Results for the tech stocks in last week's preview were a mixed bag, some beats, some misses, some in line. By and large, expectations for tech companies reporting results this week remain high, though. Here's what analysts surveyed by Thomson Financial are anticipating in the way of earnings, as compared to the same period of the previous year.
Today started out as though we were going to break the losing streak. After a mixed trading day we markets indeed ended up higher to gain ground rather than posting a third day of triple-digit losses. Oil started out higher this morning, getting back over $116 per barrel before coming back down slightly.
Hewlett-Packard Co. (NYSE: HPQ) came out with strong earnings last night and guided inline to higher without the EDS integration. Shares were up almost 6% at $46.29 at the end of the day. This name alone is probably responsible for more cheers than any today as 32 million shares changed hands.
Marvell Technology (NASDAQ: MRVL) reported late Thursday a first-quarter profit, beating analyst estimates. Revenue rose 27%. MRVL shares are up nearly 17% in premarket trading. J.P. Morgan upgraded Marvell from Neutral to Overweight and Oppenheimer from Perform to Outperform with a target price of $21.
J. Crew (NYSE: JCG) shares, on the other hand, are dropping over 18% after it said late Thursday it cut its full-year earnings outlook. Seems the high-flying retailer is not immune to weak U.S. consumer spending. Citigroup downgraded JCG from Hold to Sell and cut the target price from $42 to $34. Wachovia downgraded JCG from Outperform to Market Perform.
Ford Motor Co. (NYSE: F) shares are up over 1.3% this morning after Tracinda Corp., the investment arm of billionaire activist investor Kirk Kerkorian, said Friday it will waive a condition on its $170 million cash tender offer that the market price of Ford shares does not fall by 10% or more from its May 8 close of $8.20. Since the time of the offer to buy up to 20 million shares at $8.50 per share -- at the time a slight premium -- shares have fallen 18%. The offer expires June 9.
MOST NOTEWORTHY: Amazon.com, Altria Group and Skilled Healthcare were today's noteworthy initiations:
Canaccord Adams expects Amazon.com (NASDAQ: AMZN) growth to be driven by its expanding international reach, mix shift to third-party revenue, product innovation, and category expansion. The firm initiated shares with a Buy rating and $78 target.
UBS is positive on Altria's (NYSE: MO) growth, low likelihood of downward EPS revisions, and best-in-class cash flow distribution; shares were started with a Buy rating.
Skilled Healthcare (NYSE: SKH) was initiated with an Outperform rating at Morgan Keegan, as they believe nursing home reimbursement risk is already reflected in its valuation.
OTHER INITIATIONS:
KeyBank assumed Callaway Golf (NYSE: ELY) with a Buy rating and $19 target.
Credit Suisse initiated Intuit (NASDAQ: INTU) with an Outperform rating and $35 target.
Broadpoint initiated Novell (NASDAQ: NOVL) with a Buy rating.
Here are highlights of some other earnings reports from Thursday:
Gap Inc. (NYSE: GPS) reported a 21% increase in its fourth-quarter profit year over year. The $265 million, or 35 cents per share, matched analysts' expectations. Revenue totaled $4.68 billion, down 5% from the previous year.
Kohls Corp. (NYSE: KSS) fourth-quarter profit fell about 15% year over year to $411.7 million, or $1.31 per share, just beating analysts' estimates. Sales rose less than 1% $5.49 billion, but same-store sales fell.
Novell Inc. (NASDAQ: NOVL) swung to a profit in its fiscal first quarter: $16.8 million, or 5 cents per share, matching expectations. Revenue rose to $230.9 million from $218.4 million a year ago.
MOST NOTEWORTHY: Novell, Con-Way and Flamel Technologies were today's noteworthy upgrades:
Jefferies named Novell (NASDAQ: NOVL) its Tuesday Value Pick and upgraded shares to Buy from Hold based on expectation for revenue stabilization and gradually improving margins throughout 2008. They note the company has $3.64 in cash per share.
JP Morgan upgraded Con-Way (NYSE: CNW) to Overweight from Neutral, citing strong execution following the company's Q4 report.
Flamel Tech (NASDAQ: FLML) was raised to Buy from Neutral at Merriman, as they believe low expectations and the company's robust pipeline create upside the potential for upside in 2008.
OTHER UPGRADES:
Toyota (NYSE: TM) was upgraded to Neutral from Underweight at HSBC.
UBS upgraded Arris (NASDAQ: ARRS) to Buy from Neutral.
Stock futures were lower this morning, pointing to a similar start for U.S. stocks. Investors are eying Citi's decision to move some $49 billion of SIV assets onto its balance sheet, while awaiting consumer prices to be released an hour before the opening bell.
Yesterday, U.S. stocks closed mixed. Renewed inflation worries as the PPI climbed 3.2% in November put pressure on stocks, but better-than-expected retail sales and a good earnings forecast from industrial Honeywell International (NYSE: HON) helped lift 's earnings forecasts helping lift sentiment. The Dow ended up 41 points, or 0.33%, the S&P 500 added 1.8 points, or 0.12%, while the Nasdaq Composite Index ended the day down 2.6 points, or 0.1%.
Today, prices at the consumer level will be reported at 8:30 a.m. EST. CPI, a closely watched inflation gauge, is expected to have risen 0.6% in November, after a 0.3% climb in October. Core CPI, which strips the volatile food and energy costs, is estimated to have risen 0.2% in November, same as the month before. Also being released today just before the opening bell is November industrial production and capacity utilization.
KO announced Muhtar Kent as its new CEO, succeeding resining chairman and CEO Neville Isdell. Isdell will remain chairman until April 2009. KO overall option implied volatility of 21 is near its 26-week average of 20 according to Track Data, suggesting non-directional risk.
NOVL postponed its Q4 and full year 2007 earnings release because of inquiries from the SEC about NOVL's accounting practices. NOVL, a provider of network software, closed at $6.94. NOVL overall implied volatility of 46 is above its 26-week average of 35 according to Track Data, suggesting larger risk.
Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
The key to the effectiveness of network software is the experience of the provider. There is an outfit in Waltham, Massachusetts that shapes up pretty good along that line. It has been in business for nearly a quarter of a century and serves more than 50,000 customers.
Novell Inc. (NASDAQ: NOVL) is engaged in the development, implementation and support of mixed source and open source business software. The firm's flagship NetWare operating system integrates corporate networks, connecting servers with PCs, storage systems and printers. Novell also provides network management software, directory services products, a version of the Linux operating system and IT consulting services. Strategic partners include Dell (NASDAQ: DELL), Intel (NASDAQ: INTC) and Oracle (NASDAQ: ORCL).
The company pleased investors last week, when it reported fiscal Q3 EPS of five cents and revenues of $243 million. Analysts had been looking for two cents and $234.8 million. Management also guided FY07 revenues to $925-$955 ($942.42M consensus). First Albany subsequently spoke well of the stock, citing an improved balance sheet, a low valuation and potential future restructuring/buyback catalysts. The NOVL price popped on the news and has since settled into a bullish "flag" consolidation pattern. Equities frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with two "strong buys," three "buys," seven "holds" and one "sell." Analysts expect a 43% growth rate through the next year. The NOVL Price to Sales ratio (2.68), Price to Book ratio (2.23), Price to Free Cash Flow ratio (6.70) and EPS Growth rate (66.67%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 73% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $5.70 and $8.26. A stop-loss of $6.35 looks good here.
In what has become a market roller coaster ride, U.S. stock futures were down this morning, indicating a lower start, a day after the Dow has staged a nearly 250 point rally. It seems the uncertainty regarding the Federal Reserve's next move left investors looking for direction. Today, more economic data is on the docket as well as several companies reporting earnings. It seems the market may yet again change direction today.
Yesterday, U.S. stocks recovered most of Tuesday's selloff. The Dow industrials, which dropped 280 points on Tuesday finished the day up 248 points Wednesday. The Street was encouraged by a letter Fed Chairman Bernanke sent to Sen. Charles Schumer, in which he said the Fed was monitoring the financial markets and was prepared to take action if necessary.
Today, an article in the WSJ left investors less sure about the Fed's next move as it suggests that Bernanke and the Fed may not rush to cut rates [subscription required]. Bernanke may do so eventually, the Journal writes, but his strategy is to break expectation that financial markets turmoil leads to the Fed bailing out. Meanwhile, investors will have to wait and any speeches, like the one Bernanke is set to give Friday at the Federal Reserve Bank of Kansas City's annual symposium in Jackson Hole, Wyo will be scrutinized.
Today at 8:30 a.m., the second release of second-quarter GDP is due. Economists expect the economy grew at a 4.1% rate in Q2, faster than the original estimation of 3.4%. Update (8:41 a.m.): The U.S. economy bounced back in the second quarter , growing at a 4% annual real growth rate. It is unlikely this will have an impact on the direction of the market. Also at 8:30, weekly jobs claims will be reported.
Overseas, Asian markets rebounded, closing higher. Hong Kong led the rally in Asia due to earnings while news of out China was that Finance Minister Jin Renqing resigned. In Europe, despite news that European banks are battling short-term loan crunch, shares rose for the ninth time in ten sessions, also helped by some strong earnings.
In corporate news:
Lehman Brothers upgradedMotorola Inc. (NYSE: MOT) to Overweight from Equal weight, saying it expects a recovery in the the group's phone unit.
Earnings are due from Tiffany & Co. (NYSE: TIF), and after the close, Dell (NASDAQ: DELL) - expected 30 EPS.
Novell (NASDAQ: NOVL) shares are up 2.2% in premarket trading after the company reported quarterly results yesterday, beating estimates.
Apple Inc. (NASDAQ: AAPL) shares are up over 1.7% in premarket trading after the company officially announced yesterday it will be holding a "special event" on September 5, The Beat Goes On. Expectations are that Apple will introduce several new products. According to Theflyonthewall, Goldman Sachs said it expects a new family of iPods to be announced during the event, a week ahead of expectations. The new iPods will likely include greater functionality at current price points and Goldman believes this will create another opportunity for upside in the second half of 2008. Bloomberg also reports that the release of new models of the company's iPod media player is expected during the event. Piper Jaffray's Gene Munster said, "I would say 99 percent it's a new iPod."
Meanwhile, Nokia Corp. (NYSE: NOK) is up nearly 4% in premarket trading after the company announced launching new top-end phones a new online music store, and a global gaming service, directly competing with Apple.
In the auto industry, U.S. car makers continue their effort to expand overseas. Ford Motor Co. (NYSE: F) had signed an agreement with a Spanish union to invest €425 million ($578 million) in its vehicle manufacturing plant in Valencia, eastern Spain. General Motors Corp (NYSE: GM) and Japan's Isuzu Motors Ltd said they would work together more closely in South America.
While Kuwait is in talks with Boeing Co (NYSE: BA) and Airbus SAS about buying aircraft, Boeing announced yesterday it has been awarded a NASA contract valued at approximately $514.7 million to produce the upper stage of the Ares I crew launch vehicle. BA shares are up 0.95% in premarket trading (8:08 a.m.).
Novell Inc. (NASDAQ: NOVL) shares are up 1.5% in premarket trading (8:00 a.m.) as the company is expected to report third-quarter earnings of 2 cents a share.
The theory goes that Linux, the open-source operating system, will replace Windows as the preferred software to run servers. Over time, the cost advantage of software created by a community of developers would overwhelm the pricey Microsoft (NASDAQ: MSFT) product.
So much for theory. Windows is actually taking share from Linux in the server market. According to TheStreet.com "Microsoft picked up 2 percentage points, bringing its market share to 67.1% of servers shipped during the second quarter." Windows server revenue hit $5 billion in the second quarter compared to $1.8 billion for Linux.
The one operating system that did not do well in the last quarter was Unix, which is marketed by Sun (NASDAQ: JAVA) among others.
In some ways the figures are not a surprise, despite the cost advantage of Linux. The large enterprise marketers of the software, Novell (NASDAQ: NOVL) and Redhat (NASDAQ: RHT) have never become large companies.
Linux still operates under the threat of patent litigation. Microsoft has claimed that the open-source software violates several hundred of its patents.
Big enterprises shy away from products with potential IP problems, and that may be Microsoft's biggest weapon.
Results for the tech stocks in last week's preview were a mixed bag, some beats, some misses, some in line. By and large, expectations for tech companies reporting results this week remain high, though. Here's what analysts surveyed by Thomson Financial are anticipating in the way of earnings, as compared to the same period of the previous year. 
Today started out as though we were going to break the losing streak. After a mixed trading day we markets indeed ended up higher to gain ground rather than posting a third day of triple-digit losses. Oil started out higher this morning, getting back over $116 per barrel before coming back down slightly. 
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Stock futures were lower this morning, pointing to a similar start for U.S. stocks. Investors are eying Citi's decision to move some $49 billion of SIV assets onto its balance sheet, while awaiting consumer prices to be released an hour before the opening bell.
Coca-Cola
had been looking for two cents and $234.8 million. Management also guided FY07 revenues to $925-$955 ($942.42M consensus). First Albany subsequently spoke well of the stock, citing an improved balance sheet, a low valuation and potential future restructuring/buyback catalysts. The NOVL price popped on the news and has since settled into a bullish "flag" consolidation pattern. Equities frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
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