rating on the sector. Thus, the absence of Energy's leadership, especially since the sector accounts for the bulk of earnings growth on the S&P, merely added to lingering worries about earnings deceleration and exacerbated the lack of enthusiasm on the part of buyers to get the market back on track.
Turning in the day's second worst performance was Materials, as gold futures plunged in sympathy with oil -- one of the catalysts behind the precious commodity's continued attractiveness as an inflation hedge. Profit-taking in steel as well as diversified metals & mining, two of the year's Top Ten best performing S&P industry groups, also weighed on the sector.
On a positive note, Walt Disney (DIS 26.66 +1.70), a suggested holding in our Active Portfolio, posted strong Q1 (Dec) earnings but was one of only 9 Dow components to finish higher. To that end, the stock's 7% surge was unable to single-handedly lift Consumer Discretionary. Weighing most heavily on the sector was a disappointing FY06 sales forecast from Toll Brothers (TOL 29.55 -1.65) amid softening demand in a number of housing markets. Confirmation that General Motors (GM 22.88 -0.46) agreed to slash its dividend by 50%, especially during a time when so many companies flush with cash are returning value to shareholders in the form of dividend increases -- a source of market support, also weighed on sentiment.
The incentive to lock in profits also pressured Financials, as some investors took money off the table in the brokerage group while others used rising borrowing costs as a reason to stay away from rate-sensitive bank stocks. The 10-yr note closed down 5 ticks to yield 4.56% following a poor 3-yr note auction, which had a poor 22% showing on indirect bidder participation, and a lack of any notable economic data to perhaps set a more positive tone in the Treasuries market.
Technology, however, eked out a small gain and was the day's only sector to finish in the plus column, as investors remained optimistic that Cisco Systems' (CSCO 18.09 +0.26) strong track record of consistency would carry over into Q2 results, which were scheduled for release after the close. Upbeat analyst comments on Motorola (MOT 21.04 +0.51), another suggested holding, and NCR Corp (NCR 38.86 +1.20), as well as a late-day turnaround in semiconductor, also helped offset weakness in software and hardware. BTK -0.7% DJ30 -48.51 DJTA -1.4% DJUA -0.8% DOT -0.5% NASDAQ -13.84 NQ100 -0.3% R2K -1.5% SOX +0.1% SP400 -1.3% SP500 -10.24 XOI -3.4% NASDAQ Dec/Adv/Vol 2070/967/2.13 bln NYSE Dec/Adv/Vol 2185/1072/1.78 bln
3:38PM Texas Instruments issues statement regarding jury award of $112 mln in patent damages (TXN) 30.63 +0.09 : Co announces following a month- long trial in United States District Court in Trenton, New Jersey, a federal jury awarded Texas Instruments (TXN) $112 mln in patent damages for infringement by Globespan Virata, a subsidiary of Conexant Systems (CNXT), of two T.I patents and one Stanford University patent covering DSL modems. "This verdict underscores the value of the intellectual property embodied in the T.I and Stanford patents, and we are gratified with the jury's decision," said Joseph F. Hubach, Senior Vice President and General Counsel of T.I. Remaining to be resolved is an issue relating to whether Globespan's future production of DSL modems will be licensed as a result of its acquisition by Conexant in 2004. Conexant is a licensee of the TI/Stanford patents. If Globespan's production is not licensed, the court can enjoin future manufacture and sales of Globespan products in the U.S. Also to be resolved are Globespan's antitrust claims, which are set for trial in October 2006.
10:41 am Anadigics: Needham & Co reiterates Buy. Target $7 to $7. Firm ups price target following Q4 results, as they like ANAD's growth prospects in both of their key business segments: broadband driven by WLAN and cable set top box markets and the wireless business driven by growth in the GSM/ W-EDGE handset markets. They believe that ANAD's improving EPS will be driven by absorption of fixed costs as capacity utilization of the 6" GaAs fab increases and by a richer product mix.
10:40 am Sirenza Micro: WR Hambrecht reiterates Buy. Target $8 to $8. The firm believes that with the acquisition of Premier Devices (PDI), SMDI has moved to the next level and has now become a major player in the RF market. They believe the acquisition has the potential to substantially increase the co's rev, in addition to being accretive next quarter, along with a strong strategic fit.
10:39 am Lexar Media: WR Hambrecht downgrades Buy to Hold. While firm believes that Toshiba is likely to settle with LEXR for a substantial amount, they believe there is near-term risk in the story with regards to gross margins and profitability in Q1 that cannot be ignored.
10:38 am Daktronics: Janco Partners initiates Buy. Target $38. Firm says DAKT is gaining share in an industry which has seen growth accelerate to high teens to low 20% rev growth over the last several quarters. Their expectations for DAKT are for 20% rev growth over the next several years, which embeds limited expectations for market share gains and could prove conservative should digital billboard demand increase substantially.
10:37 am Occulogix: Rodman & Renshaw downgrades Mkt Outperform to Mkt Perform. Firm also canceling their price tgt. The firm says the co's pivotal trial MIRA-1 failed its primary endpoint and the co highlighted that there was an "anomaly" in the control group. The firm says they believe a further subset analysis might do little to help position rheotherapy for FDA approval. The FDA might ask RHEO to conduct another trial, which has its own risks. The firm says skepticism among the retinal community, especially given the lack of understanding about rheopheresis and its mechanism of action of treating dry A.M.D just got higher.
10:36 am HRPT Properties: Ferris Baker Watts initiates Buy. Target $16. Firm is saying that given HRPT's current dividend yield of 7.9%, the co's investment-grade debt rating and solid capital structure, and its current stock price that approx book value, they believe there is little downside risk to HRP shares. The firm believes continued strengthening of the economy, specifically in the co's major markets, provides some upside to their 2006 FFO per share estimate.
10:35 am AC Moore: Wedbush Morgan upgrades Hold to Buy. Target $14 to $14. Firm believes the co is very focused on addressing several key strategic factors that should result in improved execution and drive sales and margins in 2006 and longer-term. They say this includes merchandising (including roll-out of custom framing), marketing, store operations, payroll, and import buying. believe ACMR should be able to grow 20% longer-term due to a combination of low to mid teens square footage growth, low to mid single digit comps, and opportunities for operating margin expansion.
10:33 am Websense: Wedbush Morgan downgrades Buy to Hold. Firm sees an increasing amount of downside risk given an increasingly competitive U.S. mkt. The firm also says that the risk/reward is neutral at current levels. They believe Web Security Suite bundles are countering commoditization of the core product in the U.S., but attach rates through bundle sales are difficult to ascertain.
4:20 pm William Wrigley Jr. Co. (WWY)
63.50 -1.20: The Wm. Wrigley Jr. Company gave investors something to chew on Tuesday afternoon. The world's largest chewing gum manufacturer reported fourth quarter earnings of $0.52 per share, excluding a dime in restructuring charges, and fell $0.03 short of the Reuters Estimates consensus. The result reflects flat year-over-year EPS growth.
Matching analysts' expectations, global sales rose 15% to $1.1 billion. In addition to strong volume growth within its core business, newly acquired confectionary brands were behind the top line growth and drove revenue in North America. Those new brands were responsible for three-fourths of the region's 37% sales increase; strong performance by Orbit, Extra, and Excel were additional factors. In Wrigley's Europe, Middle East, Africa, and India (EMEAI) segment, unfavorable exchange rates contributed to flat sales results.
While the newest additions to Wrigley's brand portfolio drove revenues, the acquisitions had a dilutive impact on earnings. The items, which include Altoids, Life Savers, and Sugus, are lower margin products. To that end, the company's consolidated gross margin contracted by 510 basis points to 50.0% in the fourth quarter (restructuring costs accounted for 310 basis points of the decline).
As we noted following the company's Q3 report, acquisition-related costs and restructuring charges marred its earnings results. Wrigley's near-term outlook remains undecided, but as the company remains focused on successfully integrating its newly acquired brands and realigning its global supply chain operations, it is positioned to regain momentum and generate stronger growth in the longer-term. Separately, Wrigley increased shareholder value by raising its quarterly dividend 14% to $0.32 per share last quarter. WWY shares trade at 26.3x trailing twelve month earnings, a discount to their 29.8x five-year average.
--Lisa Beilfuss, Briefing.com
1:01 pm Toll Brothers (TOL)
30.02 -1.18: Luxury home builder Toll Brothers on Tuesday lowered its outlook for home sales, due to softening demand in a number of markets, as well as delays in obtaining certificates of occupancy and construction inspections. Toll Brother's warning also fueled broader concerns about an accelerated slowdown in the housing market, pushing the Dow Jones U.S. Home Construction Index down about 2.3%.
Toll Brothers said it expects to deliver between 9,200 and 9,900 homes in the fiscal year, ending on October 31. That is down from a previously lowered forecast of 9,500 to 10,200 homes, as a result of slowing demand in the face of rising interest rates and longer delivery times at many of the company's communities. Toll Brothers will update its earnings guidance during its quarterly conference call on February 23.
For the first quarter ended January 31, the company said new orders declined to 1,572 from 2,209 a year earlier, while the value of the signed contracts fell 21% to $1.14 billion. Total revenue for the period rose 35% to approximately $1.33 billion. However, analysts had forecast revenue of $1.35 billion, according to Reuters Estimates. Toll Brothers ended the quarter with a backlog of 8,635 homes with a value of $5.95 billion, up 22% from a year earlier.
Since Toll Brothers first lowered its outlook in November, shares of the company have plunged about 25%, compared to a 4.7% decline in the Dow Jones U.S. Home Construction Index over the same period. As the housing market, and Toll Brothers in particular, continues to be constrained by rising interest rates and slowing demand, we would refrain from committing new money to the sector at this time.
--Richard Jahnke, Briefing.com
12:57 pm Polo Ralph Lauren (RL)
55.37 -2.10: Polo Ralph Lauren Corporation reported net income of $90.7 million, or $0.84 in diluted earnings per share, for its third fiscal quarter. Its EPS result exceeded Wall Street's expectation by seven cents, and reflects close to 17% year-over-year growth. Aided by a 15% jump in retail sales and a 6% rise in wholesale sales, the retailer's top line rose a better than expected 10.4% to $995 million.
The increase in retail sales was driven by a 7.4% increase in total company comparable store sales. Each of Ralph Lauren's retail formats posted solid growth, with its namesake stores faring best. Inclusion of the company's footwear line and improved performances across the womenswear, childrenswear, full-price menswear, and European businesses fostered the wholesale sales increase. Improvements in full-price sell-throughs and sourcing efficiencies within both the retail and wholesale segments helped the company's gross margin expand significantly.
This month, Ralph Lauren completed the $255 million cash purchase of the Polo Jeans business from Jones Apparel. The company expects the transaction to be dilutive by a nickel per share in fiscal 2006. In fiscal 2007, the acquisition should have a neutral effect upon earnings. After adjusting for that deal, as well as for the closures of the Club Monaco outlet stores and the disposition of the Caban home stores, the company has lowered its FY06 (Mar.) forecast. EPS of $2.80-2.85 is now anticipated versus the previously guided range of $2.85-2.92. The consensus estimate is pegged two cents above the high end of that range. Management noted that its Club Monaco strategy will be dilutive by about a dime in full-year EPS, but that it is an initiative consistent with the company's long-terms efforts to reduce off-price sales and rationalize distribution channels. Excluding $0.15 in stock-based compensation expenses, the retailer expects FY07 EPS to be $3.15-3.25; analysts estimate $3.31.
RL shares presently trade at 19.6x estimated FY06 earnings. The stock trades at a premium to peer companies such as Jones Apparel (JNY), Liz Claiborne (LIZ) and Tommy Hilfiger (TOM), and consequently, it has fallen prone to profit taking following the company's guidance.
--Lisa Beilfuss, Briefing.com
12:43 pm Under Armour (UARM)
32.25 -6.95: Shares of Under Armour traded sharply lower on Tuesday after the maker of performance sports apparel reported better than expected results for its first quarter as a public company, but provided a seemingly disappointing forecast for the current period. With investors' high expectations grounded, the stock, which has tripled since the company went public in late November, fell more than 18% during the regular trading session.
The latest results highlight our concerns that expectations have exceeded fundamentals, leading to stretched valuation levels. Though the pull-back in shares presents a compelling entry point into what is still one of the most exciting growth stories in the branded apparel sector, the comparatively high multiple of 64x forward earnings continues to underscore our neutral position on the stock.
For the fourth quarter, Under Armour reported net income of $7 million, or $0.08 per share, compared with $6.2 million, or $0.15 per share, in the year ago period. The results included the impact of $3.5 million for debt redemption. Without this charge, the company would have earned $0.16 per share - $0.09 better than the Reuters Estimates consensus of $0.07. Revenue rose 25% in the quarter to $87.3 million, from $69.6 million a year earlier, driven by strong demand for the performance apparel and expanding product offerings.
Under Armour also forecasted net income and revenue would increase 20-25% in the current year. That equates to revenue of $337.3 to $351.4 million. Currently, analysts are expecting revenue of $352.53 million and EPS of $0.50, according to Reuters Estimates.
--Richard Jahnke, Briefing.com
10:18 am Activision (ATVI)
14.15 -0.21: Activision on Monday said third quarter profits fell 30% from a year earlier, as a result of weaker than expected market conditions in the U.S. and Europe due to the transition to next-generation gaming systems. The video game publisher also projected a fourth quarter loss and lowered its earnings guidance for the full year. In turn, shares of the company plunged more than 6% in early trading.
For the third quarter, Activision, which publishes such titles as Call of Duty, Tony Hawk's American Wasteland, and Shrek, posted net income of $67.9 million, or $0.23 per share. In the same period a year earlier, the company earned $97.3 million, or $0.35 per share. Meanwhile, revenue rose 20% year/year to $816.2 million from $680.1 million. The results fell short of analysts' earnings expectations, but beat top-line estimates. According to Reuters Estimates, analysts had forecast earnings of $0.36 per share on revenue of $708.19 million.
Based on its disappointing earnings results and weaker than expected market conditions in the third quarter, Activision lowered its outlook for the fourth quarter and fiscal year. For the fourth quarter, the company forecasted a loss of ($0.07) to ($0.09) per share on revenue between $125 and $135 million, down from its previous earnings estimate of $0.05 per share and revenue of $226 million. For the full year, earnings are expected to be in the range of $0.09 to $0.11 per share on revenue of $1.41 to $1.42 billion. Wall Street had forecast earnings of $0.02 per share on revenue of $199.8 million for the fourth quarter, and $0.32 per share on $1.37 billion for the year.
In the midst of a transition to next generation gaming systems, rivals Electronic Arts (ERTS) and THQ Inc. (THQI) also reported lower quarterly earnings and lowered expectations for the current period as they continue to invest actively in product development. While the console transition phase is still expected to create near-term disruptions, the industry, and Activision, is poised for longer-term growth that typically follows the release of new gaming hardware. As a result, investors have reason to continue to hold the stock, but until there is better earnings visibility, we wouldn't be committing new money.
--Richard Jahnke, Briefing.com
09:55 am YUM Brands (YUM)
51.38 +0.21: For its fourth fiscal quarter, Yum! Brands reported $0.81 in earnings per share. That result excluded $0.04 in stock-options expensing, and surpassed the Reuters Estimates consensus by three cents. Chief Executive David Novak acknowledged that FY05 marked Yum's fourth consecutive year of meeting its goal of at least 10% EPS growth, as earnings per share were up 13% prior to special items and expensing stock options. Record store openings in China, Taco Bell's same-store sales performance, and a turnaround at KFC were drivers.
The company's top line rose 4.1% to $2.90 billion during the fourth quarter, slightly shy of analysts' $2.97 billion estimate. Worldwide system same-store sales increased 2%. Fueled by higher same-store sales, revenues were up 4% to $1.82 billion in the U.S. Sales across Yum's International division rose 2% to $658 million. The company's China business, which has been key to its growth story, posted an 8% increase in Q4 sales to $425 million, but operating profit there fell 18% excluding options expense. Yum attributed the weakness to consumer concerns related to avian flu and a seasoning-supplier issue that had surfaced during the second quarter. KFC was the particular drag there.
Yum continues to expect EPS growth of at least 10% for the full-year, primarily driven by global expansion and same-store sales growth of 2-3% in the U.S. That translates to $2.79 in FY06 (Dec.) profit per share, which includes $0.13 per share of option expensing. The company forecasts at least 5% growth in International full-year system sales. For the China division, Yum anticipates system sales growth of at least 22%.
YUM shares presently trade at 18.6x estimated FY06 earnings, a premium to rival McDonald's 16.7x forward multiple. McDonald's remains our favored stock within the casual restaurant space, and is a recommended holding in our suggested portfolio for active investors.
Separately, Yum reported January 2006 same-store sales. U.S. blended same-store sales increased 5%, with Taco Bell (+11%) faring best and Pizza Hut (-4%) performing worst.
--Lisa Beilfuss, Briefing.com
09:42 am General Motors (GM)
23.23 -0.11: The pretense for GM's announcement Tuesday morning is to say categorically, "we are all in this together." As we expected, the automaker announced it will cut its cash dividend by fifty percent. The move is seen as a goodwill gesture to the United Auto Worker's Union ("UAW") in order to garner the necessary concessions for the 2007 contract negotiations. Shareholders are not the only ones taking a hit, as GM's senior leadership will be taking salary and compensation cuts, including a 50% cut for CEO Rick Wagoner.
As part of its North American turnaround plan, GM announced a slew of actions aimed at reducing costs. These include revising the health-care benefit plan for salaried retirees, which is expected to reduce its liability by about $4.8 bln and cut annual health-care expenses by almost $900 mln before tax. These are necessary actions GM must take in order to get its cost structure in line in order to compete globally in this intensively competitive environment.
GM announced significant salary reductions for GM's chairman and senior leadership, as well as a 50% reduction in compensation for outside board members. The move is a clear sign to the UAW that it will not be the only one feeling the cost-cut burden. Many expected GM wouldn't cut the dividend unless it was confident it would receive the concessions necessary.
Overall, the news today was a modest positive for GM's shares, which were up in pre-market trading. While news of a dividend cut certainly makes headlines, it would have been bigger news if GM didn't cut the dividend considering its level of cash burn. The reduction is part of a psychological move to align all participants in GM's recovery. All of today's actions are necessary for GM to lower its cost structure. The next step is for GM to sell GMAC and settle the Delphi situation.
We would argue the pace of cuts has been slow (to put it mildly) and that GM still has yet to demonstrate it has the vehicles consumers want to buy. Today's news was a first step, but GM continues to face Himalayan-esque problems and this news does little to change our bearish view on GM's fundamental outlook. Still, we would concede the downside risk at this juncture appears limited. The question regarding GM's future will not be answered in terms of quarters, but instead in terms of years.
--Kimberly DuBord, Briefing.com
09:07 am Boston Scientific (BSX)
21.62: Boston Scientific on Tuesday said fourth quarter profits rose from a year earlier, despite lower sales of its coronary stent systems. Specifically, the medical device maker, which recently won a bidding war with Johnson & Johnson (JNJ) for Guidant Corp. (GDT), earned $334 million, or $0.40 per share, compared with $297 million, or $0.35 per share, in the year ago period. However, excluding special charges, the company would have earned $340 million, or $0.41 per share. Analysts, on average, had expected earnings of $0.42 per share, according to Reuters Estimates.
Net sales for the fourth quarter, which the company pre-announced in January, fell 3.8% year/year to $1.54 billion from $1.6 billion. Worldwide coronary stent sales totaled $640 million, down from $730 million a year earlier. Sales of Taxus stent systems were down 12% to $606 million, with U.S. sales down almost 21% to $398 million.
Boston Scientific said it plans to announce financial guidance for fiscal 2006 after the completion of its merger with Guidant. The pending acquisition, which will provide the company access to the $10 billion market for pace makers and defibrillators, is expected to foster sales growth and help reverse negative momentum in the company's stock. Shares of Boston Scientific are down nearly 40% over the past year and are trading near 52-week lows.
--Richard Jahnke, Briefing.com
09:00 am Coca-Cola (KO)
40.94: Coke's fortune rests on its ability to sell soft drinks, which account for more than 80% of total sales, compared to less than 20% for Pepsi. This mix continues to favor Pepsi in terms of growth prospects. Still, Coke's fourth quarter showed a solid improvement in key areas, as Coke's turnaround remains on track. New product introductions, innovation, and brand extension will be key areas on which to capitalize for Coke in the effort to accelerate growth for the 120 year-old company.
Coke reported fourth quarter revenue growth of 7% to $5.55 bln, slightly ahead of expectations, reflecting a 4% increase in gallon sales, 3% pricing and mix benefit, and offsetting a 1% negative currency impact. Profits declined 28% to $864 mln due to a $188 mln expense in repatriating overseas profits, but excluding items, per share profits of 46 cents topped analysts' estimate by two cents.
Worldwide case volume growth of 4% continues to be driven by growth in the Emerging Markets - namely China, Russia, Turkey and Brazil. North America delivered a solid 3% rise, while Germany finally recovered posting a mid-single digit growth rate for the first time since 2003. Southeast Asia and Northwest Europe were notably weak in the quarter. The non-carbonated and water segments remain the driving force, growing 12% and 17%, respectively, compared to soft drinks which were up a mere 2%.
Coke's turnaround remains on track. The bigger question is whether investors will have the patience to ride it out. The stock is hovering near multi-year lows, trading at 18x forward earnings, which is well below its historical multiple of 27.9x. From this perspective, we continue to like KO on a risk/reward basis.
--Kimberly DuBord, Briefing.com
08:51 am Walt Disney (DIS)
24.96: Theme parks were the leading contributor to Disney's first quarter results, which surpassed expectations by fifteen percent. Overall, it was a solid quarter with 6% earnings growth and each division performing as expected. The parks division continues to be a steady profit center for Disney, up an impressive 51% to $375 mln as attendance, lodging, and restaurants were all up on promotional activity surrounding the 50th Anniversary of Disneyland, along with contributions from Euro Disney and Hong Kong Disneyland.
Net income in the quarter rose to $734 mln, or 37 cents per share, on revenue growth of 2.2% to $8.85 bln. After a tax benefit and asset sales, earnings per share came in a nickel above consensus. The film unit continues to be a drag on Disney, with profits tumbling 60% to $128 mln. Disney did face tough comparisons in this unit and we should see a second half recovery with the release of the second installment of Pirates of the Caribbean and the new Pixar release, Cars.
Separately, Citadel Broadcasting Corp. (CDL) has agreed to merge with Disney's ABC radio unit, gaining 22 stations and a piece of the network in a deal valued at $2.7 bln. Disney will own 52% of the newly formed Citadel Communications and will receive as much as $1.65 bln in cash as part of the deal.
The solid quarter underscores our positive view on the company, as Disney is clearly refocusing for the future. We expect double-digit operating growth this year. At 17.8x, Disney represents a strong investment at current levels.
--Kimberly DuBord, Briefing.com
4:30PM Rambus C.F.O. to resign (RMBS) 28.71 -0.45 : Co announced that Robert K. Eulau, Sr V.P. and C.F.O., will resign from Rambus effective March 2, 2006 to pursue another opportunity. Harold Hughes, C.E.O., will serve as interim C.F.O. until a replacement has been found.
4:11PM Cisco Systems beats by a penny (CSCO) : Reports Q2 (Jan) earnings of $0.26 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.25; revenues rose 9.3% year/year to $6.63 bln vs the $6.62 bln consensus. CSCO reports gross margin 67.9% vs 67% co guidance.
4:43 pm Cisco Systems (CSCO)
18.09: Leading networking company Cisco Systems reported fiscal second quarter results that were slightly better than analysts' expectations. Specifically, its non-GAAP profit of $0.26 per share was a penny above the consensus estimate and revenues of $6.63 billion were a smidgen above the $6.62 billion expected by analysts. The top-line result translated to growth of 9.3% on a year-over-year basis and 1.2% versus the prior quarter.
On a pro-forma basis, Cisco's gross margins were 67.97% in the second quarter compared to 66.86% in the same period a year-ago and 67.33% in its fiscal first quarter.
The initial reaction to the report has been slightly positive, as Cisco didn't provide any blatant disappointments. The stock is trading at $18.61 in the after hours session. The company will be commenting on its business outlook on the conference call, which began a short time ago. Briefing.com, for its part, will be commenting further on the Cisco report, and its outlook, on our Story Stocks page Tuesday morning.
4:00PM FEI Company Terminates Discussions With Carl Zeiss SMT (FEIC) : Co announced that it has terminated discussions with Carl Zeiss SMT, a unit of Carl Zeiss AG regarding the potential acquisition of FEI by Carl Zeiss SMT. The discussions were initiated by Carl Zeiss. According to Vahe Sarkissian, chairman, president and CEO, "We are renewing our focus on generating improved operating results in 2006, building on our market focus and restructuring activities of 2005. Our potential as a leader in tools for nanotechnology is very large, and we are concentrating on taking advantage of that potential, generating positive shareholder returns in the process."
4:20 pm : The major averages were weak across the board as ongoing worries of slowing profit growth prompted broad-based consolidation, closing nine of ten economic sectors lower. For the first time this month, inflation fears weren't cited as a catalyst behind underlying market weakness. Instead, a huge decline in oil prices (-3.1%) actually alleviated some concern that rising energy prices will accelerate and potentially crimp consumer spending. Nonetheless, oil's drubbing incited sellers to lock in some of the profits that have lifted Energy to a sector-leading 11.5% gain, which continues to play into our Overweight rating on the sector. Thus, the absence of Energy's leadership, especially since the sector accounts for the bulk of earnings growth on the S&P, merely added to lingering worries about earnings deceleration and exacerbated the lack of enthusiasm on the part of buyers to get the market back on track.
Turning in the day's second worst performance was Materials, as gold futures plunged in sympathy with oil -- one of the catalysts behind the precious commodity's continued attractiveness as an inflation hedge. Profit-taking in steel as well as diversified metals & mining, two of the year's Top Ten best performing S&P industry groups, also weighed on the sector.
On a positive note, Walt Disney (DIS 26.66 +1.70), a suggested holding in our Active Portfolio, posted strong Q1 (Dec) earnings but was one of only 9 Dow components to finish higher. To that end, the stock's 7% surge was unable to single-handedly lift Consumer Discretionary. Weighing most heavily on the sector was a disappointing FY06 sales forecast from Toll Brothers (TOL 29.55 -1.65) amid softening demand in a number of housing markets. Confirmation that General Motors (GM 22.88 -0.46) agreed to slash its dividend by 50%, especially during a time when so many companies flush with cash are returning value to shareholders in the form of dividend increases -- a source of market support, also weighed on sentiment.
The incentive to lock in profits also pressured Financials, as some investors took money off the table in the brokerage group while others used rising borrowing costs as a reason to stay away from rate-sensitive bank stocks. The 10-yr note closed down 5 ticks to yield 4.56% following a poor 3-yr note auction, which had a poor 22% showing on indirect bidder participation, and a lack of any notable economic data to perhaps set a more positive tone in the Treasuries market.
Technology, however, eked out a small gain and was the day's only sector to finish in the plus column, as investors remained optimistic that Cisco Systems' (CSCO 18.09 +0.26) strong track record of consistency would carry over into Q2 results, which were scheduled for release after the close. Upbeat analyst comments on Motorola (MOT 21.04 +0.51), another suggested holding, and NCR Corp (NCR 38.86 +1.20), as well as a late-day turnaround in semiconductor, also helped offset weakness in software and hardware. BTK -0.7% DJ30 -48.51 DJTA -1.4% DJUA -0.8% DOT -0.5% NASDAQ -13.84 NQ100 -0.3% R2K -1.5% SOX +0.1% SP400 -1.3% SP500 -10.24 XOI -3.4% NASDAQ Dec/Adv/Vol 2070/967/2.13 bln NYSE Dec/Adv/Vol 2185/1072/1.78 bln
3:38PM Texas Instruments issues statement regarding jury award of $112 mln in patent damages (TXN) 30.63 +0.09 : Co announces following a month- long trial in United States District Court in Trenton, New Jersey, a federal jury awarded Texas Instruments (TXN) $112 mln in patent damages for infringement by Globespan Virata, a subsidiary of Conexant Systems (CNXT), of two T.I patents and one Stanford University patent covering DSL modems. "This verdict underscores the value of the intellectual property embodied in the T.I and Stanford patents, and we are gratified with the jury's decision," said Joseph F. Hubach, Senior Vice President and General Counsel of T.I. Remaining to be resolved is an issue relating to whether Globespan's future production of DSL modems will be licensed as a result of its acquisition by Conexant in 2004. Conexant is a licensee of the TI/Stanford patents. If Globespan's production is not licensed, the court can enjoin future manufacture and sales of Globespan products in the U.S. Also to be resolved are Globespan's antitrust claims, which are set for trial in October 2006.
10:41 am Anadigics: Needham & Co reiterates Buy. Target $7 to $7. Firm ups price target following Q4 results, as they like ANAD's growth prospects in both of their key business segments: broadband driven by WLAN and cable set top box markets and the wireless business driven by growth in the GSM/ W-EDGE handset markets. They believe that ANAD's improving EPS will be driven by absorption of fixed costs as capacity utilization of the 6" GaAs fab increases and by a richer product mix.
10:40 am Sirenza Micro: WR Hambrecht reiterates Buy. Target $8 to $8. The firm believes that with the acquisition of Premier Devices (PDI), SMDI has moved to the next level and has now become a major player in the RF market. They believe the acquisition has the potential to substantially increase the co's rev, in addition to being accretive next quarter, along with a strong strategic fit.
10:39 am Lexar Media: WR Hambrecht downgrades Buy to Hold. While firm believes that Toshiba is likely to settle with LEXR for a substantial amount, they believe there is near-term risk in the story with regards to gross margins and profitability in Q1 that cannot be ignored.
10:38 am Daktronics: Janco Partners initiates Buy. Target $38. Firm says DAKT is gaining share in an industry which has seen growth accelerate to high teens to low 20% rev growth over the last several quarters. Their expectations for DAKT are for 20% rev growth over the next several years, which embeds limited expectations for market share gains and could prove conservative should digital billboard demand increase substantially.
10:37 am Occulogix: Rodman & Renshaw downgrades Mkt Outperform to Mkt Perform. Firm also canceling their price tgt. The firm says the co's pivotal trial MIRA-1 failed its primary endpoint and the co highlighted that there was an "anomaly" in the control group. The firm says they believe a further subset analysis might do little to help position rheotherapy for FDA approval. The FDA might ask RHEO to conduct another trial, which has its own risks. The firm says skepticism among the retinal community, especially given the lack of understanding about rheopheresis and its mechanism of action of treating dry A.M.D just got higher.
10:36 am HRPT Properties: Ferris Baker Watts initiates Buy. Target $16. Firm is saying that given HRPT's current dividend yield of 7.9%, the co's investment-grade debt rating and solid capital structure, and its current stock price that approx book value, they believe there is little downside risk to HRP shares. The firm believes continued strengthening of the economy, specifically in the co's major markets, provides some upside to their 2006 FFO per share estimate.
10:35 am AC Moore: Wedbush Morgan upgrades Hold to Buy. Target $14 to $14. Firm believes the co is very focused on addressing several key strategic factors that should result in improved execution and drive sales and margins in 2006 and longer-term. They say this includes merchandising (including roll-out of custom framing), marketing, store operations, payroll, and import buying. believe ACMR should be able to grow 20% longer-term due to a combination of low to mid teens square footage growth, low to mid single digit comps, and opportunities for operating margin expansion.
10:33 am Websense: Wedbush Morgan downgrades Buy to Hold. Firm sees an increasing amount of downside risk given an increasingly competitive U.S. mkt. The firm also says that the risk/reward is neutral at current levels. They believe Web Security Suite bundles are countering commoditization of the core product in the U.S., but attach rates through bundle sales are difficult to ascertain.
4:20 pm William Wrigley Jr. Co. (WWY)
63.50 -1.20: The Wm. Wrigley Jr. Company gave investors something to chew on Tuesday afternoon. The world's largest chewing gum manufacturer reported fourth quarter earnings of $0.52 per share, excluding a dime in restructuring charges, and fell $0.03 short of the Reuters Estimates consensus. The result reflects flat year-over-year EPS growth.
Matching analysts' expectations, global sales rose 15% to $1.1 billion. In addition to strong volume growth within its core business, newly acquired confectionary brands were behind the top line growth and drove revenue in North America. Those new brands were responsible for three-fourths of the region's 37% sales increase; strong performance by Orbit, Extra, and Excel were additional factors. In Wrigley's Europe, Middle East, Africa, and India (EMEAI) segment, unfavorable exchange rates contributed to flat sales results.
While the newest additions to Wrigley's brand portfolio drove revenues, the acquisitions had a dilutive impact on earnings. The items, which include Altoids, Life Savers, and Sugus, are lower margin products. To that end, the company's consolidated gross margin contracted by 510 basis points to 50.0% in the fourth quarter (restructuring costs accounted for 310 basis points of the decline).
As we noted following the company's Q3 report, acquisition-related costs and restructuring charges marred its earnings results. Wrigley's near-term outlook remains undecided, but as the company remains focused on successfully integrating its newly acquired brands and realigning its global supply chain operations, it is positioned to regain momentum and generate stronger growth in the longer-term. Separately, Wrigley increased shareholder value by raising its quarterly dividend 14% to $0.32 per share last quarter. WWY shares trade at 26.3x trailing twelve month earnings, a discount to their 29.8x five-year average.
--Lisa Beilfuss, Briefing.com
1:01 pm Toll Brothers (TOL)
30.02 -1.18: Luxury home builder Toll Brothers on Tuesday lowered its outlook for home sales, due to softening demand in a number of markets, as well as delays in obtaining certificates of occupancy and construction inspections. Toll Brother's warning also fueled broader concerns about an accelerated slowdown in the housing market, pushing the Dow Jones U.S. Home Construction Index down about 2.3%.
Toll Brothers said it expects to deliver between 9,200 and 9,900 homes in the fiscal year, ending on October 31. That is down from a previously lowered forecast of 9,500 to 10,200 homes, as a result of slowing demand in the face of rising interest rates and longer delivery times at many of the company's communities. Toll Brothers will update its earnings guidance during its quarterly conference call on February 23.
For the first quarter ended January 31, the company said new orders declined to 1,572 from 2,209 a year earlier, while the value of the signed contracts fell 21% to $1.14 billion. Total revenue for the period rose 35% to approximately $1.33 billion. However, analysts had forecast revenue of $1.35 billion, according to Reuters Estimates. Toll Brothers ended the quarter with a backlog of 8,635 homes with a value of $5.95 billion, up 22% from a year earlier.
Since Toll Brothers first lowered its outlook in November, shares of the company have plunged about 25%, compared to a 4.7% decline in the Dow Jones U.S. Home Construction Index over the same period. As the housing market, and Toll Brothers in particular, continues to be constrained by rising interest rates and slowing demand, we would refrain from committing new money to the sector at this time.
--Richard Jahnke, Briefing.com
12:57 pm Polo Ralph Lauren (RL)
55.37 -2.10: Polo Ralph Lauren Corporation reported net income of $90.7 million, or $0.84 in diluted earnings per share, for its third fiscal quarter. Its EPS result exceeded Wall Street's expectation by seven cents, and reflects close to 17% year-over-year growth. Aided by a 15% jump in retail sales and a 6% rise in wholesale sales, the retailer's top line rose a better than expected 10.4% to $995 million.
The increase in retail sales was driven by a 7.4% increase in total company comparable store sales. Each of Ralph Lauren's retail formats posted solid growth, with its namesake stores faring best. Inclusion of the company's footwear line and improved performances across the womenswear, childrenswear, full-price menswear, and European businesses fostered the wholesale sales increase. Improvements in full-price sell-throughs and sourcing efficiencies within both the retail and wholesale segments helped the company's gross margin expand significantly.
This month, Ralph Lauren completed the $255 million cash purchase of the Polo Jeans business from Jones Apparel. The company expects the transaction to be dilutive by a nickel per share in fiscal 2006. In fiscal 2007, the acquisition should have a neutral effect upon earnings. After adjusting for that deal, as well as for the closures of the Club Monaco outlet stores and the disposition of the Caban home stores, the company has lowered its FY06 (Mar.) forecast. EPS of $2.80-2.85 is now anticipated versus the previously guided range of $2.85-2.92. The consensus estimate is pegged two cents above the high end of that range. Management noted that its Club Monaco strategy will be dilutive by about a dime in full-year EPS, but that it is an initiative consistent with the company's long-terms efforts to reduce off-price sales and rationalize distribution channels. Excluding $0.15 in stock-based compensation expenses, the retailer expects FY07 EPS to be $3.15-3.25; analysts estimate $3.31.
RL shares presently trade at 19.6x estimated FY06 earnings. The stock trades at a premium to peer companies such as Jones Apparel (JNY), Liz Claiborne (LIZ) and Tommy Hilfiger (TOM), and consequently, it has fallen prone to profit taking following the company's guidance.
--Lisa Beilfuss, Briefing.com
12:43 pm Under Armour (UARM)
32.25 -6.95: Shares of Under Armour traded sharply lower on Tuesday after the maker of performance sports apparel reported better than expected results for its first quarter as a public company, but provided a seemingly disappointing forecast for the current period. With investors' high expectations grounded, the stock, which has tripled since the company went public in late November, fell more than 18% during the regular trading session.
The latest results highlight our concerns that expectations have exceeded fundamentals, leading to stretched valuation levels. Though the pull-back in shares presents a compelling entry point into what is still one of the most exciting growth stories in the branded apparel sector, the comparatively high multiple of 64x forward earnings continues to underscore our neutral position on the stock.
For the fourth quarter, Under Armour reported net income of $7 million, or $0.08 per share, compared with $6.2 million, or $0.15 per share, in the year ago period. The results included the impact of $3.5 million for debt redemption. Without this charge, the company would have earned $0.16 per share - $0.09 better than the Reuters Estimates consensus of $0.07. Revenue rose 25% in the quarter to $87.3 million, from $69.6 million a year earlier, driven by strong demand for the performance apparel and expanding product offerings.
Under Armour also forecasted net income and revenue would increase 20-25% in the current year. That equates to revenue of $337.3 to $351.4 million. Currently, analysts are expecting revenue of $352.53 million and EPS of $0.50, according to Reuters Estimates.
--Richard Jahnke, Briefing.com
10:18 am Activision (ATVI)
14.15 -0.21: Activision on Monday said third quarter profits fell 30% from a year earlier, as a result of weaker than expected market conditions in the U.S. and Europe due to the transition to next-generation gaming systems. The video game publisher also projected a fourth quarter loss and lowered its earnings guidance for the full year. In turn, shares of the company plunged more than 6% in early trading.
For the third quarter, Activision, which publishes such titles as Call of Duty, Tony Hawk's American Wasteland, and Shrek, posted net income of $67.9 million, or $0.23 per share. In the same period a year earlier, the company earned $97.3 million, or $0.35 per share. Meanwhile, revenue rose 20% year/year to $816.2 million from $680.1 million. The results fell short of analysts' earnings expectations, but beat top-line estimates. According to Reuters Estimates, analysts had forecast earnings of $0.36 per share on revenue of $708.19 million.
Based on its disappointing earnings results and weaker than expected market conditions in the third quarter, Activision lowered its outlook for the fourth quarter and fiscal year. For the fourth quarter, the company forecasted a loss of ($0.07) to ($0.09) per share on revenue between $125 and $135 million, down from its previous earnings estimate of $0.05 per share and revenue of $226 million. For the full year, earnings are expected to be in the range of $0.09 to $0.11 per share on revenue of $1.41 to $1.42 billion. Wall Street had forecast earnings of $0.02 per share on revenue of $199.8 million for the fourth quarter, and $0.32 per share on $1.37 billion for the year.
In the midst of a transition to next generation gaming systems, rivals Electronic Arts (ERTS) and THQ Inc. (THQI) also reported lower quarterly earnings and lowered expectations for the current period as they continue to invest actively in product development. While the console transition phase is still expected to create near-term disruptions, the industry, and Activision, is poised for longer-term growth that typically follows the release of new gaming hardware. As a result, investors have reason to continue to hold the stock, but until there is better earnings visibility, we wouldn't be committing new money.
--Richard Jahnke, Briefing.com
09:55 am YUM Brands (YUM)
51.38 +0.21: For its fourth fiscal quarter, Yum! Brands reported $0.81 in earnings per share. That result excluded $0.04 in stock-options expensing, and surpassed the Reuters Estimates consensus by three cents. Chief Executive David Novak acknowledged that FY05 marked Yum's fourth consecutive year of meeting its goal of at least 10% EPS growth, as earnings per share were up 13% prior to special items and expensing stock options. Record store openings in China, Taco Bell's same-store sales performance, and a turnaround at KFC were drivers.
The company's top line rose 4.1% to $2.90 billion during the fourth quarter, slightly shy of analysts' $2.97 billion estimate. Worldwide system same-store sales increased 2%. Fueled by higher same-store sales, revenues were up 4% to $1.82 billion in the U.S. Sales across Yum's International division rose 2% to $658 million. The company's China business, which has been key to its growth story, posted an 8% increase in Q4 sales to $425 million, but operating profit there fell 18% excluding options expense. Yum attributed the weakness to consumer concerns related to avian flu and a seasoning-supplier issue that had surfaced during the second quarter. KFC was the particular drag there.
Yum continues to expect EPS growth of at least 10% for the full-year, primarily driven by global expansion and same-store sales growth of 2-3% in the U.S. That translates to $2.79 in FY06 (Dec.) profit per share, which includes $0.13 per share of option expensing. The company forecasts at least 5% growth in International full-year system sales. For the China division, Yum anticipates system sales growth of at least 22%.
YUM shares presently trade at 18.6x estimated FY06 earnings, a premium to rival McDonald's 16.7x forward multiple. McDonald's remains our favored stock within the casual restaurant space, and is a recommended holding in our suggested portfolio for active investors.
Separately, Yum reported January 2006 same-store sales. U.S. blended same-store sales increased 5%, with Taco Bell (+11%) faring best and Pizza Hut (-4%) performing worst.
--Lisa Beilfuss, Briefing.com
09:42 am General Motors (GM)
23.23 -0.11: The pretense for GM's announcement Tuesday morning is to say categorically, "we are all in this together." As we expected, the automaker announced it will cut its cash dividend by fifty percent. The move is seen as a goodwill gesture to the United Auto Worker's Union ("UAW") in order to garner the necessary concessions for the 2007 contract negotiations. Shareholders are not the only ones taking a hit, as GM's senior leadership will be taking salary and compensation cuts, including a 50% cut for CEO Rick Wagoner.
As part of its North American turnaround plan, GM announced a slew of actions aimed at reducing costs. These include revising the health-care benefit plan for salaried retirees, which is expected to reduce its liability by about $4.8 bln and cut annual health-care expenses by almost $900 mln before tax. These are necessary actions GM must take in order to get its cost structure in line in order to compete globally in this intensively competitive environment.
GM announced significant salary reductions for GM's chairman and senior leadership, as well as a 50% reduction in compensation for outside board members. The move is a clear sign to the UAW that it will not be the only one feeling the cost-cut burden. Many expected GM wouldn't cut the dividend unless it was confident it would receive the concessions necessary.
Overall, the news today was a modest positive for GM's shares, which were up in pre-market trading. While news of a dividend cut certainly makes headlines, it would have been bigger news if GM didn't cut the dividend considering its level of cash burn. The reduction is part of a psychological move to align all participants in GM's recovery. All of today's actions are necessary for GM to lower its cost structure. The next step is for GM to sell GMAC and settle the Delphi situation.
We would argue the pace of cuts has been slow (to put it mildly) and that GM still has yet to demonstrate it has the vehicles consumers want to buy. Today's news was a first step, but GM continues to face Himalayan-esque problems and this news does little to change our bearish view on GM's fundamental outlook. Still, we would concede the downside risk at this juncture appears limited. The question regarding GM's future will not be answered in terms of quarters, but instead in terms of years.
--Kimberly DuBord, Briefing.com
09:07 am Boston Scientific (BSX)
21.62: Boston Scientific on Tuesday said fourth quarter profits rose from a year earlier, despite lower sales of its coronary stent systems. Specifically, the medical device maker, which recently won a bidding war with Johnson & Johnson (JNJ) for Guidant Corp. (GDT), earned $334 million, or $0.40 per share, compared with $297 million, or $0.35 per share, in the year ago period. However, excluding special charges, the company would have earned $340 million, or $0.41 per share. Analysts, on average, had expected earnings of $0.42 per share, according to Reuters Estimates.
Net sales for the fourth quarter, which the company pre-announced in January, fell 3.8% year/year to $1.54 billion from $1.6 billion. Worldwide coronary stent sales totaled $640 million, down from $730 million a year earlier. Sales of Taxus stent systems were down 12% to $606 million, with U.S. sales down almost 21% to $398 million.
Boston Scientific said it plans to announce financial guidance for fiscal 2006 after the completion of its merger with Guidant. The pending acquisition, which will provide the company access to the $10 billion market for pace makers and defibrillators, is expected to foster sales growth and help reverse negative momentum in the company's stock. Shares of Boston Scientific are down nearly 40% over the past year and are trading near 52-week lows.
--Richard Jahnke, Briefing.com
09:00 am Coca-Cola (KO)
40.94: Coke's fortune rests on its ability to sell soft drinks, which account for more than 80% of total sales, compared to less than 20% for Pepsi. This mix continues to favor Pepsi in terms of growth prospects. Still, Coke's fourth quarter showed a solid improvement in key areas, as Coke's turnaround remains on track. New product introductions, innovation, and brand extension will be key areas on which to capitalize for Coke in the effort to accelerate growth for the 120 year-old company.
Coke reported fourth quarter revenue growth of 7% to $5.55 bln, slightly ahead of expectations, reflecting a 4% increase in gallon sales, 3% pricing and mix benefit, and offsetting a 1% negative currency impact. Profits declined 28% to $864 mln due to a $188 mln expense in repatriating overseas profits, but excluding items, per share profits of 46 cents topped analysts' estimate by two cents.
Worldwide case volume growth of 4% continues to be driven by growth in the Emerging Markets - namely China, Russia, Turkey and Brazil. North America delivered a solid 3% rise, while Germany finally recovered posting a mid-single digit growth rate for the first time since 2003. Southeast Asia and Northwest Europe were notably weak in the quarter. The non-carbonated and water segments remain the driving force, growing 12% and 17%, respectively, compared to soft drinks which were up a mere 2%.
Coke's turnaround remains on track. The bigger question is whether investors will have the patience to ride it out. The stock is hovering near multi-year lows, trading at 18x forward earnings, which is well below its historical multiple of 27.9x. From this perspective, we continue to like KO on a risk/reward basis.
--Kimberly DuBord, Briefing.com
08:51 am Walt Disney (DIS)
24.96: Theme parks were the leading contributor to Disney's first quarter results, which surpassed expectations by fifteen percent. Overall, it was a solid quarter with 6% earnings growth and each division performing as expected. The parks division continues to be a steady profit center for Disney, up an impressive 51% to $375 mln as attendance, lodging, and restaurants were all up on promotional activity surrounding the 50th Anniversary of Disneyland, along with contributions from Euro Disney and Hong Kong Disneyland.
Net income in the quarter rose to $734 mln, or 37 cents per share, on revenue growth of 2.2% to $8.85 bln. After a tax benefit and asset sales, earnings per share came in a nickel above consensus. The film unit continues to be a drag on Disney, with profits tumbling 60% to $128 mln. Disney did face tough comparisons in this unit and we should see a second half recovery with the release of the second installment of Pirates of the Caribbean and the new Pixar release, Cars.
Separately, Citadel Broadcasting Corp. (CDL) has agreed to merge with Disney's ABC radio unit, gaining 22 stations and a piece of the network in a deal valued at $2.7 bln. Disney will own 52% of the newly formed Citadel Communications and will receive as much as $1.65 bln in cash as part of the deal.
The solid quarter underscores our positive view on the company, as Disney is clearly refocusing for the future. We expect double-digit operating growth this year. At 17.8x, Disney represents a strong investment at current levels.
--Kimberly DuBord, Briefing.com
Discover What Traders Are Watching
Explore small cap ideas before they hit the headlines.
