From Briefing.com: 7:41AM Integrated Circuit beats by a penny (ICST) 32.14: Reports Q4 (Jun) earnings of $0.23 per share, $0.01 better than the Reuters Research consensus of $0.22; revenues rose 10.8% year/year to $61.1 mln vs the $60.8 mln consensus.
7:24AM Copper Mountain selected as preferred provider by DSL.net (CMTN) 10.75:
7:12AM Veeco Instruments reports in line, guides next quarter (VECO) 20.50: Reports Q2 (Jun) earnings of $0.03 per share, in line with the Reuters Research consensus of $0.03; revenues fell 5% year/year to $73.5 mln vs the $66.2 mln consensus. Co guiding Q3 EPS of between $0.03 and $0.06 per share and revs of $67-$70 mln vs. Reuters Research consensus earnings of $0.07 per share and revs of $70.2 mln
7:04AM Nokia, STM and TXN form alliance (NOK) 15.45: The Wall Street Journal reports Nokia is teaming up with STMicroelectronics, Texas Instruments and ARM Holdings to set standards for semiconductors used in mobile devices. The newly formed Mobile Processor Interface Alliance is an attempt to head off dominance in the mobile device sector that Intel and Microsoft now hold in the personal computer market.
From Briefing.com last night: Advanced Micro Devices (AMD) 7.33 +0.17: The Co announced that it reached an agreement with Dawning Information Industry Corp. Ltd. of China to include Dawning's plans to use the AMD Opteron processor in an effort to construct the fastest supercomputer in China. The expected speeds of the proposed Dawning 400A supercomputer will be at 10 trillion operations per second or 10 Tflops. In addition, it will also be expected to be the first supercomputer made in China which would rank amongst the most powerful in the world.
Anadigics (ANAD) 3.52 +0.05: Before the open, reported Q2 (Jun) loss of $0.39 per share, excluding a $0.06 charge, $0.03 worse than the Reuters Research consensus of ($0.36); revenues fell 21.7% year/year to $18.0 mln vs the $16.2 mln consensus.
Broadcom (BRCM) 22.14 -0.62: USB Piper Jaffray downgraded to Underperform from Market Perform... Firm's checks indicate that Intel's upcoming chipsets have been designed in at both Dell and HP across the entire 2004 server platform. Piper estimates that SeverWorks contribution, direct and indirect, could drop from $450 mln in 2003 to $250 mln in 2004 with a more dramatic impact to earnings. Firm believes stock is fairly valued at a mkt multiple on CY04 estimates or $15.
NVIDIA (NVDA) 20.41 -0.65: After the close, company said it expects to report total revenues of $455-460 mln for Q2, "within the guidance provided by the Company on its last quarterly conference call"... R.R. consensus is $460 mln.. Gross margins are expected to be slightly lower than the Co's original guidance as a result of higher than anticipated product costs.
OmniVision (OVTI) 39.70 +2.41: Needham increased price target to $48 from $25 and reiterated its Buy rating on the stock. Needham also increased Q1 est to $0.19 from $0.16, FY04 to $0.90 from $0.70 (consensus $0.84), and FY05 to $1.60 from $1.04 (consensus $1.18). The target is based on stock trading at 30x estimated FY05 earnings.
Amkor (AMKR) 17.60 +0.54: After the close, reported Q2 (Jun) loss of $0.12 per share, excluding a $0.19 charge for debt retirement, in line with the Reuters Research consensus of ($0.12); revenues rose 7.8% year/year to $378 mln vs the $377.5 mln consensus. Co. sees Q3 EPS in the range of a loss of $0.02 to a gain of $0.02, R.R. consensus is breakeven (0.00), and Q3 sequential revenue increase of 8-10% over Q2 revenues of $378 mln.
Cree (CREE) 16.09 +0.63: Friedman Billings Ramsey reiterated its Underperform rating on CREE ahead of tomorrow's results; firm continues to be concerned about rising competitor LED capacity (particularly in Asia), and also believes the number of shareholder lawsuits, the suit by former Chairman Eric Hunter, and the informal SEC inquiry will weight heavily on the stock until all are resolved; in addition, firm suspects that Street expectations will be modified to reflect rising legal expenses in the coming quarters.
U.S. equities fell after an unexpected decline in consumer confidence this month signaled that household spending may slow. The surprisingly sharp drop spooked investors who were hoping for signs of a pick-up in this influential economic indicator. The S&P 500 slipped 7 points (-0.7%) to 989, for its third decline in four days. All 10 industry groups dropped. The DJIA lost 62 points (-0.7%) to 9204. The Nasdaq Composite shed 4 points (-0.2%) to 1731. U.S. Treasury prices extended their recent slide, pushing the yield on the benchmark 10-year note to its highest level in nearly a year. Investors worry that sharp gains in interest rates will hike borrowing costs and derail the fragile U.S. economic recovery. Earnings continue to roll in and Wall Street still has a slew of key economic reports ahead, such as the Chicago Purchasing Management Index and a read on gross domestic product, plus the July non-farm payrolls data and the Institute for Supply Management's report on manufacturing.
Top Stories . . . U.S. 10-year Treasuries dropped for a fourth day in New York and their yield reached the highest since August 2002, after the government said it plans to borrow a record amount to finance a growing budget deficit.
U.S. consumer confidence declined unexpectedly in July to the lowest in four months as assessments of the job market fell to the weakest in almost a decade, a private group's report showed.
Enron used World Bank and U.S. government agency funds to make at least $17 million in ``questionable'' payments to a group of Guatemalan businessmen who helped win approval for the first power plant in Central America for what became the world's biggest energy trader, a U.S. Senate investigation found.
OppenheimerFunds, the mutual fund company owned by MassMutual Financial Group, said it plans to participate in a debt exchange Brazil has proposed to help reduce its need for short-term financing and lower borrowing costs.
Verizon Communications, the largest U.S. local-telephone company, returned to a second- quarter profit, helped by customer and sales gains at its wireless joint venture.
McDonald's, the world's largest hamburger chain, said second-quarter profit fell 5.3 percent because of an increase in advertising spending that helped boost sales in the U.S. for the third month in a row.
Quotes of Note . . . ``As long as we continue to see earnings beat expectations and data that says the economy is cranking ahead, stocks have higher to go,'' said Nicholas Roe-Ely, who oversees $43 million at Tilney Investment Management in Liverpool, England.
``You've had some good economic news. We could have a 12- to 18-month run in the economy and in the market.'' said Richard Campagna, who helps manage $750 million as director of research at Shaker Investments in Cleveland. He recently bought shares of semiconductor makers such as Broadcom and Applied Materials.
Texas Instruments CEO Thomas Engibous said he expects growth in the semiconductor market this year. Asked about the outlook for the chip market, Engibous said: "Our business has been growing and I do not see the reason (for it to) to stop growing in the near future," he said at a briefing in Tokyo. He said Texas Instruments' revenue has been steadily increasing because of the growth its in broadband communications and digital consumer electronics businesses.
Bonds of Note . . . The spread, or difference in yield, between a 2-year and 10-year Treasury note on Tuesday gaped to its widest margin in more than a decade. The spread stood at 270 basis points as long-term yields are rising faster than short-term yields. A steepening yield curve reflects bullish ideas for an economic recovery. Higher long-term yields are needed to compensate for the inflation risks that can accompany stronger growth. A basis point equals 0.01 percentage points.
Eco Speak . . . U.S. consumer confidence weakened in July as worries about slow job growth and a tepid recovery grew. The consumer confidence index fell to 76.6 in July from 83.5 in June. It's the lowest level since March's 61.4. Economists were expecting the index to rise to 84.7 in July. The expectations index plunged by 10 points to 86.4 in July from a revised 96.4 in June. The present situation index fell to 61.9 in July from 64.2 in June. "Expectations are likely to remain weak until the job market becomes more favorable," said Lynn Franco, head of the board's consumer research center.
Financials . . . Charles Schwab introduced two new products focused on dividend paying stocks that garner the best rating from its newly introduced Schwab Equity Ratings unit. One product is a mutual fund focusing on the selected stocks and another, the Schwab Personal Portfolios, will be a managed account product.
Automatic Data Processing reported net earnings of $216.67 million, or 36 cents a share, compared with $287.31 million, or 46 cents a share, in the year-ago quarter. First Call estimated earnings of 38 cents a share. Revenue rose 4 percent to $1.9 billion in the quarter from last year's $1.85 billion. Looking ahead, the independent computing services firm projects "mid-single digit" revenue growth in fiscal 2004 and earnings-per-share of $1.50 to $1.60, reflecting the impact of the weak economy and lower interest rates, which ADP said would cause a decline in interest income on corporate and client funds. First Call projects earnings of $1.62 a share in 2004.
Equity Office Properties said net income was $149.9 million, or 37 cents per share, compared with $166.5 million, or 40 cents per share last year. Funds from operations were $310.2 million, or 69 cents per share down from $366.3 million, or 78 cents per share. The company matched the forecast for funds from operations of 69 cents per share. The Chicago-based real estate investment trust cited lower occupancy levels in the total portfolio and lower lease termination fees. The decline was partially offset by gains on asset sales, which totaled $44.4 million in the second quarter of 2003, compared with $5.5 million in the year-ago period. The company is targeting 2003 funds from operations of $2.80-$3 per share vs. $2.81 expected by Wall Street.
Allied Capital reported earnings of $0.52 per share which was in line with the consensus of $0.52. On 7/21, the company raised it’s quarterly dividend of $0.57 per share for 3rd quarter of 2003.
Bankrate reported a 2nd quarter net of $0.16 a share which was 2 cents better than the consensus versus year-ago EPS of $0.07. Revenues rose 54% to $9.6 million versus consensus $8.9 million.
Automatic Data reported earnings of $0.36 per share which was $0.02 worse than the consensus of $0.38. Revenues rose 3.6% year/year to $1.91 billion versus the $1.82 billion consensus. The company mentions in release that 4th quarter results include restructuring charges, but they are never broken out in the release. ADP sees 2004 EPS of $1.50-1.60 versus consensus of $1.62.
Nationwide was cut to Neutral at Merrill Lynch. The firm is saying it appears the benefit from a rebound in the stock market will be more than offset by disappointing results in Life Insurance; it appears that disappointing volumes at Provident are forcing mgmt to rely more heavily on expense reduction to drive earnings, and absent a substantial reduction in Provident headcount and consolidation of back-office facilities. The firm thinks earnings would probably miss their 2004 estimate by at least $0.06.
Providian cut to Underperform at Raymond James. Despite stronger than expected results, the firm says operating metrics are moving around significantly, making it more difficult to project earnings for the company. The firm also cuts their 2003-04 EPS estimates given some concerns about how the rev model will develop.
Providian reported managed EPS of $0.13 per share, better than forecasted estimate of $1.12 and the consensus of $1.10. The quarter included a $0.03 after tax charge to mark to market certain "standard" or higher risk receivables that were reclassified as available for sale and also benefited from loss reserve draw downs. The company reduced reserves by $105 million, apparently reflecting the improvement in delinquency and charge-off indicators. Excluding the reclassification of the assets available for sale, the managed charge-off rate decreased to 16.84% from 17.61% in 1st quarter and the managed 30+ delinquency rate declined to 9.72% from 10.31% in 1st quarter. Management expects dollar charge-offs in 2003 to total about $2.85 billion, more specific than previous guidance that charge-offs would be "under $3 billion." The company also indicated that net income for the full year would be between $170 and $180 million, lower than the $205 million, we had previously estimated, even though charge-offs may now be lower than previously expected. Managed receivables declined by almost 4% sequentially due to charge-offs and attrition. Loan sales in 3rd quarter will further reduce balances. The margin on receivables declined to 15.09% from 15.41% in 1st quarter, while the non-interest income margin declined to 8.74% from 9.09%. Both metrics seem to reflect the increasingly higher FICO portfolio mix. The declines in the net interest margin and non-interest income and loan growth are now greater concerns than credit quality. Analysts don't see credit as a serious problem. Analysts are lowering 2003 estimate to $0.62 from $0.70, more in line with management's guidance. Analysts are maintaining 2004 estimates.
American Express reported 2nd quarter EPS of $0.59; $0.02 higher than estimates and the consensus (which crept up in the last few weeks). Earnings reflected better growth in billed business than expected, slightly better credit quality in card lending and the beneficial effect of the rise in the stock market on AEFA's assets under management and related fees. Earnings were very good despite the still challenging operating environment. The company's reengineering efforts continue to yield benefits as the company was able to increase marketing spending by 13.9% sequentially and still show a 9% sequential increase in net income. There is still little in the way of a corporate T&E recovery. Earnings at AEFA, improved with a rise in the stock market. Assets under management grew by 8.8% sequentially to $155.2 billion, compared to the 12.2% increase in the S&P 500. Estimate average assets under management grew by 3.2% from 1st quarter. The company provided guidance that EPS for the full year would not exceed $2.29 (excluding a $150 million charge for the effect of the FIN 46 application in 3rd quarter, which will be a below the line item). The increase will come despite higher investment and marketing spending which should help support future growth.
Oil & Gas . . . Valero Energy reported net income of $128.4 million, or $1.08 per share, compared with net income of $11.3 million, or 10 cents per share in the year-ago period. The refinery company beat by a penny the forecast of $1.07 per share. Revenue rose to $8.84 billion from $7.22 billion. The company is forecasting above-average profit margin in the second half of the year.
Rohm and Haas was cut to Hold at Janney based on valuation, as the stock is near their $37 target.
BP Amoco said net income adjusted for special items rose to $3.115 billion, up 42 percent against expectations of 35 percent. The quarterly dividend increased from 6.25 cents to 6.50 cents per share.
Transocean reported a net loss of $44.5 million, or 14 cents per share, compared with income of $80 million per share, or 25 cents per share last year. Excluding items, the company's 2nd quarter 2003 net loss was $19.7 million, or 6 cents per share. Revenue was $603.9 million, down from $646.2 million last year. Analysts forecasted a loss of 6 cents per share and revenue of $602.12 million. The Houston-based oil services giant said it anticipates a "difficult" earnings environment through the rest of the year.
DuPont posted a rise in second quarter net income to $675 million, or 67 cents per share from $543 million, or 54 cents a share. It said the gain "principally reflects the absence of prior-year restructuring and facilities shut-down costs." Agriculture & Nutrition and Safety & Protection delivered "strong double-digit revenue and earnings growth," it said, offsetting significantly higher raw material costs in DuPont Textiles & Interiors and Performance Materials. Before special items, second quarter earnings were 62 cents exceeding the company's outlook for the quarter. Analysts expected earnings of 57 cents a share. Net sales rose 10 percent to $7.4 billion. Looking ahead, it said: "Leading economic indicators have begun to trend positively, providing some optimism for resumed growth of U.S. industrial production in the second half of 2003. If such growth does not occur until late in the second half, the company maintains a bias toward the lower end of the current First Call range. If growth in U.S. industrial production is early and robust, the company sees upside toward the middle of the First Call range." The First Call range is $1.60 - $2.10 for the year.
Energy . . . Southern Company reported earnings of $432 million, or 60 cents per share, compared with $332 million, or 47 cents per share, in the year-ago period. The latest results include a one-time after-tax gain of $88 million from a previously announced termination of long-term wholesale power contracts between Southern Company and Dynegy. The gain amounts to $83 million, or 11 cents per share after adjustments. Without the gain, earnings would have been 49 cents per share, ahead of the forecast of 45 cents per share. Revenue was $2.9 billion, ahead of Wall Street's target of $2.79 billion.
Ballard Power net loss grew to $417.1 million, or 28 cents from $286.8 million, or 20 cents per share a year ago. Total revenue in the quarter was (up 35% yr/yr) $29.1 million versus $21.5 million a year ago. The higher loss for the quarter primarily results from the writedown of an investment in MicroCoating Technologies, Inc., lower investment income, Ballard said. The company also widens the range of its revenue guidance to $100-120 million versus consensus of $115.6 million and prior revenue guidance of $110-120 million.
Cinergy was upgraded at JP Morgan based on relative yield and valuation. The firm says CIN offers a safe 5.4% common dividend yield, or 80-100bp higher than its average peer, but trades at a group average forward earnings multiple.
Metals . . . Barrick Gold was downgraded at RBC to Sector Perform from Outperform given valuation as well as the company's hedge book uncertainty.
Defense & Aerospace. . . Northrop delivered strong operating results, spearheaded by better than expected margin improvement in all of NOC’s legacy businesses, with the exception of Ship Systems. Despite recording a $68 million pre-tax charge to recognize cost growth on the Polar Tanker program, the Company beat expectations by $0.23, largely due to better than expected sales volume and operating margins, early recognition of some award fees, some small but favorable cumulative profit rate adjustments, and lower than projected interest expense. Sales grew 13% from the first quarter and were up 56.6% from a year ago. Segment EBIT Margin fell 50 basis points to 7.4% from 7.9% a year ago, reflecting the recognition of the Polar Tanker charge. Perhaps most importantly, Northrop generated close to $600 million of free cash flow, well above our estimate and a much needed boost following the weak performance in 1st quarter 2003. Clearly, Northrop possesses an arsenal of opportunities to help it realize strong double digit earnings growth and robust cash generation. Perhaps the 2nd quarter 2003 performance provided a good example of what Northrop is capable of doing. In the past, Northrop’s financial performance has suffered from a severe case of lumpiness, marked by quarters that have often been well above expectation but other periods that have fallen short of the consensus forecast. Judging by the 2nd quarter 2003 results, Mr. Sugar is seeking to place his mark on the Company’s results. Despite taking a Polar Tanker charge, the Company was able to more than offset the impact by a plethora of favorable events, including some acceleration of award fees and strong sales and profit performance from the former TRW units. For 2003, analysts are raising eps estimate to $4.25 from $4.05 to factor in the strong 2nd quarter 2003 performance. For 2004, analysts are nudging up our estimate to $4.90 from $4.75 to reflect slightly stronger sales and margin. At current prices, Northrop’s shares are selling at 8.2x 2004 EBITDAP and 13.7x economic eps, roughly a 4% discount from the group average. Relative to Lockheed Martin, the shares are selling at a discount of 3% on EBITDAP and 14% on economic eps. In light of the strong 2nd quarter 2003 performance and increase in the earnings guidance, the shares probably deserve an even more modest discount from the group, suggesting upside to roughly $95-$100 (based on a 2004 target EBITDAP multiple of 8.5x). Yet, analysts are maintaining our Peer Perform rating. Although impressed by the strong performance in 2nd quarter 2003, analysts are not yet convinced that now is the time to upgrade NOC’s shares.
Food & Beverage . . . R.J. Reynolds reported net income of $70 million, or 83 cents per share vs. $211 million, or $2.29 per share in the year-ago period. The tobacco giant fell a penny short of the forecast of 84 cents per share. Revenue fell to $1.43 billion from $1.71 billion, but came in ahead of the Wall Street forecast of $1.35 billion. The company said the latest quarter reflects "lower volume and increased promotion spending." The company said it will make further, "significant changes," and announce a restructuring charge in September-October. The company said it'll maintain its annual dividend of $3.80 per share. RJR is forecasting 2003 EPS of $2.78 to $2.96, compared with $2.96 expected by Wall Street.
Fresh Del Monte reported earnings of $1.42 per share, $0.15 better than the consensus of $1.27. Revenues rose 23.5% year/year to $700.6 million versus the $703.0 million consensus.
Trash . . . Casella Waste was upgraded at Friedman Billings Ramsey to Outperform from Market Perform. This upgrade is based on the increased likelihood that CWST will improve internalization by 500-1000 bps in the next 18 months, which should have a positive impact on margins, cash flow, and earnings. The firm raised target to $13 from $8.70.
Transports . . . AirTran reported net income of $57.2 million, or 74 cents a share, up from 7 cents a share in the year-earlier period, marking the air carrier's fifth-straight profitable quarter. Excluding one-time items, such as government reimbursements under the Emergency Wartime Supplemental Appropriations Act, earnings were 28 cents a share. Total operating revenue rose 23 percent to $233.9 million, amid improvements in passenger load factor and average yield, as well as declines in unit costs. Analysts had been expecting earnings of 19 cents a share and revenue of $230.2 million, on average.
Atlantic Coast Air was cut to Underperform at CSFB. The firm cuts their target to $5 from $12. The company announced yesterday a plan to operate as a standalone, low-fare carrier in the likely event that UAL rejects the current contract in Chapter 11, and despite yesterday's sell-off, firm says that no one who owns this stock bought it for the uncertainty they now face and it looks likely that this will make it tough to attract new buyers of the stock.
Cummins downgraded at CSFB to Neutral from Outperform but raises their target to $45 from $34. The firm says the company's balance sheet remains problematic, and for the company to reach its mid-cycle potential of $7-$8 in EPS (yielding a $55 target), it must win the Cooled EGR/ACERT battle; if it does win, then the stock has substantial upside, but if CAT's ACERT prevails, then CUM is a $30-$35 stock; as such, firm says CUM is fairly priced at current levels.
Retail . . . U.S. chain store sales dropped 0.3 percent in the latest week after rising for three straight weeks, the Bank of Tokyo-Mitsubishi and UBS reported Tuesday. Same-store sales are up 2.3 percent year-over-year. July sales are on track for a 3 percent year-over-year increase, BTM said, the best since April's 3.1 percent increase. Heavy discounting, slightly higher disposable income as a result of the tax cut and an easy comparison with weak sales last July account for the gains, BTM said.
Lehman Brothers downgraded its rating on Pier 1 Imports to equal-weight, telling clients the stock "lacks a near-term catalyst as a result of tough comparisons and a still uncertain macro (economic) environment."
American Eagle was upgraded at Wachovia to Outperform from Market Perform, citing relative valuation as well as easy 1st quarter comps.
Pier 1 Imports downgraded at Lehman to Equal-Weight from Overweight. The firm is citing a lacks a near-term catalysts as a result of tough comparisons through Nov and a still uncertain macro environment. Price target is $22.
UBS believes that American Eagle, Abercrombie & Fitch, Pacific Sun, Limited, and Urban Outfitters are well-positioned to continue to gain market share this Fall, and are particularly optimistic on AEOS' Fall prospects, as their assortment is much improved over previous seasons. The firm believe that Gap Stores and Too may see some difficulty this Fall as they struggle with price perception and turnarounds, and are decidedly not optimistic on the Fall outlook for juniors retailers Charlotte Russe and Wet Seal due to increased competition and persistent weak fashion trends. Upgrades ANF to Buy from Neutral and raises target to $38 from $29, downgrades Charming Shoppes and WTSLA to Reduce from Neutral and maintains targets of $4.50 and $10, and raises their targets on PSUN (to $28 from $24), LTD (to $18 from $14), and Men’s Wearhouse (to $30 from $28).
Apparel . . . Coach reported that net income surged 80 percent to $29.9 million, or 32 cents a share, compared with $16.6 million, or 18 cents a share, in the prior year. Thomson First Call had projected earnings of 30 cents a share in the quarter. The retailer posted net sales of $231.5 million, up 35 percent from the year-ago period. Looking ahead, Coach sees fiscal first-quarter sales of "at least" $230 million and earnings-per-share of "at least" 33 cents. That compares to the 30 cents a share currently expected by First Call. Coach also raised its outlook for fiscal 2004, now estimating sales of at least $1.1 billion and earnings-per-share of at least $1.92, which compares favorably to the current Wall Street view of $1.85 a share. COH also reported that three key executives: Lew Frankfort, Chairman and CEO, Reed Krakoff, President and Executive Creative Director, and Keith Monda, President and Chief Operating Officer entered into five-year employment agreements.
Restaurants . . . McDonald's reported earnings of $0.37 per share which was in line with the consensus of $0.37. Revenues rose 10.8% year/year to $4.28 billion versus the $4.09 billion consensus.
Healthcare . . . Coventry Health Care reported earnings of $1.05 per share, $0.18 better than the consensus of $0.87. Revenues rose 23.2% year/year to $1.10 billion versus the $1.10 billion consensus. The company raised 3rd quarter guidance to $1.05 versus consensus is $0.89, for 203 now sees $3.95-4.00 versus consensus is $3.51.
Odyssey Healthcare was cut to Neutral at Merrill Lynch. The downgrade from Buy is based on valuation with firm noting ODSY's 85% appreciation over the last five months.
Medical Devices . . . Cyberonics expects results to exceed its previous outlook. The medical device firm now sees "quarterly annual sales growth exceeding 15 percent and quarterly annual net earnings growth exceeding 145 percent."
Boston Scientific was upgraded at Goldman Sachs to Outperform from In-Line. The upgrade is based on the following factors: 1) their expectation for solid Taxus IV DES data on Sept 15, 2) 2004 Street EPS estimates are likely to increase due to SG&A leverage, 3) attractive valuation, and 4) their belief that near-term patent litigation concerns are reflected in the shares. The firm sees fair value of at least $77.
Drugs . . . Teva Pharmaceutical said second-quarter profit surged to $210.4 million, or 75 cents per share, compared with $91.9 million, or 34 cents per share, in the 2002 second quarter. Excluding a one-time gain, Teva said profit was $137.2 million, or 49 cents per share. Analysts, on average, had expected profit of 44 cents per share.
King Pharma’s net loss totaled $35 million, or 15 cents per share, compared to a profit of $58.4 million, or 24 cents per share a year ago. King recorded special items resulting in a net charge totaling $119.1 million after tax during 2003's second quarter. King Pharms determined that it had under-accrued for estimated amounts due under Medicaid and other governmental pricing programs, and recorded an adjustment of $46.5 million to total revenues and accrued expenses in 4th quarter 2002.
Biovail reported a loss of $1 million, or a penny per share. Excluding acquired research and development expenses, the drug firm earned $83.2 million, or 52 cents per share, in the June period. Analysts were looking for a profit of 47 cents per share in the quarter, on average. In the same period a year earlier, the company reported earnings of $62.5 million, or 39 cents per share. Revenue rose 17 percent in the latest three months to $217.3 million from $185.1 million in the same period a year earlier. Biovail said results were helped by the launch of its Cardizem LA product in April, contributions from Wellbutrin XL, growth from Canadian product sales and an interest in gross profits from the sales of generic Prilosec. The company also reaffirmed its previously issued earnings outlook.
Barr Labs was started with an Overweight at JP Morgan. The stock trades at an 11% discount to peers on their 2004 estimate, and in the short-term firm believes that upside from Ortho Tri-Cyclen, a solid earnings report next week, and 2004 guidance will make investors look at BRL.
Biotech . . . Human Genome Sciences reported a net loss of $47.4 million, or 37 cents a share, compared with a net loss of $46.5 million, or 36 cents a share, for the year-ago quarter. First Call had projected a loss of 40 cents a share. The company posted revenue of $642,000 for the quarter, flat from last year's level.
Amylin Pharma 'encouraged by Phase II GLP results for congestive heart failure.
Advanced Neuro was upped to Buy at WR Hambrecht based on firm's positive view of the neuromodulation marketplace and its belief that future top and bottom line upside remains likely for company. Target $45.
Hotel & Leisure . . . Priceline.com plans to offer up to $100 million of convertible senior notes maturing on Aug. 1, 2010 in a private placement. The company said it would use the proceeds of the anticipated sale for general corporate purposes, strategic purposes and working capital requirements.
Hilton Hotels was downgraded at Harris Nesbitt Gerard downgrades to Neutral from Outperform based on valuation, as the stock is near their $15 target.
Boyd Gaming was downgraded at Harris Nesbitt Gerard to Neutral from Outperform based on valuation, as the stock is near their $19 target.
Media . . . Marvel Enterprises expects earnings and revenue to exceed the high end of previous expectations due to strength in its licensing business, including the sales of The Incredible Hulk character. Marvel Enterprises expects to exceed on the high end for revenue, EBITDA, Net Income, EPS and Free Cash Flow for 2nd quarter. On May 6, the company said it expected earnings to range from 25 to 30 cents a share, and revenue to be $62 million to $67 million. The company slated to reveal results on Aug. 12.
McGraw-Hill reaffirms 7-9% EPS growth view for 2003.
ValueClick reported earnings of $1.3 million, or 2 cents per share, in line with the average estimate but ahead of the company's own outlook. In the same period a year earlier. the marketing technology firm lost $2.8 million, or 4 cents per share. Revenue surged 42 percent in the latest three months to $20.1 million from $14.1 million in the same period a year ago. Looking ahead, the company boosted its outlook for 2003, forecasting earnings of 9 cents per share on revenue of between $85 million and $86 million for 2003. For the third quarter, the company sees a profit of 2 cents per share on revenue of $21.5 million.
Clear Channel reported second-quarter net earnings of $251.3 million, or 41 cents a share, up from 39 cents a share in the year-earlier period. Excluding a gain related to the early extinguishments of debt, earnings were 37 cents a share, matching the average analyst forecast. Reported revenue increased 6.6 percent to $2.32 billion, as growth in its outdoor advertising, entertainment and other segments helped offset a decline in radio. Clear Channel sees 3rd quarter EBITDA growth in high single digits year/year. For 2003 sees EBITDA growth in mid to high single digits while the consensus calls for 3rd quarter EBITDA of $656.7 million and 2003 EBITDA of $2.29 million.
McGraw-Hill reported net income of $142 million, or 74 cents a share, up from 69 cents a share in the same period a year ago, and in line with the average analyst forecast. Operating revenue rose 1.3 percent to $1.2 billion, also matching expectations. The publishing and information services company attributed the improved results to gains in its financial services businesses, growth in college and university sales, cost containment and favorable currency exchange rates.
Telecom . . . Sprint FON was downgraded at UBS to Reduce from Neutral. The firm cited faster than expected deterioration in Sprint's local service biz. Price target is $12.
Sprint was the subject of opposing analyst views after posting its quarterly results late Monday. The stock's rating was downgraded by UBS to a "reduce" from a "neutral" due to the carrier's faster-than-expected deterioration in local service business. UBS suggests investors take money off the table following the recent run in shares in light of its softer-than-expected results. But SoundView Technology took a different stance, upgrading Sprint to a "neutral" rating from an "underperform," citing better-than-expected cost-cutting measures and relative pricing stability for the carrier.
The Wall Street Journal's "Heard on the Street" column discusses the concerns by MCI's "distressed debt" investors over the company being able to emerge from bankruptcy court protection this fall amidst new accusations of wrongdoing. The company's bonds traded down by as much as 10% on Monday amidst the new accusations suggesting the co wrongly avoided paying possibly hundreds of millions of dollars in access fee to its rivals. The fund managers interviewed in the article believe the accusations are the last minute effort by rivals to have a negative effect on the co just as its about to have a hearing for its reorganization plan. In addition, some hedge fund managers interviewed in the article suggest betting on the telecom industry turnaround would be better in more established company's such as AT&T.
Saddled with $1.6 billion in onetime costs, Verizon Communications on Tuesday posted a second-quarter profit of $338 million, or 12 cents a share. A year earlier, the company posted a net loss of $2.1 billion. Excluding onetime costs, Verizon earned 1.9 billion, or 69 cents a share. That beat the 68-cent consensus of analysts. Sales rose 0.5 percent to $16.8 billion, but adjusted for sold operations, revenue was up 2 percent. Verizon Wireless added 1.3 million customers, well above estimate of 900,000. Wireless revenue rose 14.3 percent to $5.5 billion.
Sprint PCS reported results that were ahead of estimates on most metrics. The company posted solid ARPU, EBITDA, and churn, while gross adds fell below expectations. Customer mix continues to be favorable. Sprint’s net subscriber results were stronger than most analysts’ official estimates, but did not live up to higher expectations following strong performance displayed by AT&T Wireless, Cingular, and Nextel. Disappointment at the slower growth rate is somewhat mitigated by the company’s focus on higher quality customers and lower churn. Analysts upgraded shares of Sprint PCS to Peer Perform from Underperform, based on belief that the company has turned the corner with an improved mix of customers, a respectable churn rate, and relatively stable ARPU. In light of the fundamental improvements, analysts no longer view the stock as an Underperform. While the company has turned the corner in terms of fundamentals, still maintain that the risk profile for PCS is greater than its peers. Outstanding concerns include weak gross subscriber additions, high debt levels, and the complex tracking stock structure. Based on an 11.5% WACC, 2.5% perpetual growth rate, and a private to public discount of 25% to reflect the tracking stock structure, arrive at a DCF-based fair value of $7-8 for PCS shares.
IT Services . . . Perot Systems reported earnings of $5.4 million, or 5 cents per share, down from its year-ago profit of $20.2 million, or 17 cents per share. The latest results include expenses of $16 million, or 8 cents per share, related to restructuring actions. 10 analysts polled by Thomson First Call were looking for earnings of 13 cents per share in the June period, on average. Revenue rose 8 percent in the latest three months to $361 million from $333.5 million in the same period a year earlier. The revenue growth was attributable to the company's acquisitions of ADI Technology and Soza and to form its federal information technology services business. Looking ahead, Perot forecast earnings of 10 to 13 cents per share on revenue of between $360 million and $375 million for the third quarter. This outlook is below Wall Street's current consensus estimate for a profit of 15 cents per share in the period, on average.
Affiliated Computer reported earnings of $83.9 million, or 60 cents per share, up from its year-ago profit of $68.1 million, or 49 cents per share, and a penny ahead of the average estimate. Revenue jumped 18 percent in the latest three months to $1.014 billion from $857 million in the same period a year earlier. The firm added that it's in the late stages of talks about the possible divestiture of its federal government business, and the purchase of a commercial information technology business. ACS plans to withhold its outlook for fiscal 2004 until the talks are completed, but it did say it expects any transactions to be non-dilutive to its prior projection for a profit of $2.57 to $2.66 per share.
Storage . . . EMC is expected to announce additions/improvements to its high-end Symmetrix DMX series on 07/30 with industry trade press speculation focused on higher capacity, FICON (mainframe) connectivity, new replication software, iSCSI support. The enhancements will clearly be positive for EMC and may have investment implications for other storage and component vendors (IBM, Q-Logic, Emulex, Brocade, McData,Computer Network). Six months after the launch of the DMX series, EMC is expected to announce a new model which doubles the current maximum capacity of 42Terabytes (TB) to 84TB. While this would still lag behind Hitachi's Lightning (resold by HP/Sun) at 150TB, it will narrow the significant gap EMC had vs. Hitachi and will be ahead of IBM Shark's current 56 TB capacity. As it had promised (for 3rd quarter 2003 availability), EMC is expected to announce FICON (fast mainframe) connectivity for the DMX, which enhances its competitiveness against Hitachi and IBM in mainframe environments. Also expected is a new version of its SRDF replication software to allow asynchronous replication over unlimited distances which could be a longer-term challenge for CMNT's extender solutions. EMC is also expected to announce native iSCSI (or storage over IP) support for the Symmetrix. While there won't likely be near-term impact, EMC's support for iSCSI will raise longer-term concerns for Fibre Channel HBA vendors Emulex and QLogic -- both will play in iSCSI but it will be a more competitive market (Intel has iSCSI HCAs). In
the SAN switch market, iSCSI better positions Cisco over BRCD/MCDT.
Network Equipment . . . Alcatel posted a net loss of 675 million euro in the second quarter, broker Dresdner Kleinwort Wasserstein said. "While Alcatel presented a surprise "operating income" of 21 million euro for the second quarter, we discern that the company suffered a net loss before restructuring and goodwill of 346 million euro - dwarfing our forecast," DKW said. "The report reinforces our view that Alcatel will have to step up restructuring measures and undertake another (dilutive) capital injection in the immediate future." Alcatel shares were up 3 percent in opening trade in Paris.
Copper Mountain selected as preferred provider by DSL.net.
Semiconductor Equipment . . . Veeco Instruments reported earnings of $0.03 per share, in line with the consensus of $0.03. Revenues fell 5% year/year to $73.5 million versus the $66.2 million consensus. The company guided 3rd quarter EPS of between $0.03 and $0.06 per share and revenues of $67-$70 million versus consensus earnings of $0.07 per share and revenues of $70.2 million.
Semiconductors . . . STMicroelectronics will raise $1.2 billion through zero-coupon convertible bonds due in 2013. The proceeds will be used to help pay holders of STMicro's convertible bond due 2010 who can redeem their bonds in 2005. Up to 40.9 million shares could be issued, at a premium of 55 percent to STMicro's share price when the bond is issued. Managers will be able to increase the issue size by up to 15 percent a month after issue.
The Wall Street Journal reports Nokia is teaming up with STMicroelectronics, Texas Instruments and ARM Holdings to set standards for semiconductors used in mobile devices. The newly formed Mobile Processor Interface Alliance is an attempt to head off dominance in the mobile device sector that Intel and Microsoft now hold in the personal computer market.
M-Systems and Toshiba announced a joint venture to develop next-generation products as well as cross licensing of intellectual property, guarantees for M-Systems regarding capacity of the NAND flash, and a strategic investment by Toshiba in M-Systems.
Cirrus Logic was started with a Buy at Needham. The firm is saying the company is likely to cut its operating expenses sharply from current levels at some point during the next few quarters; in addition, firm believes the co may be close to a major DVD-Recorder win at LG, and a number of outstanding lawsuits could provide significant cash awards.
ATI Tech was upped to Outperform at Goldman Sachs. Market share data released yesterday, as well as Nvidia's preannouncement, showed that ATYT has increased its leading share in notebook graphics, from 51% to 59%. The firm believes company will remain well positioned over the next 2-3 quarters at least. The firm noted that ATYT is the company with the highest exposure to notebooks in firm's coverage at 30-40% of sales.
Boxmakers . . . Reflecting healthy PC shipments in 2Q03, we are raising our 2003 PC forecast from 6% to 9% Year/Year unit growth (previously lowered from 8% to 6%) and increasing revenue forecast from a 1% Year/Year decline to 2% Year/Year increase. In addition, analysts are adjusting product mix to reflect a strong shift towards notebook PCs as seen in 2nd quarter 2003. Analysts are raising 2003 notebook growth rate from 13% to 22% Year/Year. While some may attribute 2nd quarter 2003 strength to the on-going PC replacement cycle, it is more likely due to return to “normal” seasonality from depressed levels, helped by an accelerating shift towards notebook PCs with the launch of Intel’s Centrino and price declines. Going forward, expect “normal” seasonality and strong notebook PC sales to continue to drive demand for 2nd half 2003. According to IDC, PC unit shipments declined by 3% sequentially in 2nd quarter 2003, which was in line with a “normal” seasonal decline of 2% but ahead of our expectation of a 5% sequential decline. The healthier than expected 2nd quarter 2003 shipments were due to a stable spending environment, strong demand for notebooks (which accounted for over 50% of 2nd quarter growth), and strength in Europe and “third” world countries. By product mix, desktops (71% of total units) declined by 5% sequentially, in line with our expectations. On the other hand, notebook PCs (26% of total) were particularly strong with a 1% sequentially increase in shipments compared to estimates of 7% sequential decline. Moreover, Intel servers (<$25K) were also strong with 3% sequential growth, although its impact was small (only 3% of total). From an investment perspective, we believe that healthier 2nd quarter 2003 PC shipment rate is positive for all PC vendors, including Dell and H-P (although their fiscal quarter ends in July), Gateway, Apple, and IBM (although PCs account for very small portion of IBM’s revenue). Given the continued strength of mobile PCs, Synaptics, a leading supplier of touchpads, could be a play on strong notebook demand.
Software . . . Immersion settled a legal dispute with Microsoft. The software king agreed to pay Immersion $26 million to license technology that improves the quality of Microsoft's Xbox video-game system. Microsoft will also acquire a stake in the smaller company and loan it up to $9 million. Immersion still has a suit against Sony.
Wedbush maintains Buy on Openwave and $4 target. The firm is saying PCS's Vision wireless data service results bode well for OPWV given the number of technologies that OPWV provides to PCS (PCS is OPWV's largest customer at 14% of revenue).
Openwave technology was licensed by Bell Mobility, Canada's leading wireless provider. The license supports Openwave Mobile Access Gateway Version 6 to support the deployment of WAP 2 phones and new enhanced wireless game services for mobile subscribers.
SAP started with an Underperform at Jefferies and $24.50 target. The firm says SAP is likely to see further deterioration in Europe coupled with a lack of improvement in the Americas, checks suggest pipelines were drained to close 2nd quarter -- making their license estimate for 3rd quarter a challenge, and ongoing pressure on deal sizes will make expectations for 2nd half 2003 licenses more difficult to achieve.
Sonic Solutions' AuthorScript licensed by Microsoft has licensed Sonic AuthorScript. The company's CD and DVD formatting and burning engine, for Microsoft Digital Image Suite 9, Microsoft's latest software application for advanced image-editing and photo organization.
Internet . . . Netease.com was upgraded at Piper Jaffray to Outperform from Market Perform following stronger than expected results. In addition, firm believes that online advertising in China is seeing an acceleration in its growth rate, the co should grow gaming revs despite last quarter's flat growth due to SARS, and SMS revs are solid despite dropping affiliates. The firm raised target to $54 from $37.
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