From Briefing.com: 6:24PM Monday After Hours prices levels vs. 4 pm ET: Stocks have assumed a more tentative tone following today's slow drift higher, with the S&P futures, at 1145, 1 point above fair value and the Nasdaq 100 futures, at 1498, flat with fair value. Tonight's headliner, Novellus (NVLS), has come in ahead of consensus expectations and has provided a floor to technology selling.
The below table lists this and other notable news items, and the stocks' reactions:
After Hours Mover % Change Move Reason for Move NMS Communications (00C0) -1% Small-cap communications equipment provider tops the Reuters Research bottom-line consensus estimate by $0.04 on revenues that rose 17% to $24.4 mln; Stock has been a momentum play, up 233% in the past six months and up 5% in today's session alone - leading to some light profit-taking tonight Novatel Wireless (NVTL) +7% Provider of wireless data access solutions increases its Q1 (Mar) revenue guidance to a range above the consensus estimate; This is the second consecutive quarter Novatel has raised its sales outlook; Competitors include ERICY, MOT, NOK, RIMM, and SWIR Novellus (NVLS) +2% After guiding Q1 (Mar) EPS to $0.08 on Jan 26, chip equipment maker reports EPS of $0.12 (consensus of $0.10); Revenues and shipments were also at the high-end of estimates; On its conference call, Novellus guides Q2 (June) EPS to $0.18-0.20 as compared to the Reuters Research estimate of $0.18; Q2 revenues were also pegged at $305-325 mln versus the consensus of $292.9 mln Pfizer (PFE) unch World's largest drug maker files a lawsuit against the operator of 'look4generics.com,' an internet site selling an unapproved copy of Pfizer's more than $9 bln/year drug, Lipitor; Company says that the website advertises that it is manufactured by Ranbaxy Pharmaceuticals Tesoro Petroleum (TSO) +10% Independent refiner forecasts Q1 (Mar) EPS of $0.72, nearly twice that of the Street's estimate, based on stronger refining margins, higher throughput volumes, and lower interest costs; Company reported worse than expected Q4 (Dec) earnings on Feb 3, and that has kept TSO under wraps until now
Tomorrow, the market has Q1 (Mar) earning reports from blue chip names Johnson & Johnson (JNJ) and Merrill Lynch (MER) before the open. Economic reports such as February Business Inventories and March Retail Sales are also due out. Tomorrow after the close, Intel (INTC) is slated to release its Q1 earnings, with the Reuters Research consensus estimates pegged at $0.27 and $8.17 bln for EPS and revenues, respectively.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. Heather Smith, Briefing.com
4:07PM Novellus beats by $0.02, ex items (NVLS) 34.64 +0.27: Reports Q1 (Mar) earnings of $0.12 per share, excluding charge related to $2.5 mln pre-tax litigation settlement, $0.02 better than the Reuters Research consensus of $0.10; revenues rose 10.3% year/year to $262.9 mln vs the $252.0 mln consensus. Shipments were $311.0 mln, up $82.9 mln, or 36.3%, from $228.1 mln reported in prior quarter.
2:44PM Komag (KOMG) 19.17 +0.72 Komag raised Q1 revenue guidance before the open. The supplier of thin-film disks for the storage industry forecast revenue of over $118.2MM (+12.0% Y/Y) vs. Reuters Research consensus EPS at $0.45 on revenue of $116.88MM. KOMG reports after the close on April 28.
Q4 revenue increased 13.1% Y/Y to $118.231MM. Gross margin increased 753 bps Y/Y to 30.8%. Operating margin increased 777 bps Y/Y to 16.8%. Refer to the March 2 Story Stocks for added perspective.
Shares are, based on our inverted EVA / DCF model, priced for sustained 10% revenue growth assuming flat operating margin.
IDC projects the annual total storage capacity and unit shipment of disk drives to grow at compound annual rates of approximately 45-46% and 10-11% respectively. We think upside is possible from an increase in use of storage capacity in existing and emerging applications including enterprise level back-up systems and consumer digital electronic products such as personal video recorders.
The operating margin reflected in our model is consistent with management's target operating model of 12-19% operating margin. We think there is room for upside, driven by scale efficiencies and continuing focus on cost containment on the operating level.
The following table shows price multiples and Y/Y growth rates for KOMG compared against the semiconductor components group. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth TTM 2004E 2005E TTM 2004E 2005E Komag (KOMG) 0.5 5.3 1.2 1.1 1.0 52.8% 8.9% 6.5% Computer Systems & Peripherals 1.0 18.9 1.4 10.2% *P/SG Ratio: Trailing 12 month (Price / Sales) / Growth ratio as of April 08, 2004. **P/OPG Ratio: Trailing 12 month (Price / Operating Income) / Growth ratio as of April 08, 2004.
Shares are attractively priced on both a relative value and discounted cash flow basis. KOMG is highlighted in the Relative Value Ideas Focus List (Story Stocks, March 1, 2004).--Ping Yu, Briefing.com
12:02PM Genentech (DNA) 111.34 -0.66: Avastin, approved in late February 2004, emerged as the 'it drug' of the past year, and stock of Genentech (DNA) responded accordingly. The first therapy designed to inhibit angiogenesis - the growth of blood vessels between a tumor and surrounding tissue - generated tremendous excitement when it demonstrated efficacy in Phase III trials in late May. Eleven brokerage firms immediately upgraded DNA, and that bullish sentiment led to a more than tripling in stock price in the past year.
Avastin's first quarter on the marketplace surpassed even analyst expectations, raking in $38.1 mln for the colorectal cancer treatment. Genentech is selling $5 mln of the drug a week and has approximately 1,500 active accounts. Avastin's use in first, second, and third-line settings should result in a robust rate of re-ordering, with management calling for over 50% of first-time orders. The company continues to study Avastin in other forms of cancer such as non-small cell lung (NSCL), breast, renal, and pancreatic, and that should ensure the drug's place as Genentech's growth driver in the years to come.
Genentech's other oncology drugs - Rituxan and Herceptin - performed well in 1Q04 (Mar) and contributed to a 30% increase in operating revenues to $975.1 mln. US sales in the former were a bit disappointing, but the company indicated that inventory adjustments made by wholesalers at the beginning of the year were the reason for the shortfall. The outlook for Rituxan - 41% of total revenues - remains bright as management investigates market opportunities in autoimmune diseases and plans to initiate Phase II/III trials later this year.
The stock - up 22% since Briefing.com last wrote about Genentech three months ago in Story Stocks - has had an incredible run, and profit-taking at these levels would be strongly advised. DNA should manage to hold onto most of its gains - particularly after the company schedules the stock's 2-for-1 split at the shareholder meeting on Friday - but multiple expansion should start to slow at the current highs.
Long-term investors, however, should not be eager to close out entire positions in DNA. EPS growth of 20-25% is attainable - as management acknowledged on the conference call - with Avastin poised to record $1 bln or more in sales in the next year or so. Genentech remains the best positioned company in biotech right now and investors should not underestimate its potential with three strong drugs on the market and over $1.6 bln in cash. Heather Smith, Briefing.com
10:52AM Tektronics (TEK) 32.75 +0.36: Tektronix is a $900MM revenue manufacturer of test, measurement and monitoring solutions for the communications, computing and semiconductor sectors; secondary markets include automotive, broadcast, consumer electronics, education, government and military/aerospace.
The test and measurement market is estimated at approximately $8B with the general test and measurement segment estimated at over $3B.
TEK's products for viewing, measuring and analyzing electrical, optical, and RF signals include:
communication test equipment (leading or #2 position in most segments of $900MM market; 33% of sales); logic analyzers (38% market share of $200MM market; ~9% of sales); oscilloscopes (~48% market share of $900MM market; ~45% of sales); video test equipment (40% market share of $250MM market; ~11% of sales) and related components. Products allow customers to design (60% of sales), manufacture (20% of sales), and deploy, monitor & service (20% of sales) advanced technologies, and computing and next generation global communications networks. Customers include Boeing, Cisco, Intel, Motorola, Nokia, Nortel, Raytheon, Siemens, Sony, Texas Instruments, the U.S. government and Verizon.
Q3 revenue increased 30.5% Y/Y to $243.506MM on growth across product lines and regions. Gross margin increased 469 bps Y/Y to 58.0%. Operating margin increased 1061 bps Y/Y to 16.0%.
Guided for Q4 EPS of $0.24-0.28 on revenue of $230-240MM (+22.7-28.0% Y/Y). Reuters Research prints consensus EPS at $0.29 on $239.76MM. TEK reports results after the close on June 16.
TEK shares are, based on our inverted EVA / DCF model, priced for sustained mid to upper 20% revenue growth assuming 16-17% operating margin.
Early stage of unfolding global economic recovery, growing demand from China and other developing economies, upper single digits to low teens growth within core markets, strong product position supported by approximately 675 patents, and selective acquisitions provide for an environment that is capable of sustaining upper teens to lower 20% revenue growth.
Strong operating leverage business model, with each incremental sales dollar contributing $0.30-0.40 in operating income, suggests company is within striking distance of reducing operating expense as a percent of sales to at least match the historical low of 35%. Under this scenario, operating margin improves to approximately 25% and the implied sustained revenue growth rate drops to the upper teens range.
The following table shows price multiples and Y/Y growth rates for TEK compared against industry comps within the electronic instruments & controls group. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth TTM 2004E 2005E TTM 2004E 2005E Tektronix (TEK) 1.9 19.4 3.2 3.1 2.9 10.3% 13.0% 6.3% Agilent Technologies (A) 1.6 (39.8) 2.4 2.2 2.0 4.9% 13.5% 11.9% Lecroy (LCRY) 1.0 25.0 1.8 1.7 1.5 9.1% 11.8% 10.4% Electronic Instruments & Controls 0.9 (138.0) 1.1 3.7% *P/SG Ratio: Trailing 12 month (Price / Sales) / Growth ratio as of April 08, 2004. **P/OPG Ratio: Trailing 12 month (Price / Operating Income) / Growth ratio as of April 08, 2004.
Shares are priced close to fair value on a DCF basis and trade at a discount to peers on a price-to-operating profit-to-growth basis. TEK's market leading position and potential for upside to expectations provides a base of support for shares at current level with modest upside/above average returns vis-à-vis benchmark indices for the patient investor. TEK is highlighted in Tech Relative Value Ideas Focus List on Story Stocks, April 5, 2004.--Ping Yu, Briefing.com 9:39AM Standard Microsystems (SMSC) 27.10: Standard Microsystems posted Q4 results before the open. The fabless provider of analog, digital and mixed signal Input/Output semiconductor and software solutions for high-speed peripheral connection, communication and computing applications printed EPS of $0.17 on revenue of $52.114MM (+22.3% Y/Y) vs. Reuters Research consensus at $0.17 on $52.39MM and revenue guidance of $50-54MM including intellectual property payments. Product revenue increased 16.7% Y/Y.
Gross margin, including intellectual property payment, increased 282 bps Y/Y to 48.1%. Product gross margin increased 34 bps Y/Y to 45.1%. Operating margin, including intellectual property payment, increased 512 bps Y/Y to 7.3%. Product operating margin declined 57 bps Y/Y to 1.8%.
Guided for Q1 EPS of $0.13-0.17 on $51.0-55.0MM (+19.4-28.7% Y/Y) vs. consensus at $0.14 on $53.21MM. Gross margin is expected to increase to 49-50%; R&D expenses expected to be $10.0-11.0MM; and SG&A expenses $11.0-12.0MM.
SMSC shares are, based on our inverted EVA / DCF model, priced for sustained lower 20% revenue growth assuming steady Y/Y improvement to 19-20% operating margin.
Revenue growth expectations are generally in-line with forecasts for industry growth and at low end of management guidance. Operating margin expectations factor in substantial increase in product operating margin and/or increase in royalty payments. Company is at inflection point where incremental sales are beginning to flow to the operating income line.
The following table shows price multiples and Y/Y growth rates for SMSC compared against the semiconductor components group. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth TTM 2004E 2005E TTM 2004E 2005E Standard Microsystems (SMSC) 1.1 11.5 2.3 2.4 2.1 38.8% 13.4% National Semiconductor (NSM) 2.9 33.5 4.7 4.4 3.6 10.2% 17.5% 22.1% Semiconductors 3.0 57.8 4.7 13.0% *P/SG Ratio: Trailing 12 month (Price / Sales) / Growth ratio as of April 08, 2004. **P/OPG Ratio: Trailing 12 month (Price / Operating Income) / Growth ratio as of April 08, 2004.
Shares are attractively priced on a price-multiple-to-growth basis vs. industry comps and modestly below fair value according to our model.--Ping Yu, Briefing.com
9:07AM Ratings Briefing - INTC : ThinkEquity upgrades Intel (INTC 27.37) to Overweight from Equal-Weight in anticipation of significant margin expansion throughout 2004. While firm is not advocating that investors buy with an anticipation of big Q1 results, or even positive Q2 guidance, it says the recent correction from overly optimistic models has been based on stale news/concerns (e.g. Dothan delay). Firm's key assumption is that the materiality of this bad news is largely behind Intel and leverage will return as 300mm production ramps. While Intel is not cheap, firm says the stock is attractive given that it is trading at 18x its 2005 EPS estimate, and that despite record revenue and earnings, the stock has already underperformed its peer group.
What It Means:
At Think Equity an Overweight rating means stock is expected to outperform the return of a comparable universe of stocks over the next 12 months Analyst Charlie Glavin ranks among the better analysts on Intel in terms of EPS estimate accuracy... Tracking firm StarMine awards him 4 out of 5 stars for accuracy over the trailing two fiscal years and four quarters Not a trading call as analyst downplays buying in anticipation of Q1 results or positive Q2 guidance Ratings change oriented toward investors as emphasis is on belief that inflated expectations have been properly adjusted, that margins will expand significantly, that leverage will return with ramp of 300 mm production, and that stock is attractively-priced given recent underperformance that has occurred despite record revenue and earnings Analysts are predominantly in bullish camp when it comes to Intel; hence, downgrades are apt to have more impact than upgrades at this juncture... ratings distribution per Reuters Research: 15 Buy; 15 Outperform; and 6 Hold Sidenote: Intel will report Q1 (Mar) results after the close on Tuesday... on March 4, company narrowed its Q1 revenue guidance to $8.0-$8.2 bln versus its previous range of $7.9-$8.5 bln and consensus at the time of $8.27 bln. The gross margin percentage is expected to be 60%, plus or minus a point, versus previous expectation of 60%, plus or minus a couple of points.... Intel is a suggested stock in Briefing.com's portfolio for active investors -- Patrick J. O'Hare, Briefing.com
Market Data 
Markets 
AI
