From Briefing.com: 6:21PM Monday After Hours prices levels vs. 4 pm ET: The after hours trade is negative tonight as buyers have lost their appetite for stocks. Tonight's earnings reports have been mostly upbeat, but they have come from a wide range of fairly minor players. Presently, the S&P futures, at 1132, are 3 points below fair value, and the Nasdaq 100 futures, at 1471, are 5 points below fair value. A fall in the Semiconductor Equipment book-to-bill ratio (to 1.10) in March has probably contributed to the selling in tech.
The below table lays out the evening's most notable reports and the stocks' reactions:
After Hours Mover % Change Move Reason for Move Kraft (KFT) unch After lowering its Q1 (Mar) EPS outlook to $0.42-0.45 on Jan 27, the food processing company reports EPS of $0.45 - $0.02 ahead of the revised Reuters Research consensus estimate; Management says it sees FY04 (Dec) EPS of $1.93-2.00 (consensus of $1.94), which is somewhat below FY03's result of $2.01; Stock is down 9% from its Mar highs j2 Global (JCOM) +10% Communications services provider shows upside in its Q1 (Mar) report and also guides Q2 (June) numbers above that of market expectations; Citing the strong start to the year, j2 says FY04 (Dec) EPS should come in at the upper end of the range given on Feb 2; That range was actually below consensus estimates, prompting an 18% sell-off and laying the groundwork for tonight's up move Mylan Labs (00C) +3% Generic drug company announces it will replace Sprint PCS (PCS) in the S&P 500 after the close of trading on Apr 22; Sprint Corp is eliminating its PCS tracking stock on that day; In a separate announcement, Valero Energy (VLO +2%) will replace John Hancock Financial (JHF) in the S&P 500 on a date to be announced; The latter company is merging with Manulife Financial (MFC) National Semiconductor (NSM) +2% Board of Directors approves a 2-for-1 stock split payable to shareholders of record on Apr 29; The actual stock dividend will be issued on May 13; Shares of the analog semiconductor name have advanced 140% in the past year as the company has posted four quarters of improving profit growth Pixelworks (PXLW) +7% Designer of semiconductors for the advanced display industry delivers Q1 (Mar) EPS of $0.14 (from $0.05 a year ago) on revenues that rose 41% to $45.3 mln; Company puts Q2 (June) top and bottom-line targets well above consensus estimates; Rival GNSS is up 3% tonight
Tomorrow, the market will sift through a number of earnings releases that include three reports from Dow companies (Altria Group, General Motors, and Pfizer). Fed Chairman Greenspan's testimony to the Senate Banking Committee will also be influential in determining trade - especially considering the market's recent obsession with rising interest rates.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
6:07PM SEMI Book-to-Bill Report : Semi equipment industry book-to-bill ratio fell to 1.10 in March versus W.R. Hambrecht's estimate of 1.13 (front end 1.12 and back end was 1.17). Bookings of 1.20 bln came in 5.0% above February's level of $1.14 bln and 40.0% above the $857 mln in orders posted in the same time a year ago.
4:32PM Semtech names new COO (SMTC) 23.23 +0.35:
4:11PM Pixelworks beats by $0.05; guides Q2 higher (PXLW) 16.87 +0.27: Reports Q1 (Mar) earnings of $0.14 per share, ex-items, $0.05 better than the Reuters Research consensus of $0.09; revenues rose 41.4% year/year to $45.3 mln vs the $42.3 mln consensus. Co expects Q2 pro forma EPS of $0.11-$0.13 on sales of $47-$49 mln vs consensus of $0.10 and $45 mln, respectively.
4:03PM Powerwave misses by $0.03, misses on revs (PWAV) 7.38 -0.04: Reports Q1 (Mar) loss of $0.05 per share, $0.03 worse than the Reuters Research consensus of ($0.02); revenues rose 30.7% year/year to $63.2 mln vs the $69.3 mln consensus.
Close Dow -14.12 at 10,437.85, S&P +1.23 at 1,135.84, Nasdaq +24.66 at 2,020.40: Sentiment was mixed for much of the session, as the blue-chip averages struggled in negative territory, while the Nasdaq steadily improved its stance through the session... While earnings reports have been generally stronger than anticipated, participants were hesitant in the face of concerns over rising interest rates... To that effect, the 10-year note closed down 8/32, bringing its yield up to 4.37%... Volume was anemic, demonstrating a lack of conviction on the part of traders, especially in the face of the major averages' technical dead ends... Specifically, while the Dow and S&P 500 opened above their respective 50-day simple moving averages, they spent the bulk of the session trading below the technically significant level... The Nasdaq also spent the bulk of the day below its 50-day simple and exponential moving averages at 2011 and 2013, respectively... However, the tech composite's firming in the last hour of trading catapulted the Nasdaq above the technically significant levels, inciting buying interest in the broader market, which was further exaggerated by the light volume totals...
As a result, all of the major averages rallied in the last hour of the session and closed at their best levels of the session, with the S&P 500 (like the Nasdaq) lifting above its 50-day simple moving average... At session's end, the internet, networking, semiconductor, software, telecom, biotech, industrial, and retail groups... Laggards of note were difficult to come by, but sectors in the red included the banking, broker/dealer, drug, gold, insurance, and oil services sectors... NYSE Adv/Dec 1640/1649, Nasdaq Adv/Dec 1789/1392
1:15PM Nokia (NOK) 15.01 +0.40: Nokia reported Q1 results on Friday. The handset and telecom equipment leader posted EPS of €0.17 on revenue of €6.625B (-2.2% Y/Y).
Sales were up by 7% in constant currency and were negatively impacted by lower volumes and product mix in mobile devices. Growth was strong in Latin America and China, stable in the rest of Asia, and declined in the U.S. and EMEA. EMEA accounts for 54% of sales, Asia including China 26%, and the Americas 20%.
The following table shows sales, gross and operating margins and Y/Y change in margins by revenue segment. Segment Revenue Gross Margin Operating Margin € in B % of Ttl Y/Y Growth Reported Y/Y Variance Reported Y/Y Variance Mobile Phones 4.251 64% (14.8%) 24.5% (40) 25.6% (340) Multimedia 0.776 12% 60.3% 26.7% 10 0.3% 880 Networks 1.415 21% 16.3% 86.0% 140 12.9% 590 Enterprise Solutions 0.189 3% 94.8% 60.5% 160 (16.4%) 7,950 Total 6.625 100% (2.2%) 36.0% -- 17.2% (300) Management estimates the global sell-through market in Q1 at approximately 128MM units (+29% Y/Y) vs. 148MM in Q4. CDMA increased 57% Y/Y to 27MM units (21% of total); GSM 30% to 84MM (66% of total); PDC -4% to 8MM (6% of total) and TDMA -34% to 5MM (4% of total).
NOK's total handset volume increased 19% Y/Y to 44.7MM units (35% market share). The Latin America market more than doubled Y/Y to approximately 10MM units (8% of sales); Asia/North American market 25% to 25MM (25% and 13% of sales respectively); and EMEA area 22% to 44MM (50% of sales). Sales growth weakest in Europe due to limited mid-range product offering. Market share declined 200 bps Q/Q to 35% due to relative weakness in Europe/Africa area and North America.
Gross margin increased 186 bps Y/Y to 40.5%. Operating margin, excluding amortization, increased 243 bps Y/Y to 18.8%.
Management expects 1) device market momentum to continue with Q2 market volumes slightly above Q1 level of 128MM units; 2) overall market volume to increase in the upper teens Y/Y from the 474MM units sold in 2003; 3) mobile infrastructure market to increase slightly Y/Y in euros; 4) margin pressures as company defends handset market share / takes measures to achieve desired 40% market share.
Approximately 40% of 100 product portfolio is entry-level, with the balance evenly split between mid-tier and high-end. Company intends to launch a total of approximately 40 products in 2004; has begun shipping six new products; announced nine products with shipments to begin in Q3 and Q4. Half of the new products to be in the high price point, higher functionality categories, while the balance will be evenly split between entry-level and mid-tier.
Guided for Q2 EPS of €0.13-0.15 with revenue expected to be flat to slightly down Y/Y at €7.0B. Reuters Research consensus at $0.23 on $8.589B (+0.7% Y/Y). C04 capital expenditures to remain approximately flat with 2003 level of €432MM.
NOK shares are, based on our inverted EVA / DCF model, priced for sustained upper single digits revenue growth assuming stable operating margin.
Shares trade at a discount to comps. The following table shows price multiples and Y/Y growth rates for NOK compared against peers in the communications equipment group. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth TTM 2004E 2005E TTM 2004E 2005E Nokia (NOK) 1.4 9.9 1.9 1.9 1.7 (1.9%) 7.0% 8.0% LM Ericsson (ERICY) 2.8 (43.6) 3.0 2.8 2.6 (19.2%) 8.6% 8.0% Lucent (LU) 1.9 68.0 2.1 2.0 1.9 (20.0%) 4.4% 6.2% Motorola (MOT) 1.1 34.6 1.4 1.3 1.2 (0.8%) 7.9% 6.3% Nortel Networks (NT) 1.8 60.5 2.3 2.1 1.9 (7.2%) 10.2% 10.6% palmOne (PLMO) 0.8 (27.6) 1.0 1.0 0.9 6.4% 7.9% 15.9% Research in Motion (RIMM) 5.6 118.8 13.3 6.7 5.2 93.9% 98.6% 30.0% Communications Equipment 1.7 36.9 2.2 (5.0%) *P/SG Ratio: Trailing 12 month (Price / Sales) / Growth ratio as of April 16, 2004. **P/OPG Ratio: Trailing 12 month (Price / Operating Income) / Growth ratio as of April 16, 2004.
Growth expectations are reasonable in view of global opportunity for handsets and stabilizing demand environment for infrastructure solutions but concern over market share loss and margins likely to keep shares range-bound near-term. We think improving infrastructure operating results will help offset at least some of the weakness in handset margins. Shares are attractively valued on both a discounted cash flow and relative value basis. Would also continue to focus on PLMO.--Ping Yu, Briefing.com
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