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Wednesday, February 08, 2006 9:45:24 PM
From Briefing.com: 4:41PM Axcelis Tech beats by $0.04, ex items; guidance (ACLS) : Reports Q4 (Dec) earnings of $0.01 per share, excluding non-recurring items, $0.04 better than the Reuters Estimates consensus of ($0.03); revenues fell 1.7% year/year to $92.9 mln vs the $90.1 mln consensus. Co guides for Q1, sees Q1 revs of $90-100 mln vs. $90.31 mln consensus.
4:30PM Planar Systems adopts new shareholder rights plan (PLNR) 13.95 -0.05 : Co announces that its Board of Directors adopted a Shareholder Rights Plan to replace the previous plan that expired Feb 1, 2006. The replacement plan includes a so-called "TIDE" provision requiring a committee of independent directors to meet at least once every 3 years to determine whether the plan remains in shareholders' best interests. The plan will not prevent a takeover, but is designed to encourage anyone attempting to acquire the co to first negotiate with the Board of Directors and to guard against abusive or coercive tactics that might be used in an attempt to gain control of the co without paying all the shareholders a fair price for their shares.
4:26PM Avanex beats by $0.04, ex items; guides in-line (AVNX) : Reports Q2 (Dec) loss of $0.06 per share, excluding non-recurring items, $0.04 better than the Reuters Estimates consensus of ($0.10); revenues fell 13.8% year/year to $36.1 mln vs the $35.9 mln consensus. Co issues in-line guidance for Q3, sees Q3 revs of $36-40 mln vs. $39.76 mln consensus.
4:24PM TTM Tech beats by $0.02 and issues upside Q1 guidance (TTMI) 10.63 +0.55 : Reports Q4 (Dec) earnings of $0.15 per share, excluding $0.31 in valuation allowance charges, $0.02 better than the Reuters Estimates consensus of $0.13; revenues rose 3.4% year/year to $63.1 mln vs the $62.1 mln consensus. Co issues upside guidance for Q1, sees EPS of $0.16-0.20 vs. $0.12 consensus; sees Q1 revs of $67-70 vs. $61.26 mln consensus.
4:23PM Carrier Access beats by $0.01 (CACS) 5.40 -0.08 : Reports Q4 (Dec) earnings of $0.02 per share, $0.01 better than the Reuters Estimates consensus of $0.01; revenues rose 31.2% year/year to $21.1 mln vs the $20.9 mln consensus.
4:20 pm : Concerns over inflation, Fed tightening, Iran, earnings growth, and the yield curve continue to hang over the equity market, but investors found reasons to buy today. Cisco (CSCO 19.44 +1.35) delivered better than expected earnings after yesterday's close, and news that Pfizer (PFE 26.44 +1.50) may divest its lower-margin consumer health care business lent further upside. In addition, the market took a bullish cue from extended price declines across the energy complex.
The notion that Cisco did not disappoint, as has been the case with a number of Tech companies, gave the market an early boost. The communication equipment industry surged, and bargain hunters lifted the sector a market-leading 1.9%. The hardware and semiconductor groups were also particularly strong following analyst upgrades on Dell (DELL 31.55 +1.86) and Applied Materials (AMAT 20.19 +0.69) shares. Led by Pfizer, Health Care (+1.2%) was a strong force behind the market's rise. The Financial sector's late-day advance (+0.7%) lent further momentum. The Treasury market spent the day on negative turf, largely due to rumored comments out of former Fed Chief Greenspan yesterday. The yield curve remained inverted, and uncertainty over the length of the Fed's tightening cycle continues to bother the market. However, even banks benefited from the broad-based buying action.
Minutes before the closing bell, the Energy sector (+0.1%) rebounded. That action sent the indices to their best levels of the session. The economic front featured just one item, which was a mixed bag from the Department of Energy. Crude supply unexpectedly dropped, but gasoline inventory increased more than two times the forecasted build. Given the implication that higher gasoline inventories should translate into lower prices at the pump for consumers, the latter point was a supportive factor for the broader market. While extended energy price declines incited profit taking across the Energy sector, it too was lifted by wide-spread buying. We remain bullish on the sector, and very strong earnings reports from our portfolio pick Grant Prideco (GRP 45.93 -2.52) and Diamond Offshore (DO 79.85 -0.23) underpin that view.
The Discretionary sector benefited by the energy price action, as well as from strong same-restaurant sales data from McDonald's (MCD 36.38 +0.19). The company, another one of our portfolio picks, reported its 33rd straight month of global comps growth. Due to news that Univision (UVN 34.26 +3.72) may put itself up for sale, broadcasting and cable surged. On a related note, reports that Carl Icahn has advanced his Time Warner (TWX 18.50 +0.14) break-up plan helped send Telecom 1.7% higher.
General Motors (GM 21.95 -0.86) was one of the market's worst performers today. Deutsche Bank downgraded the stock to Sell from Hold and cut their target to $17 from $22, citing continued disappointment in the limited cash savings targeted by the company's current restructuring efforts. Related issues also trended lower, but were more than offset by advances across the broader market.DJ30 +108.86 NASDAQ +22.02 SP500 +10.87 NASDAQ Dec/Adv/Vol 1291/1769/2.20 bln NYSE Dec/Adv/Vol 1380/1918/1.79 bln
1:07 pm Cigna (CI)
120.86 +1.13: Health insurer Cigna Corp. on Wednesday reported a 60% drop in fourth quarter earnings, due to large gains from special items in the year ago period, but still beat Wall Street's estimate. Specifically, the Philadelphia-based company said net income fell to $224 million, or $1.78 per share, from $558 million, or $4.16 per share, a year earlier. Adjusted income from operations, which exclude one-time items, were $249 million, or $1.98 per share, compared with a year ago profit of $323 million, or $2.41 per share. On that basis, the latest results were $0.33 better than the Reuters Estimates consensus of $1.65.
Fourth quarter revenues slipped 3% year/year to $4.21 billion, but topped the consensus estimate of $4.03 billion as Cigna's healthcare, group disability and life, and international operations generated stronger than expected results. In Health Care, premiums and fees were flat from a year earlier at $2.62 billion, while segment earnings were down 30%. The decline reflects the effects of lower membership as well as higher operating expenses. The Disability and Life segment, meanwhile, reported a 10% increase in premiums and fees to $548 million due to continued solid results and strong customer persistency. Earnings for the segment declined 4% to $52 million, however, as the company experienced higher disability claims and more normal mortality results in the life insurance business.
Looking to the first quarter and fiscal year 2006, Cigna forecasted financial results below analysts' expectations. For the current quarter, the company said it expects EPS in the range of $1.65 to $1.80 versus the consensus estimate of $1.86. Cigna also sees earnings of $7.25 to $7.70 per share for the full year. That compares to the Reuters Estimates consensus of $7.85 per share. Based on current expectations, Cigna shares are trading at 15.4x forward earnings, compared with 17.6x for Aetna (AET) and 19.9x for Unitedhealth Group (UNH). Briefing.com currently has Market Weight rating on the Health Care sector, with managed care stocks seen as a pocket of strength.
--Richard Jahnke, Briefing.com
12:26 pm Univision (UVN)
33.74 +3.20: According to The New York Times, Spanish-language broadcaster Univision Communications is considering a plan to put itself up for sale. Long considered an attractive takeover target, as advertisers continue to invest more and more of their budgets into luring a booming Hispanic consumer base with campaigns in Spanish, such a deal has yet to be consummated since Univision has commanded such a large price tag for so long.
The Los Angeles-based company, with a market cap of $10.4 bln, currently trades a 5.7x trailing twelve month sales. That compares with much lower price-to-sales multiples of 2.0x, 1.9x, 1.7x and 0.9x for media giants News Corp (NWS.A), Time Warner (TWX), Walt Disney (DIS) and CBS Corp (CBS), respectively. Disney and News Corp are suggested holdings in our Active Portfolio.
Since Univision has seen its television audiences grow even as ratings for the top four U.S. networks erode under pressure from competing media outlets such as the Internet and video games, it's only a matter of time until larger cable companies fully embrace the importance of meeting the needs of such a lucrative market. According to the U.S. Census Bureau, the nation's Hispanic population is expected to triple over the next 50 years, growing from 36 mln to 103 mln and accounting for almost 25% of the total population, nearly double today's figures.
While Time Warner may want to look at acquiring Univision, today's announcement from financier Carl Icahn could stall potential talks as TWX explores Icahn's proposal of spinning off Time Warner Cable as one of four separate entities. News Corp may also look into it but would possibly have to sell a station in order to take it on, according to CNBC. Disney is another possible candidate, according to CNBC, but currently has its hands full trying to complete a $7 bln deal for Pixar Animation (PIXR) while CBS Corp is another possibility but could find it difficult trying to absorb a company half its size. General Electric (GE), whose NBC network acquired smaller rival Telemundo in 2002 for $2.7 bln, should not be ruled out as a potential acquirer either. It is worth noting that, while Telemundo enjoyed 22% of the Spanish-language prime-time audience in 2002, its market share dropped to 16% within a year.
According to JP Morgan, though, acquiring Univision simply might not be worth the risk for many large media companies. Univision, whose 28 television stations, 60+ affiliate stations and more than 1,200 cable affiliates that address the needs of roughly 98% of U.S. Hispanic households, is what JP Morgan considers a "unique and scarce asset." Nonetheless, the brokerage firm also believes most large-cap media companies might be better off expanding their presence in Hispanic media organically instead of paying top dollar for Univision, especially considering the poor M&A track record of entertainment conglomerates as a whole.
--Brian Duhn, Briefing.com
12:09 pm IAC/InterActive Corp. (IACI)
27.99 +0.33: In the wake of the spin-off of its travel business Expedia, IAC Interactive on Wednesday reported better than expected profits for the fourth quarter, helped by performance at Home Shopping Network, Ticketmaster, and online personals service Match.com. IACI shares, in turn, are trading higher in the regular session, as the company's growing position in a number of market categories and improving business continues to strengthen its long-term investment appeal after years of sluggishness.
For the fourth quarter, the Internet media conglomerate posted net earnings of $113.1 million, or $0.33 per share, up from a year-ago loss of $45.9 million, or ($0.13) per share. Excluding special items, however, the company earned $180.1 million, or $0.52 per share, compared with $157.9 million, or $0.41 per share, a year earlier. That topped the Reuters Estimates consensus of $0.46.
Revenue for the period rose 45% year/year to $1.79 billion, slightly better than the consensus estimate of $1.78 billion. Growth in the quarter was led by the company's two largest segments, Retailing and Services. In Retailing, revenue grew 42% from a year earlier to $940.9 million, driven primarily by the inclusion of Cornerstone Brands, which was acquired last April, and strong online demand. Home Shopping Network booked modest revenue growth, with higher sales in the ready-to-wear and home fashions categories, offset by lower sales in Jewelry. Services revenue, which rose 46% to $475.5 million, was led by strong concert and sporting event sales at Ticketmaster and solid growth at LendingTree from increased loan closings. Membership and Subscription, meanwhile, reported revenue of $261.8 million. That is up 8% from the year ago period, due to record revenue in Personals and improved performance in Vacations.
--Richard Jahnke, Briefing.com
10:12 am Pepsico (PEP)
57.47 +0.61: Pepsico on Wednesday reported higher fourth quarter profits that matched Wall Street's estimates, driven by strong top-line growth across all of its businesses. Despite elevated input cost pressures, the world's No.2 soft drink maker said net income for the quarter increased to $1.1 billion, or $0.65 per share, from $985 million, or $0.58 per share, a year earlier. The quarter benefited from an extra week of results, but was offset by pre-tax charges totaling $83 million related to previously announced restructuring actions to reduce costs in its operations.
Overall revenue increased 14.7% year/year to $10.1 billion, with global servings volume up over 9%. Analysts, on average, were expecting revenue of $9.5 billion, according to Reuters Estimates. Pepsico's largest division, Frito-Lay North America, reported $3.2 billion in revenue, up 13% from a year ago. Growth in the segment was driven by strong volume gains in the Lay's, Cheetos, and Santitas brands, as well as the impact of an extra reporting week. In Pepsico Beverages North America, revenue increased 13% to $2.6 billion on higher volumes, led by strong gains in non-carbonated beverages, including Gatorade sports drinks, Aquafina, and Propel fitness water. Meanwhile, Pepsico International booked $3.7 billion in revenue, an increase of 16% over the prior year period, with volume growth of 5%. For the quarter, snack volume grew 13%, while beverage volume grew 12%, with double-digit growth for both carbonated and non-carbonated soft drinks.
Pepsico expects to continue its strong performance in fiscal 2006. For the upcoming year, the company forecasted earnings of at least $2.93 per share, along with mid single-digit volume and revenue growth. That compares with analysts' expectations for earnings of $2.93 per share and revenue of $33.85 billion. In spite of a challenging cost environment, Pepsico's strong momentum, continued investment in the marketplace and productivity initiatives, and favorable product mix highlight its long-term investment appeal, as compared to rival Coca-Cola (KO).
--Richard Jahnke, Briefing.com
10:04 am Time Warner (TWX)
18.34 -0.02: Last year, Sumner Redstone, the founder and controlling shareholder of Viacom, said that the age of the diversified media conglomerate was over, saying the breakup of the business was essential to dealing with a changing industry landscape. On January 1st, the separation of the "old" Viacom into CBS Corporation (CBS) and "New" Viacom, Inc. (VIA.B) was complete. Last night, financier Carl Icahn stepped up his campaign to do the same with Time Warner, calling for the media giant to split into four separate companies.
Icahn, who along with his allies are believed to own shares and options equal to about 5% of TWX stock, is accusing Time Warner of mismanagement, noting in a report compiled by investment bank Lazard Ltd. (LAZ) that management's "lack of a clearly defined strategy and a short-term focus" has cost shareholders a total of $40 bln.
While Time Warner has already sold off its music division and intends to float shares in its cable TV subsidiary in an effort to return value to shareholders, Icahn believes much more must be done to unlock the true worth of a company whose value far exceeds its stock price. To that end, Icahn also wants Time Warner to increase its share repurchase program to $20 bln from $12.5 bln, noting that such measures could lift TWX's stock price to $26.57, nearly 50% higher than where the stock has traded over the past couple of years. In fact, one of the few things Time Warner CEO Dick Parsons and Icahn actually do see eye to eye on is the fact that TWX shares have languished, still trading at roughly the same level they were in the spring of 2002.
Since then, nearly every strategic decision, especially concerning the AOL business, has been wrong according to Bruce Wasserstein, the head of Lazard. Wasserstein noted that Time Warner should have moved sooner into Internet-based telephone services and didn't capitalize on the surge in Internet advertising. "Time has not been friendly to Time Warner," added Wasserstein who along with Icahn believes that the need for changes at TWX is urgent.
While we continue to favor the media industry due to its increasing visibility, renewed focus on shareholder returns, and growth prospects, the names we prefer are Walt Disney (DIS), which recently agreed to merge its ABC radio unit with Citadel Broadcasting Corp. (CDL), and News Corp. (NWS.A), which has $5 bln in cash available to continue returning value to shareholders in the form of stock buybacks. Both companies are suggested holdings in our Active Portfolio.
--Brian Duhn, Briefing.com
09:50 am Grant-Prideco (GRP)
46.50 -1.95: Grant Prideco, the world's largest manufacturer and supplier of oilfield drillpipe, is reaping the benefits from robust activity across the energy patch. The Houston-based company continues to set new records with each quarter, ending Q4 with record-setting revenues of $388.7 mln on continued strong market activity. Net income more than doubled to $78.4 mln, compared to $28.6 mln in the prior period, surpassing estimates by two cents.
Strong revenue growth and pricing power expanded operating margins to 24%, up 400 basis points year/year. GRP's results only strengthen our outlook for the company, a suggested holding in our Active Portfolio, as backlog increased another 10% to $813.6 mln and indicates strong earnings momentum in 2006. The stock trades at 18.8x FY06 estimates of $2.58 and 15x FY07 estimates of $3.21, a considerable discount to larger-cap peers that include Cooper Cameron (CAM), National-Oilwell Varco (NOV), and Smith Intl (SII).
--Kimberly DuBord, Briefing.com
09:19 am Dean Foods (DF)
38.63: Dean Foods Company announced that net income in the fourth quarter fell 17% year/year to $71 mln due to challenges caused by two major hurricanes and the resulting dislocation of energy and packaging costs. Analysts were expecting a 16% year/year decline. Adjusted operating margin was 6.38%, down 45 basis points from a year ago and below the 18-month average of 6.6%. On an adjusted basis, the Dallas-based dairy king reported earnings of $0.54 per share, which matched the Reuters Estimates consensus.
Net sales rose 4% year/year to $2.7 bln, which were slightly better than the $2.63 bln consensus due to strong sales growth at the Dairy Group and WhiteWave Foods. Dairy Group revenue rose 3% to $2.3 bln, due primarily to a 1.4% increase in fluid milk volumes, but sales increases were offset somewhat by the pass through of lower dairy commodity costs to customers. The WhiteWave Foods division posted strong sales growth of 10% and achieved notable milestones toward the consolidation and integration of its businesses, which bodes well heading into 2006 but the segment only accounts for about 11% of Dean's total top line.
Consistent with its previous guidance for 2006, management expects consolidated net sales of approximately $10.5 bln (consensus $10.67 bln). Because the dilution from accelerated vesting of restricted stock offsets the accretion from the repurchase of 9 mln shares in Q4, the company simply reiterated its 2006 EPS guidance of $2.20 to $2.25 before stock option expense. Deducting stock option expense of approximately $0.10 per share results in EPS guidance of $2.10 to $2.15, representing year/year growth of 15-18%. For Q1, the company expects to report adjusted EPS of between $0.39 and $0.41, a year/year increase of 5-11%, but below analysts' consensus estimate of $0.42. The company currently has $19 mln remaining under its repurchase authorization.
Shares of Dean Foods currently trade at 18x estimated FY06 earnings of $2.15 per share, a slight premium to the Consumer Staples sector's 17.3x forward multiple; competitor Kraft Foods (KFT) trades with discounted forward P/E multiples of 15.3x and 14.5x estimated FY06 and FY07 earnings. Both DF and KFT have posted modest gains of 2.6% and 3.0%, respectively, so far in 2006 compared to a year-to-date decline of 1.3% for the Market Weight rated Consumer Staples sector.
-- Brian Duhn, Briefing.com
09:09 am Diamond Offshore (DO)
80.08: We received our first look at the operating environment for the offshore drillers this morning and Diamond Offshore didn't disappoint. Fourth quarter earnings skyrocketed nine-fold to $106.9 mln as producers ramped up spending to capitalize on record energy prices. Pro-forma earnings were 62 cents per share, 16 cents above what the market forecasted. The top line expanded by 55% to $368.2 mln as dayrates soared on robust drilling market conditions.
The tightening market conditions have pushed dayrates up to record levels with the drillers operating near 100% utilization levels - a rare occurrence in the industry. Diamond, which mainly operates in the mid-water segment, saw average dayrates in the quarter for high-specification rigs rise 93% to $181,000 per day. The windfall of capital spending occurring within the industry is causing a shortage in rigs, particularly in the offshore market, which in turn is giving the drillers significant pricing power. We have long foreseen this accelerating spending as producers look to increase production and reserves. The industry, which typically suffers from a lack of visibility, is experiencing longer-term, multi-year contracts - a sign the market could extend into 2008.
DO's results underscore our bullish view on the oil services industry and we look for a similarly strong result from its main competitor Transocean (RIG), which is a suggested holding in our Active Portfolio. We continue to prefer RIG due to its premier fleet of offshore deepwater assets, strong earnings momentum, significant operating leverage and improving capital structure.
--Kimberly DuBord, Briefing.com
08:57 am Pfizer (PFE)
25.18: In a brief press release issued on Tuesday, Pfizer said it plans to explore strategic alternatives for its Consumer Healthcare business ("PCH"), which includes brands like Rogaine hair-growth treatment and Listerine mouthwash. These alternatives could include retaining, spinning off, or selling the division.
According to the company, "The objective of the review is to unlock the value of the business for Pfizer shareholders at a time when market valuations are attractive for large, high-quality consumer businesses. PCH is a leading global consumer healthcare business with a portfolio of well-known, growing brands."
Pfizer's consumer products division reported sales of $3.88 billion last year, representing approximately 7.5% of overall revenue. Though the business provides a steady source of revenue for the company, consumer products in general command lower margins than patent-protected prescription drugs due to strong competitive pressures in the over-the-counter market. As such, many large pharmaceutical companies have refocused their research and marketing efforts on prescription drugs, including Bristol-Myers Squibb (BMY), which sold its consumer products business to Novartis (NVS) last year.
Pfizer said it will provide a comprehensive overview of its business and financial strategy, as well as elaborate on alternatives for its consumer products business, at its analyst meeting on Friday, February 10. In addition, the company is scheduled to provide fiscal 2006 and fiscal 2007 guidance at the meeting.
--Richard Jahnke, Briefing.com
08:45 am Cisco Systems (CSCO)
19.01: It has been a volatile ride for Cisco's shareholders, as the market readjusted growth expectations for the world's largest maker of networking equipment. The stock, which is trading at a discount to its peers and the market, may have gotten the spark it needed on unexpectedly optimistic commentary from CEO John Chambers. Cisco sees Q2 revenue growth of 10-12%, or roughly $6.81-$6.93 bln versus the consensus estimate of $6.91 bln, on order growth of 10-15%. The guidance, coupled with an upside in first quarter results, has set an optimistic tone for stock futures.
Net income fell 1.8% to $1.38 bln on stock-option expenses. The pro-forma figure of 26 cents topped consensus by a penny. Revenues also came in a hair better, increasing 9.3% to $6.63 bln, up over one percent from last quarter. Orders showed accelerating momentum in the quarter, with year/year growth in the mid-teens beating the company's guidance of 10-14%. Strength in the US led the rise with orders gaining 20% year/year, coupled with a 20% increase in the Emerging Markets. The book-to-bill ratio, which measures demand, exceeded 1.0 - an atypical occurrence in this quarter.
Gross margins remained steady from last quarter, expanding by 110 basis points to 67.9% from the year-ago period. Deferred revenues also increased, which speaks to stronger demand. Cisco appears to be gaining some traction across all of its business units. Network switches, which are Cicso's highest margin products, rose 12% to $2.67 bln. Cisco has been losing market share in routers to Juniper (JNPR), a trend that has been weighing on the stock, but in this quarter routers rose 7% to $1.42 bln as more customers bought the $1 mln CRS-1 routers that deliver faster voice, video, and data. The number of customers grew from 28 to 40 in Q1, including Comcast (CMCSA) and Telstra (TLS). The advanced technology unit, which will include Scientific Atlanta (SFA), a former holding in our Active Portfolio, grew 5% to $1.28 bln. Cisco expects the $6.9 bln SFA acquisition to be accretive next quarter.
The upside in Q1 earnings, stronger than expected order growth, a book-to-bill over 1.0, and an increase in deferred revenues together indicate revenue growth is gaining momentum. At 17.5x forward earnings, CSCO represents a strong investment on a risk/reward basis as we look for further top line acceleration as the year progresses.
--Kimberly DuBord, Briefing.com
09:41 am Ameron Int'l: Matrix Research upgrades Buy to Strong Buy. Firm is citing strong demand for oilfield piping and construction products, driving very strong economic performance. They see further upside in the stock at this level.
09:40 am NBTY Inc: Matrix Research downgrades Hold to Sell. Firm is citing that business trends are declining and they believe the stock is more than fully valued at this level; also softening demand in the higher-margin European operations and accelerating demand in the low-margin wholesale operations are driving deterioration of NOPAT.
09:39 am ViaSat: Needham & Co reiterates Buy. Target $29 to $29. The firm says they continue to like ViaSat as a strong mix of a healthy defense business benefiting from the trend towards a more networked military, and a commercial business in which the co is a leader in enterprise-focused satellite solutions, as well as next generation broadband satellite solutions. They believe the co's heavy investment in the consumer broadband area starting to pay dividends as evidenced by the substantially higher units sales and improving profitability in the last two quarters. The firm says perhaps more significantly, the co's opportunities in defense business with M.I.D.S, M.I.D.S-J.T.R.S and encryption products appears as large as it been in the co's history.
09:38 am Cheesecake Factory: Bear Stearns downgrades Outperform to Peer Perform. Firm says that although CAKE reported a solid 4Q, they are lowering their FY06 and FY07 estimates primarily due to slower than expected square footage growth related to new unit opening delays. They now think the co is shifting back to a period of missing estimates, as they do not think the impact of the square footage growth slowdown is well understood. Their target year-end 2006 25x P/E multiple on their new pre-option '07 estimate of $1.52 implies a stock price of approximately $38.
09:37 am MasTec: Needham & Co reiterates Buy. Target $11 to $11. Firm is saying they are bolstering their thesis of low valuation and recovering financial performance to reflect a simplified, more profitable business model with greater strategic opportunity. The firm says despite a solid run-up since initiating in June, valuation remains modest compared to the improving industry and company outlook.
09:36 am Endo Pharm: WR Hambrecht upgrades Hold to Buy. Target $32. Firm believes the recent correction, lowered guidance, and lowered expectations for generic OxyContin may be masking positive underlying fundamentals of Lidoderm Rx trends and the likelihood of approval and launch of Oxymorphone contributing to rev growth in H2:06 and EPS growth in FY:07. With ENDP shares now trading at just 16x their 2006 EPS est of $1.75 (a 20% discount to the specialty pharmaceutical group), with realistic downside around $1.50 if ENDP loses generic OxyContin, investors should conclude that a 17x multiple on worst case 2006 suggests ENDP has limited downside.
09:35 am Google: Am Tech/JSA Research downgrades Buy to Hold. Downgrade due to the following: 1) they are more cautious on expenses in the near-term, 2) cap-ex outlook is uncertain -- will likely be much greater than most expect and 3) they see risk to Internet business models on regulatory uncertainty regarding net neutrality vs. tiered broadband services. They say they cannot predict the outcome on net neutrality and do not see resolution within the next 12-months. Firm notes that they are equally concerned with regulatory uncertainty for YHOO and reiterate their Hold rating.
09:33 am Multi-Fineline: FTN Midwest upgrades Neutral to Buy. Firm citing the recent improvement in North American market share for Motorola (MOT), opportunities for increased profitability at elevated utilization, and what they believe to be conservative guidance.
09:32 am Nucryst Pharma: Canaccord Adams initiates Buy. Target $13. Firm saying they believe that the co, which completed its I.P.O in Dec 2005 and is gaining Street exposure, is poised for long-term future growth. They base this on its platform of nanocrystalline silver technology, and a strong, growing rev stream from its wound care franchise. Firm says this rev should act as a valuable subsidy for the co's therapeutic franchise plans.
4:30PM Planar Systems adopts new shareholder rights plan (PLNR) 13.95 -0.05 : Co announces that its Board of Directors adopted a Shareholder Rights Plan to replace the previous plan that expired Feb 1, 2006. The replacement plan includes a so-called "TIDE" provision requiring a committee of independent directors to meet at least once every 3 years to determine whether the plan remains in shareholders' best interests. The plan will not prevent a takeover, but is designed to encourage anyone attempting to acquire the co to first negotiate with the Board of Directors and to guard against abusive or coercive tactics that might be used in an attempt to gain control of the co without paying all the shareholders a fair price for their shares.
4:26PM Avanex beats by $0.04, ex items; guides in-line (AVNX) : Reports Q2 (Dec) loss of $0.06 per share, excluding non-recurring items, $0.04 better than the Reuters Estimates consensus of ($0.10); revenues fell 13.8% year/year to $36.1 mln vs the $35.9 mln consensus. Co issues in-line guidance for Q3, sees Q3 revs of $36-40 mln vs. $39.76 mln consensus.
4:24PM TTM Tech beats by $0.02 and issues upside Q1 guidance (TTMI) 10.63 +0.55 : Reports Q4 (Dec) earnings of $0.15 per share, excluding $0.31 in valuation allowance charges, $0.02 better than the Reuters Estimates consensus of $0.13; revenues rose 3.4% year/year to $63.1 mln vs the $62.1 mln consensus. Co issues upside guidance for Q1, sees EPS of $0.16-0.20 vs. $0.12 consensus; sees Q1 revs of $67-70 vs. $61.26 mln consensus.
4:23PM Carrier Access beats by $0.01 (CACS) 5.40 -0.08 : Reports Q4 (Dec) earnings of $0.02 per share, $0.01 better than the Reuters Estimates consensus of $0.01; revenues rose 31.2% year/year to $21.1 mln vs the $20.9 mln consensus.
4:20 pm : Concerns over inflation, Fed tightening, Iran, earnings growth, and the yield curve continue to hang over the equity market, but investors found reasons to buy today. Cisco (CSCO 19.44 +1.35) delivered better than expected earnings after yesterday's close, and news that Pfizer (PFE 26.44 +1.50) may divest its lower-margin consumer health care business lent further upside. In addition, the market took a bullish cue from extended price declines across the energy complex.
The notion that Cisco did not disappoint, as has been the case with a number of Tech companies, gave the market an early boost. The communication equipment industry surged, and bargain hunters lifted the sector a market-leading 1.9%. The hardware and semiconductor groups were also particularly strong following analyst upgrades on Dell (DELL 31.55 +1.86) and Applied Materials (AMAT 20.19 +0.69) shares. Led by Pfizer, Health Care (+1.2%) was a strong force behind the market's rise. The Financial sector's late-day advance (+0.7%) lent further momentum. The Treasury market spent the day on negative turf, largely due to rumored comments out of former Fed Chief Greenspan yesterday. The yield curve remained inverted, and uncertainty over the length of the Fed's tightening cycle continues to bother the market. However, even banks benefited from the broad-based buying action.
Minutes before the closing bell, the Energy sector (+0.1%) rebounded. That action sent the indices to their best levels of the session. The economic front featured just one item, which was a mixed bag from the Department of Energy. Crude supply unexpectedly dropped, but gasoline inventory increased more than two times the forecasted build. Given the implication that higher gasoline inventories should translate into lower prices at the pump for consumers, the latter point was a supportive factor for the broader market. While extended energy price declines incited profit taking across the Energy sector, it too was lifted by wide-spread buying. We remain bullish on the sector, and very strong earnings reports from our portfolio pick Grant Prideco (GRP 45.93 -2.52) and Diamond Offshore (DO 79.85 -0.23) underpin that view.
The Discretionary sector benefited by the energy price action, as well as from strong same-restaurant sales data from McDonald's (MCD 36.38 +0.19). The company, another one of our portfolio picks, reported its 33rd straight month of global comps growth. Due to news that Univision (UVN 34.26 +3.72) may put itself up for sale, broadcasting and cable surged. On a related note, reports that Carl Icahn has advanced his Time Warner (TWX 18.50 +0.14) break-up plan helped send Telecom 1.7% higher.
General Motors (GM 21.95 -0.86) was one of the market's worst performers today. Deutsche Bank downgraded the stock to Sell from Hold and cut their target to $17 from $22, citing continued disappointment in the limited cash savings targeted by the company's current restructuring efforts. Related issues also trended lower, but were more than offset by advances across the broader market.DJ30 +108.86 NASDAQ +22.02 SP500 +10.87 NASDAQ Dec/Adv/Vol 1291/1769/2.20 bln NYSE Dec/Adv/Vol 1380/1918/1.79 bln
1:07 pm Cigna (CI)
120.86 +1.13: Health insurer Cigna Corp. on Wednesday reported a 60% drop in fourth quarter earnings, due to large gains from special items in the year ago period, but still beat Wall Street's estimate. Specifically, the Philadelphia-based company said net income fell to $224 million, or $1.78 per share, from $558 million, or $4.16 per share, a year earlier. Adjusted income from operations, which exclude one-time items, were $249 million, or $1.98 per share, compared with a year ago profit of $323 million, or $2.41 per share. On that basis, the latest results were $0.33 better than the Reuters Estimates consensus of $1.65.
Fourth quarter revenues slipped 3% year/year to $4.21 billion, but topped the consensus estimate of $4.03 billion as Cigna's healthcare, group disability and life, and international operations generated stronger than expected results. In Health Care, premiums and fees were flat from a year earlier at $2.62 billion, while segment earnings were down 30%. The decline reflects the effects of lower membership as well as higher operating expenses. The Disability and Life segment, meanwhile, reported a 10% increase in premiums and fees to $548 million due to continued solid results and strong customer persistency. Earnings for the segment declined 4% to $52 million, however, as the company experienced higher disability claims and more normal mortality results in the life insurance business.
Looking to the first quarter and fiscal year 2006, Cigna forecasted financial results below analysts' expectations. For the current quarter, the company said it expects EPS in the range of $1.65 to $1.80 versus the consensus estimate of $1.86. Cigna also sees earnings of $7.25 to $7.70 per share for the full year. That compares to the Reuters Estimates consensus of $7.85 per share. Based on current expectations, Cigna shares are trading at 15.4x forward earnings, compared with 17.6x for Aetna (AET) and 19.9x for Unitedhealth Group (UNH). Briefing.com currently has Market Weight rating on the Health Care sector, with managed care stocks seen as a pocket of strength.
--Richard Jahnke, Briefing.com
12:26 pm Univision (UVN)
33.74 +3.20: According to The New York Times, Spanish-language broadcaster Univision Communications is considering a plan to put itself up for sale. Long considered an attractive takeover target, as advertisers continue to invest more and more of their budgets into luring a booming Hispanic consumer base with campaigns in Spanish, such a deal has yet to be consummated since Univision has commanded such a large price tag for so long.
The Los Angeles-based company, with a market cap of $10.4 bln, currently trades a 5.7x trailing twelve month sales. That compares with much lower price-to-sales multiples of 2.0x, 1.9x, 1.7x and 0.9x for media giants News Corp (NWS.A), Time Warner (TWX), Walt Disney (DIS) and CBS Corp (CBS), respectively. Disney and News Corp are suggested holdings in our Active Portfolio.
Since Univision has seen its television audiences grow even as ratings for the top four U.S. networks erode under pressure from competing media outlets such as the Internet and video games, it's only a matter of time until larger cable companies fully embrace the importance of meeting the needs of such a lucrative market. According to the U.S. Census Bureau, the nation's Hispanic population is expected to triple over the next 50 years, growing from 36 mln to 103 mln and accounting for almost 25% of the total population, nearly double today's figures.
While Time Warner may want to look at acquiring Univision, today's announcement from financier Carl Icahn could stall potential talks as TWX explores Icahn's proposal of spinning off Time Warner Cable as one of four separate entities. News Corp may also look into it but would possibly have to sell a station in order to take it on, according to CNBC. Disney is another possible candidate, according to CNBC, but currently has its hands full trying to complete a $7 bln deal for Pixar Animation (PIXR) while CBS Corp is another possibility but could find it difficult trying to absorb a company half its size. General Electric (GE), whose NBC network acquired smaller rival Telemundo in 2002 for $2.7 bln, should not be ruled out as a potential acquirer either. It is worth noting that, while Telemundo enjoyed 22% of the Spanish-language prime-time audience in 2002, its market share dropped to 16% within a year.
According to JP Morgan, though, acquiring Univision simply might not be worth the risk for many large media companies. Univision, whose 28 television stations, 60+ affiliate stations and more than 1,200 cable affiliates that address the needs of roughly 98% of U.S. Hispanic households, is what JP Morgan considers a "unique and scarce asset." Nonetheless, the brokerage firm also believes most large-cap media companies might be better off expanding their presence in Hispanic media organically instead of paying top dollar for Univision, especially considering the poor M&A track record of entertainment conglomerates as a whole.
--Brian Duhn, Briefing.com
12:09 pm IAC/InterActive Corp. (IACI)
27.99 +0.33: In the wake of the spin-off of its travel business Expedia, IAC Interactive on Wednesday reported better than expected profits for the fourth quarter, helped by performance at Home Shopping Network, Ticketmaster, and online personals service Match.com. IACI shares, in turn, are trading higher in the regular session, as the company's growing position in a number of market categories and improving business continues to strengthen its long-term investment appeal after years of sluggishness.
For the fourth quarter, the Internet media conglomerate posted net earnings of $113.1 million, or $0.33 per share, up from a year-ago loss of $45.9 million, or ($0.13) per share. Excluding special items, however, the company earned $180.1 million, or $0.52 per share, compared with $157.9 million, or $0.41 per share, a year earlier. That topped the Reuters Estimates consensus of $0.46.
Revenue for the period rose 45% year/year to $1.79 billion, slightly better than the consensus estimate of $1.78 billion. Growth in the quarter was led by the company's two largest segments, Retailing and Services. In Retailing, revenue grew 42% from a year earlier to $940.9 million, driven primarily by the inclusion of Cornerstone Brands, which was acquired last April, and strong online demand. Home Shopping Network booked modest revenue growth, with higher sales in the ready-to-wear and home fashions categories, offset by lower sales in Jewelry. Services revenue, which rose 46% to $475.5 million, was led by strong concert and sporting event sales at Ticketmaster and solid growth at LendingTree from increased loan closings. Membership and Subscription, meanwhile, reported revenue of $261.8 million. That is up 8% from the year ago period, due to record revenue in Personals and improved performance in Vacations.
--Richard Jahnke, Briefing.com
10:12 am Pepsico (PEP)
57.47 +0.61: Pepsico on Wednesday reported higher fourth quarter profits that matched Wall Street's estimates, driven by strong top-line growth across all of its businesses. Despite elevated input cost pressures, the world's No.2 soft drink maker said net income for the quarter increased to $1.1 billion, or $0.65 per share, from $985 million, or $0.58 per share, a year earlier. The quarter benefited from an extra week of results, but was offset by pre-tax charges totaling $83 million related to previously announced restructuring actions to reduce costs in its operations.
Overall revenue increased 14.7% year/year to $10.1 billion, with global servings volume up over 9%. Analysts, on average, were expecting revenue of $9.5 billion, according to Reuters Estimates. Pepsico's largest division, Frito-Lay North America, reported $3.2 billion in revenue, up 13% from a year ago. Growth in the segment was driven by strong volume gains in the Lay's, Cheetos, and Santitas brands, as well as the impact of an extra reporting week. In Pepsico Beverages North America, revenue increased 13% to $2.6 billion on higher volumes, led by strong gains in non-carbonated beverages, including Gatorade sports drinks, Aquafina, and Propel fitness water. Meanwhile, Pepsico International booked $3.7 billion in revenue, an increase of 16% over the prior year period, with volume growth of 5%. For the quarter, snack volume grew 13%, while beverage volume grew 12%, with double-digit growth for both carbonated and non-carbonated soft drinks.
Pepsico expects to continue its strong performance in fiscal 2006. For the upcoming year, the company forecasted earnings of at least $2.93 per share, along with mid single-digit volume and revenue growth. That compares with analysts' expectations for earnings of $2.93 per share and revenue of $33.85 billion. In spite of a challenging cost environment, Pepsico's strong momentum, continued investment in the marketplace and productivity initiatives, and favorable product mix highlight its long-term investment appeal, as compared to rival Coca-Cola (KO).
--Richard Jahnke, Briefing.com
10:04 am Time Warner (TWX)
18.34 -0.02: Last year, Sumner Redstone, the founder and controlling shareholder of Viacom, said that the age of the diversified media conglomerate was over, saying the breakup of the business was essential to dealing with a changing industry landscape. On January 1st, the separation of the "old" Viacom into CBS Corporation (CBS) and "New" Viacom, Inc. (VIA.B) was complete. Last night, financier Carl Icahn stepped up his campaign to do the same with Time Warner, calling for the media giant to split into four separate companies.
Icahn, who along with his allies are believed to own shares and options equal to about 5% of TWX stock, is accusing Time Warner of mismanagement, noting in a report compiled by investment bank Lazard Ltd. (LAZ) that management's "lack of a clearly defined strategy and a short-term focus" has cost shareholders a total of $40 bln.
While Time Warner has already sold off its music division and intends to float shares in its cable TV subsidiary in an effort to return value to shareholders, Icahn believes much more must be done to unlock the true worth of a company whose value far exceeds its stock price. To that end, Icahn also wants Time Warner to increase its share repurchase program to $20 bln from $12.5 bln, noting that such measures could lift TWX's stock price to $26.57, nearly 50% higher than where the stock has traded over the past couple of years. In fact, one of the few things Time Warner CEO Dick Parsons and Icahn actually do see eye to eye on is the fact that TWX shares have languished, still trading at roughly the same level they were in the spring of 2002.
Since then, nearly every strategic decision, especially concerning the AOL business, has been wrong according to Bruce Wasserstein, the head of Lazard. Wasserstein noted that Time Warner should have moved sooner into Internet-based telephone services and didn't capitalize on the surge in Internet advertising. "Time has not been friendly to Time Warner," added Wasserstein who along with Icahn believes that the need for changes at TWX is urgent.
While we continue to favor the media industry due to its increasing visibility, renewed focus on shareholder returns, and growth prospects, the names we prefer are Walt Disney (DIS), which recently agreed to merge its ABC radio unit with Citadel Broadcasting Corp. (CDL), and News Corp. (NWS.A), which has $5 bln in cash available to continue returning value to shareholders in the form of stock buybacks. Both companies are suggested holdings in our Active Portfolio.
--Brian Duhn, Briefing.com
09:50 am Grant-Prideco (GRP)
46.50 -1.95: Grant Prideco, the world's largest manufacturer and supplier of oilfield drillpipe, is reaping the benefits from robust activity across the energy patch. The Houston-based company continues to set new records with each quarter, ending Q4 with record-setting revenues of $388.7 mln on continued strong market activity. Net income more than doubled to $78.4 mln, compared to $28.6 mln in the prior period, surpassing estimates by two cents.
Strong revenue growth and pricing power expanded operating margins to 24%, up 400 basis points year/year. GRP's results only strengthen our outlook for the company, a suggested holding in our Active Portfolio, as backlog increased another 10% to $813.6 mln and indicates strong earnings momentum in 2006. The stock trades at 18.8x FY06 estimates of $2.58 and 15x FY07 estimates of $3.21, a considerable discount to larger-cap peers that include Cooper Cameron (CAM), National-Oilwell Varco (NOV), and Smith Intl (SII).
--Kimberly DuBord, Briefing.com
09:19 am Dean Foods (DF)
38.63: Dean Foods Company announced that net income in the fourth quarter fell 17% year/year to $71 mln due to challenges caused by two major hurricanes and the resulting dislocation of energy and packaging costs. Analysts were expecting a 16% year/year decline. Adjusted operating margin was 6.38%, down 45 basis points from a year ago and below the 18-month average of 6.6%. On an adjusted basis, the Dallas-based dairy king reported earnings of $0.54 per share, which matched the Reuters Estimates consensus.
Net sales rose 4% year/year to $2.7 bln, which were slightly better than the $2.63 bln consensus due to strong sales growth at the Dairy Group and WhiteWave Foods. Dairy Group revenue rose 3% to $2.3 bln, due primarily to a 1.4% increase in fluid milk volumes, but sales increases were offset somewhat by the pass through of lower dairy commodity costs to customers. The WhiteWave Foods division posted strong sales growth of 10% and achieved notable milestones toward the consolidation and integration of its businesses, which bodes well heading into 2006 but the segment only accounts for about 11% of Dean's total top line.
Consistent with its previous guidance for 2006, management expects consolidated net sales of approximately $10.5 bln (consensus $10.67 bln). Because the dilution from accelerated vesting of restricted stock offsets the accretion from the repurchase of 9 mln shares in Q4, the company simply reiterated its 2006 EPS guidance of $2.20 to $2.25 before stock option expense. Deducting stock option expense of approximately $0.10 per share results in EPS guidance of $2.10 to $2.15, representing year/year growth of 15-18%. For Q1, the company expects to report adjusted EPS of between $0.39 and $0.41, a year/year increase of 5-11%, but below analysts' consensus estimate of $0.42. The company currently has $19 mln remaining under its repurchase authorization.
Shares of Dean Foods currently trade at 18x estimated FY06 earnings of $2.15 per share, a slight premium to the Consumer Staples sector's 17.3x forward multiple; competitor Kraft Foods (KFT) trades with discounted forward P/E multiples of 15.3x and 14.5x estimated FY06 and FY07 earnings. Both DF and KFT have posted modest gains of 2.6% and 3.0%, respectively, so far in 2006 compared to a year-to-date decline of 1.3% for the Market Weight rated Consumer Staples sector.
-- Brian Duhn, Briefing.com
09:09 am Diamond Offshore (DO)
80.08: We received our first look at the operating environment for the offshore drillers this morning and Diamond Offshore didn't disappoint. Fourth quarter earnings skyrocketed nine-fold to $106.9 mln as producers ramped up spending to capitalize on record energy prices. Pro-forma earnings were 62 cents per share, 16 cents above what the market forecasted. The top line expanded by 55% to $368.2 mln as dayrates soared on robust drilling market conditions.
The tightening market conditions have pushed dayrates up to record levels with the drillers operating near 100% utilization levels - a rare occurrence in the industry. Diamond, which mainly operates in the mid-water segment, saw average dayrates in the quarter for high-specification rigs rise 93% to $181,000 per day. The windfall of capital spending occurring within the industry is causing a shortage in rigs, particularly in the offshore market, which in turn is giving the drillers significant pricing power. We have long foreseen this accelerating spending as producers look to increase production and reserves. The industry, which typically suffers from a lack of visibility, is experiencing longer-term, multi-year contracts - a sign the market could extend into 2008.
DO's results underscore our bullish view on the oil services industry and we look for a similarly strong result from its main competitor Transocean (RIG), which is a suggested holding in our Active Portfolio. We continue to prefer RIG due to its premier fleet of offshore deepwater assets, strong earnings momentum, significant operating leverage and improving capital structure.
--Kimberly DuBord, Briefing.com
08:57 am Pfizer (PFE)
25.18: In a brief press release issued on Tuesday, Pfizer said it plans to explore strategic alternatives for its Consumer Healthcare business ("PCH"), which includes brands like Rogaine hair-growth treatment and Listerine mouthwash. These alternatives could include retaining, spinning off, or selling the division.
According to the company, "The objective of the review is to unlock the value of the business for Pfizer shareholders at a time when market valuations are attractive for large, high-quality consumer businesses. PCH is a leading global consumer healthcare business with a portfolio of well-known, growing brands."
Pfizer's consumer products division reported sales of $3.88 billion last year, representing approximately 7.5% of overall revenue. Though the business provides a steady source of revenue for the company, consumer products in general command lower margins than patent-protected prescription drugs due to strong competitive pressures in the over-the-counter market. As such, many large pharmaceutical companies have refocused their research and marketing efforts on prescription drugs, including Bristol-Myers Squibb (BMY), which sold its consumer products business to Novartis (NVS) last year.
Pfizer said it will provide a comprehensive overview of its business and financial strategy, as well as elaborate on alternatives for its consumer products business, at its analyst meeting on Friday, February 10. In addition, the company is scheduled to provide fiscal 2006 and fiscal 2007 guidance at the meeting.
--Richard Jahnke, Briefing.com
08:45 am Cisco Systems (CSCO)
19.01: It has been a volatile ride for Cisco's shareholders, as the market readjusted growth expectations for the world's largest maker of networking equipment. The stock, which is trading at a discount to its peers and the market, may have gotten the spark it needed on unexpectedly optimistic commentary from CEO John Chambers. Cisco sees Q2 revenue growth of 10-12%, or roughly $6.81-$6.93 bln versus the consensus estimate of $6.91 bln, on order growth of 10-15%. The guidance, coupled with an upside in first quarter results, has set an optimistic tone for stock futures.
Net income fell 1.8% to $1.38 bln on stock-option expenses. The pro-forma figure of 26 cents topped consensus by a penny. Revenues also came in a hair better, increasing 9.3% to $6.63 bln, up over one percent from last quarter. Orders showed accelerating momentum in the quarter, with year/year growth in the mid-teens beating the company's guidance of 10-14%. Strength in the US led the rise with orders gaining 20% year/year, coupled with a 20% increase in the Emerging Markets. The book-to-bill ratio, which measures demand, exceeded 1.0 - an atypical occurrence in this quarter.
Gross margins remained steady from last quarter, expanding by 110 basis points to 67.9% from the year-ago period. Deferred revenues also increased, which speaks to stronger demand. Cisco appears to be gaining some traction across all of its business units. Network switches, which are Cicso's highest margin products, rose 12% to $2.67 bln. Cisco has been losing market share in routers to Juniper (JNPR), a trend that has been weighing on the stock, but in this quarter routers rose 7% to $1.42 bln as more customers bought the $1 mln CRS-1 routers that deliver faster voice, video, and data. The number of customers grew from 28 to 40 in Q1, including Comcast (CMCSA) and Telstra (TLS). The advanced technology unit, which will include Scientific Atlanta (SFA), a former holding in our Active Portfolio, grew 5% to $1.28 bln. Cisco expects the $6.9 bln SFA acquisition to be accretive next quarter.
The upside in Q1 earnings, stronger than expected order growth, a book-to-bill over 1.0, and an increase in deferred revenues together indicate revenue growth is gaining momentum. At 17.5x forward earnings, CSCO represents a strong investment on a risk/reward basis as we look for further top line acceleration as the year progresses.
--Kimberly DuBord, Briefing.com
09:41 am Ameron Int'l: Matrix Research upgrades Buy to Strong Buy. Firm is citing strong demand for oilfield piping and construction products, driving very strong economic performance. They see further upside in the stock at this level.
09:40 am NBTY Inc: Matrix Research downgrades Hold to Sell. Firm is citing that business trends are declining and they believe the stock is more than fully valued at this level; also softening demand in the higher-margin European operations and accelerating demand in the low-margin wholesale operations are driving deterioration of NOPAT.
09:39 am ViaSat: Needham & Co reiterates Buy. Target $29 to $29. The firm says they continue to like ViaSat as a strong mix of a healthy defense business benefiting from the trend towards a more networked military, and a commercial business in which the co is a leader in enterprise-focused satellite solutions, as well as next generation broadband satellite solutions. They believe the co's heavy investment in the consumer broadband area starting to pay dividends as evidenced by the substantially higher units sales and improving profitability in the last two quarters. The firm says perhaps more significantly, the co's opportunities in defense business with M.I.D.S, M.I.D.S-J.T.R.S and encryption products appears as large as it been in the co's history.
09:38 am Cheesecake Factory: Bear Stearns downgrades Outperform to Peer Perform. Firm says that although CAKE reported a solid 4Q, they are lowering their FY06 and FY07 estimates primarily due to slower than expected square footage growth related to new unit opening delays. They now think the co is shifting back to a period of missing estimates, as they do not think the impact of the square footage growth slowdown is well understood. Their target year-end 2006 25x P/E multiple on their new pre-option '07 estimate of $1.52 implies a stock price of approximately $38.
09:37 am MasTec: Needham & Co reiterates Buy. Target $11 to $11. Firm is saying they are bolstering their thesis of low valuation and recovering financial performance to reflect a simplified, more profitable business model with greater strategic opportunity. The firm says despite a solid run-up since initiating in June, valuation remains modest compared to the improving industry and company outlook.
09:36 am Endo Pharm: WR Hambrecht upgrades Hold to Buy. Target $32. Firm believes the recent correction, lowered guidance, and lowered expectations for generic OxyContin may be masking positive underlying fundamentals of Lidoderm Rx trends and the likelihood of approval and launch of Oxymorphone contributing to rev growth in H2:06 and EPS growth in FY:07. With ENDP shares now trading at just 16x their 2006 EPS est of $1.75 (a 20% discount to the specialty pharmaceutical group), with realistic downside around $1.50 if ENDP loses generic OxyContin, investors should conclude that a 17x multiple on worst case 2006 suggests ENDP has limited downside.
09:35 am Google: Am Tech/JSA Research downgrades Buy to Hold. Downgrade due to the following: 1) they are more cautious on expenses in the near-term, 2) cap-ex outlook is uncertain -- will likely be much greater than most expect and 3) they see risk to Internet business models on regulatory uncertainty regarding net neutrality vs. tiered broadband services. They say they cannot predict the outcome on net neutrality and do not see resolution within the next 12-months. Firm notes that they are equally concerned with regulatory uncertainty for YHOO and reiterate their Hold rating.
09:33 am Multi-Fineline: FTN Midwest upgrades Neutral to Buy. Firm citing the recent improvement in North American market share for Motorola (MOT), opportunities for increased profitability at elevated utilization, and what they believe to be conservative guidance.
09:32 am Nucryst Pharma: Canaccord Adams initiates Buy. Target $13. Firm saying they believe that the co, which completed its I.P.O in Dec 2005 and is gaining Street exposure, is poised for long-term future growth. They base this on its platform of nanocrystalline silver technology, and a strong, growing rev stream from its wound care franchise. Firm says this rev should act as a valuable subsidy for the co's therapeutic franchise plans.
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