From Briefing.com: 4:10 pm : The major averages began the abbreviated week on a mixed note as the Nasdaq added 0.7% while the Dow Jones Industrial Average shed 0.3%. For its part, the S&P 500 rose 0.3% as eight of ten sectors finished in the green.
Stocks began the day with solid gains but the early strength faded quickly when the S&P 500 was unable to extend above the 1850 level during the opening minutes. That rejection emboldened sellers, who promptly drove the indices to their lows. Adding insult to injury was the fact that today's mostly better-than-expected earnings failed to entice buyers.
On that note, 16 out of the 17 companies that reported this morning met or exceeded their Capital IQ consensus estimates. Forest Laboratories (FRX 68.00, -0.74), Halliburton (HAL 49.78, -0.88), and Dow components Johnson & Johnson (JNJ 94.03, -1.03), Travelers (TRV 85.00, -1.47), and Verizon (VZ 47.68, -0.68) all beat estimates but settled lower.
The notable weakness among the three Dow members pressured the price-weighted index, which had to contend with losses in 18 of its 30 components. The second-largest member, IBM (IBM 188.43, -1.66), lost 0.9% ahead of its earnings report set for an after-hours release.
One name that rallied following its earnings beat was Delta Air Lines (DAL 32.08, +1.01). The stock jumped 3.3%, which provided support to the Dow Jones Transportation Average (+0.6%). However, the industrial space was unable to keep pace with the broader market as the top sector component, General Electric (GE 26.29, -0.29), lagged after announcing a pair of acquisitions.
Similar to industrials, consumer discretionary (-0.2%) and financials (+0.1%) lagged while the remaining cyclical groups-energy (+0.5%), materials (+0.6%), and technology (+0.5%)-finished ahead of the broader market. Notably, the materials sector was boosted by Dow Chemical (DOW 45.93, +2.86), which surged 6.6% after Third Point took a big stake in the company and called for a spinoff of its petrochemical business.
On the countercyclical side, telecom services (-0.7%) lagged while consumer staples (+0.3%), health care (+0.5%), and utilities (+1.2%) outperformed. The health care sector received support from biotechnology as the iShares Nasdaq Biotechnology ETF (IBB 251.99, +4.56) rose 1.9%. In turn, this also factored into the outperformance of the Nasdaq Composite.
Treasuries ended modestly lower with the 10-yr yield up one basis point at 2.83%.
Participation was a bit above average as 740 million shares changed hands at the NYSE.
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET.
Nasdaq +1.2% YTD
Russell 2000 +1.1% YTD
S&P 500 -0.3% YTD
DJIA -1.0% YTD
DJ30 -44.12 NASDAQ +28.18 SP500 +5.10 NASDAQ Adv/Vol/Dec 1616/1.91 bln/976 NYSE Adv/Vol/Dec 2030/739.9 mln/1070 3:30 pm : Commodities were mixed today, with energy trading higher while precious metals chopped around in negative territory.
Feb gold traded lower despite a decline by the dollar index. The yellow metal brushed a session low of $1235.10 per ounce in morning pit trade and spent the remainder of the session trading slightly above that level. It eventually settled with a 0.8% loss at $1241.70 per ounce.
Mar silver also spent the floor session in the red, slipping to a session low of $19.66 per ounce in early morning action. It then trended higher, trimming losses to 2.2% for the day as it settled at $19.85 per ounce.
Mar crude oil chopped around in positive territory, extending Friday's gains. It touched a session high of $95.46 per barrel in morning floor action and eventually settled 0.4% higher at $94.98 per barrel.
Feb natural gas also traded higher, rising as high as $4.45 per MMBtu. With momentum holding steady, it settled with a 2.3% gain at $4.43 per MMBtu.
4:38PM Advanced Micro reports EPS in-line, beats on revs; guides Q1 revs in-line (AMD) 4.17 -0.01 : Reports Q4 (Dec) earnings of $0.06 per share, in-line with the Capital IQ Consensus Estimate consensus of $0.06; revenues rose 37.1% year/year to $1.59 bln vs the $1.54 bln consensus.
Gross margin was 35 percent in Q4 2013. Gross margin decreased 1 percentage point sequentially. Q4 2013 gross margin included a $7 million benefit from the sale of inventory previously reserved in Q3 2012 as compared to a similar benefit of $19 million in Q3 2013.
Cash, cash equivalents and marketable securities balance, including long-term marketable securities, was $1.2 billion at the end of the quarter, in line with expectations.
Co issues in-line guidance for Q1, sees Q1 revs of $1.287-1.382 bln vs. $1.36 bln Capital IQ Consensus Estimate.
4:37PM Texas Instruments reports EPS in-line, beats on revs; guides Q1 EPS towards the low end of expectations, revs in-line (TXN) 43.85 +0.40 : Reports Q4 (Dec) earnings of $0.46 per share, in-line with the GAAP Capital IQ Consensus of $0.46 and guidance of $0.44-0.48; revenues rose 1.6% year/year to $3.03 bln vs the $2.99 bln consensus and guidance of $2.92-3.04 bln.
Co issues guidance for Q1, sees EPS of $0.36-0.44 vs. $0.44 GAAP Capital IQ Consensus; sees Q1 revs of $2.83-3.07 bln vs. $2.95 bln Capital IQ Consensus. TI's fourth-quarter results and first-quarter outlook include restructuring charges for cost-saving actions in Embedded Processing and in Japan. The company is not exiting any markets or discontinuing any existing products but will reduce investments in markets that do not offer sustainable growth and returns. The savings will reflect the elimination of about 1,100 jobs worldwide. The charges are expected to be about $80 million, of which $49 million was included in the fourth quarter of 2013 and about $30 million will be included in the first quarter of 2014. The co expects to achieve annualized savings of about $130 million by the end of 2014.
"Our fourth quarter capped a year in which each quarter's performance increasingly reflected the impact of structural changes we've made to focus TI on Analog and Embedded Processing, where the diversity and longevity of our positions are assets. "The combined revenue from Analog and Embedded Processing grew 12 percent over last year's fourth quarter and comprised 82 percent of total revenue. Individually, Analog was up 12 percent and Embedded Processing was up 11 percent from a year ago."
4:36PM BlackBerry announces plans to divest Canadian Real Estate Holdings; will not comment on potential value of a sale (BBRY) 9.93 +0.85 : Co announced that it intends to divest the majority of its real estate holdings in Canada. In partnership with CBRE Limited, BlackBerry intends to strategically divest the majority of its commercial real estate portfolio through a combination of sale-leaseback and vacant asset sales. The properties to be offered for sale comprise over 3 million square feet of space. BlackBerry will not comment on the potential value of a sale and will disclose further information as required in connection with any definitive sale transaction.
4:26PM Xilinx beats by $0.01, misses on revs; guides Q4 revs in-line (XLNX) 47.54 +0.32 : Reports Q3 (Dec) earnings of $0.55 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus Estimate of $0.54; revenues rose 15.1% year/year to $587 mln vs the $600.62 mln consensus.
Co issues in-line guidance Xilinx sees Q4 revs +2-6% sequentially (~$598.5-622.0 mln) vs $622.14 mln Capital IQ Consensus Estimate.
Gross margin is expected to be approximately 68%.
Operating expenses are expected to be approximately $226 million, including $2.5 million of amortization of acquisition-related intangibles.
Other income and expenses are expected to be a net expense of approximately $7 million.
4:11PM IBM beats by $0.13, misses on revs; guides FY14 EPS in-line (IBM) 188.43 -1.66 : Reports Q4 (Dec) earnings of $6.13 per share, $0.13 better than the Capital IQ Consensus Estimate of $6.00; revenues fell 5.5% year/year to $27.7 bln vs the $28.29 bln consensus.
Co issues in-line guidance for FY14, sees EPS of at least $18.00 vs. $18.01 Capital IQ Consensus Estimate.
Reaffirms 2015 roadmap for operating EPS of at least $20.
Software, Services and Global Financing each grew, adjusting for currency:
Software up 3 percent, up 4 percent adjusting for currency;
Services down 2 percent, up 1 percent adjusting for currency;
Global Financing revenue flat, up 3 percent adjusting for currency;
Systems and Technology revenue declined 26 percent, down 25 percent adjusting for currency;
Services backlog of $143 billion, up 2 percent, up 5 percent adjusting for currency;
"As we enter 2014, we will continue to transform our business and invest aggressively in the areas that will drive growth and higher value."
"We remain on track toward our 2015 roadmap for operating EPS of at least $20, a step in our long-term strategy of industry leadership and continuous transformation."
The company's total gross profit margin was 51.7 percent in the 2013 fourth quarter compared with 51.8 percent in the 2012 fourth-quarter period.
Total operating (non-GAAP) gross profit margin was 52.6 percent in the 2013 fourth quarter compared with 52.3 percent in the 2012 fourth-quarter period, driven by an increase in Services and a mix to Software.
4:08PM Cree beats by $0.07, reports revs in-line; guides Q3 EPS (midpoint of range below consensus), guides Q3 revs in-line with consensus (CREE) 62.83 +0.33 : Reports Q2 (Dec) earnings of $0.46 per share, excluding non-recurring items, $0.07 better than the Capital IQ Consensus Estimate of $0.39; revenues rose 19.9% year/year to $415.1 mln vs the $412.54 mln consensus.
Co issues guidance for Q3, sees EPS of $0.34-0.41, excluding non-recurring items, vs. $0.41 Capital IQ Consensus Estimate; sees Q3 revs of $390-420 mln vs. $412.93 mln Capital IQ Consensus Estimate. Q3 Guidance Details: For its third quarter of fiscal 2014 ending March 30, 2014, Cree targets GAAP gross margin targeted to be 37.7%+/- and non-GAAP gross margin targeted to be 38.5%+/-. Operating expenses are targeted to be similar to Q2. The tax rate is targeted at 21.0%+/- for the third quarter of fiscal 2014.
Gross margin decreased 110 basis points from Q1 of fiscal 2014 to 37.5% on a GAAP basis and decreased 100 basis points to 38.2% on a non-GAAP basis. Inventory increased $17.1 million from Q1 of fiscal 2014 to $234.5 million, with days of inventory of 81 days.
"Fiscal Q2 was another strong quarter as revenue increased to a record $415 million driven by strong growth in LED fixtures and LED bulbs. For the first half of fiscal 2014, revenue is up 22% from the first half of fiscal 2013 and Non-GAAP operating profit is up 38%...Our strategy is working, the business is growing and we've made great initial progress building the Cree brand."
4:09PM Super Micro Computer beats by $0.09, beats on revs; guides Q3 EPS above consensus, revs above consensus (SMCI) 18.50 +0.54 : Reports Q2 (Dec) earnings of $0.35 per share, $0.09 better than the Capital IQ Consensus Estimate of $0.26; revenues rose 22.3% year/year to $356.4 mln vs the $333.5 mln consensus.
Margins: GAAP and Non-GAAP gross margins for the second quarter were both 15.5% compared to 13.8% in the same period a year ago. GAAP gross margin and Non-GAAP gross margin for the first quarter of fiscal year 2014 were 15.1% and 15.2%, respectively
Guidance: Co issues upside guidance for Q3, sees EPS of $0.24-$0.30 vs. $0.25 Capital IQ Consensus Estimate; sees Q3 revs of $320-$350 mln vs. $317.36 mln Capital IQ Consensus Estimate.
Commentary: Supermicro's second quarter was a record high for revenue and earnings. We grew revenue 22.3% higher than last year with significant jump in Asia revenues to 23% of revenues. Our Twin family, especially the FatTwin, storage and GPU/Xeon Phi product lines were strong drivers to revenue growth..."
Large Cap Gainers
AA (12.15 +7%): Upgraded to Overweight from Neutral at JP Morgan; tgt raised to $15 from $9.
SNP (81.44 +5.45%): Upgraded to Outperform from Mkt Perform at Bernstein; disclosed that Sinopec Group (SHI) increased its shareholding by way of acquiring 173,248,859 A shares on the secondary market as of Jan 17 2014.
DOW (45.21 +4.97%): Third Point's Dan Loeb took a ~$1.3 bln stake in DOW, wants co to spin off petrochemical biz - CNBC.
Large Cap Losers
CEO (166.87 -6.41%): Co announced its 2014 business strategy and development plan; downgraded to Mkt Perform from Outperform at Bernstein; downgraded to Neutral from Outperform at Credit Suisse; downgraded to Reduce at Nomura.
VALE (13.21 -4.21%): Weakness in Brazil stocks following Q4 China GDP data (GGB, RIO also lower).
TJX (59.85 -3.25%): Downgraded to Neutral from Buy at Sterne Agee.
Mid Cap Gainers
SBNY (124.59 +13.16%): Beat on EPS by $0.07.
BBRY (9.87 +8.7%): BlackBerry smartphones will be on 98% of DoD networks, according to reports.
GOLD (68.11 +4.27%): Reported Kibali met its goals and more.
Mid Cap Losers
LKQ (26.31 -5.8%): Co confirmed that a complaint has been filed against it by Chrysler Group in the U.S. District Court in the Eastern District of Michigan; co considers lawsuit without merit.
FEYE (69.7 -5.26%): Downgraded to Neutral from Overweight at JP Morgan.
ATI (34.63 -4.6%): Resumed with an Underweight at JP Morgan.
Texas Instruments (TXN) introduced its next-generation wireless power transfer circuit with foreign object detection that will allow designers to bring to market 3-coil, 5-V and 12-V A6 charging stations compliant with the Wireless Power Consortium 1.1 specification.
Broadcom (BRCM) announced that Swisscom has chosen Broadcom 5G WiFi solutions to power its new dual-band xDSL/fiber gateway.
Applied Ventures, the venture capital arm of Applied Materials (AMAT), has completed strategic investments in two advanced imaging detection companies: Oncoscope and Passport Systems.
Xilinx (XLNX) announced another industry first at 20nm with the tape-out of the first Virtex UltraScale device.
7:36AM Verizon beats by $0.04, reports revs in-line (VZ) 48.35 : Reports Q4 (Dec) earnings of $0.66 per share, excluding non-recurring items, $0.04 better than the Capital IQ Consensus Estimate of $0.62; revenues rose 3.4% year/year to $31.07 bln vs the $31.04 bln consensus.
Wireless
8.0 percent year-over-year increase in service revenues in 4Q 2013;
7.5 percent year-over-year increase in retail service revenues;
29.5 percent operating income margin and 47.0 percent segment EBITDA margin on service revenues (non-GAAP).
1.7 million retail net additions, excluding acquisitions and adjustments;
1.6 million retail postpaid net additions;
low retail postpaid churn of 0.96 percent;
102.8 million total retail connections, 96.8 million total retail postpaid connections.
Wireline
6.4 percent year-over-year increase in consumer revenues;
consumer ARPU (average revenue per user) up 10.8 percent year over year.
15.6 percent year-over-year increase in FiOS revenues;
126,000 FiOS Internet and 92,000 FiOS Video net additions, with continued increased sales penetration for both services.
Free cash flow totaled $22.2 billion in 2013, an increase of 45.1 percent, or $6.9 billion, compared with 2012. From this $22.2 billion, Verizon returned $5.9 billion in dividends to shareholders, including a seventh consecutive year of a quarterly dividend increase.
Verizon Communications (VZ) and Intel (INTC) announce an agreement for Verizon to purchase from Intel the assets of Intel Media, a business division dedicated to the development of Cloud TV products and services. The transaction will accelerate the availability of next-generation video services, both integrated with Verizon FiOS fiber-optic networks and delivered "over the top" to any deviceTerms of the transaction were not disclosed.Verizon will purchase intellectual property rights and other assets that enable Intel's OnCue Cloud TV platform. Verizon will also make employment offers to substantially all of the approximately 350-person Intel unit, which will continue to be based in Santa Clara and be led by its current management team.
UTStarcom Holdings (UTSI) announced that it entered into a Purchase and Sale Agreement with SoftBank (SFTBY) and Shah Capital Opportunity Fund on January 17, 2014. The transaction was consummated on the same date.Pursuant to the Share Purchase Agreement, SoftBank sold its entire stake in the Company, consisting of 4,883,875 ordinary shares with par value $0.00375 per share. The Company and Shah Capital purchased 3,883,875 and 1,000,000 Ordinary Shares, respectively, for a price of $2.54 per Ordinary Share. Following the consummation of the transaction, Shah Capital's beneficial ownership in the Company increased from 17.2% to 21.9%.
WPCS (WPCS) reported continued progress with its rollout strategy for its BTX Trader Bitcoin trading platform. According to Interim CEO Sebastian Giordano, "Though the acquisition was only recently completed on December 17, 2013, we are formalizing our plans and undertaking several initiatives to launch and begin monetizing this exciting opportunity." Divya Thakur, BTX Chief Technology Officer stated that, "BTX is the first trading platform to enable Bitcoin traders and investors to access market data as well as execute orders for the top six (6) Bitcoin exchanges in a single application. What further differentiates BTX from any other product in the market is the opportunity to be the premier algorithmic trading platform for digital currencies, allowing traders to execute orders and trading strategies not available on other exchanges, such as 'stop limit'; which BTX already offers."
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