The earnings crunch begins in earnest this coming week, with companies from Johnson & Johnson (NYSE: JNJ) and PepsiCo Inc. (NYSE: PEP) to Southwest Airlines Co. (NYSE: LUV) and Harley-Davidson Inc. (NYSE: HOG) scheduled to report results for the quarter just ended. But with the ongoing turmoil in the markets, much attention is on the tech and financial sectors. This week will provide plenty to mull over on both counts.
Wall Street expectations for tech stocks are fairly optimistic. Analysts surveyed by Thomson Financial are looking for chip maker Altera Corp. (NASDAQ: ALTR) and software/service company iGate Corp. (NASDAQ: IGTE) to be the sector's biggest earnings gainers of the week. Altera is expected to report earnings of 30 cents per share (up 33.3% from a year ago) on revenue of $355.1 million. Altera had previously forecast flat sales for the quarter, and shares fell to a 52-week low last week. iGate is expected to report earnings of 14 cents per share (up 42.9%) on revenue of $55.6 million. India-based iGate recently spun off its Mastech consulting services. Shares are down 45.0% in the past three months, and also reached a new 52-week low last week.
San Jose-based Novellus Systems Inc. (NASDAQ: NVLS), on the other hand, is expected to report that net income tumbled 90.4% from a year ago to 4 cents per share, on revenue of $245.6 million. Novellus fell to a 52-week low early last week, and shares are down 44.5% year to date.
Oppenheimer upgraded shares of Shanda Interactive (NASDAQ: SNDA) to Outperform from Perform following the company's better-than-expected quarter to reflect its growth acceleration in the casual games platform and margin improvements.
SAIC (NYSE: SAI) was upgraded to Outperform from Market Perform following the solid Q2 report and guidance.
Susquehanna upgraded Zumiez (NASDAQ: ZUMZ) to Positive from Neutral citing positive August comps, revised merchandising, easier comps, and solid financial position.
Novellus (NASDAQ: NVLS) was raised to Overweight from Equal Weight at Morgan Stanley.
Analyst downgrades:
Morgan Stanley downgraded the Semiconductor Capital Equipment sector to In-Line from Attractive citing optimistic expectations for Q4 orders following the recent bounce in stocks. The firm downgraded Lam Research (NASDAQ: LRCX) to Underweight from Overweight and KLA-Tencor (NASDAQ: KLAC) KLAC to Equal Weight from Overweight.
As the second quarter earnings crunch begins in earnest this week, the bear market has investors jittery and prognosticators spinning out dire warnings. In the wake of mixed results from Alcoa (NYSE: AA) and General Electric (NYSE: GE) kicking things off last week, here's a look at what Wall Street is expecting from many of the companies scheduled to report this coming week.
Analysts surveyed by Thomson Financial are expecting the following companies to report a rise in earnings when compared to the same period of the previous year.
Nucor Corp. (NYSE: NUE): $1.80 EPS (36.6%) on sales of $6.4 billion (+53.0%)
Google Inc. (NASDAQ: GOOG): $4.74 EPS (24.9%) on sales of $3.9 billion (+41.6%)
Nokia Corp. (NYSE: NOK): 56 cents EPS (23.2%) on sales of $19.9 billion (+17.8%)
CSX Corp. (NYSE: CSX): 90 cents EPS (21.1%) on sales of $2.9 billion (+12.8%)
Altera Corp. (NASDAQ: ALTR): 27 cents EPS (18.5%) on sales of $346.7 million (+8.4%)
IBM (NYSE: IBM): $1.82 EPS (+17.6%) on sales of $25.9 billion (+9.0%)
eBay Inc. (NASDAQ: EBAY): 41 cents EPS (17.1%) on sales of $2.2 billion (+18.0%)
MOST NOTEWORTHY: Schiff Nutrition, Siemens and Priceline.com were today's noteworthy initiations:
B. Riley assumed Schiff Nutrition (NYSE:WNI) with a Buy rating and $7.75 target. The firm believes downside is limited given the company's balance sheet and cash flows and sees opportunity for market share gains.
Morgan Stanley initiated Siemens (NYSE:SI) with an Overweight rating and is positive on the company's revenue diversification and planned headcount reductions.
Stanford believes Priceline.com (NASDAQ:PCLN) is positioned to benefit as consumers shift to the Internet and the company's bargain prices to make travel plans. Shares were initiated with a Buy rating and $140 target.
Most technology stocks are being dragged down again today after a gloomy statement from Advanced Micro Devices Inc. (NYSE: AMD) stirred new worries over the tumbling economy. Novellus Systems Inc. (NASDAQ: NVLS) is joining the market anxiety after issuing a warning related to its earnings numbers. The company slashed its first-quarter earnings outlook, and said it expects revenues at the low end of the earlier expected range.
The semiconductor equipment maker now expects first-quarter earnings in a range between 15 cents and 17 cents per share, down from its previous range of 21 to 24 cents. Quarterly revenues are expected to be at the low end of the previously communicated range of $315 million and $325 million. Analysts were waiting for Novellus Systems show quarterly earnings of 23 cents a share on sales of $319.4 million, according to Reuters Estimates.
Retailers Lowe's (NYSE:LOW) and Nordstrom (NYSE:JWN) to report Q4 earnings. Lowe's will hold its conference call at 9:00am, Nordstrom will hold its conference call at 4:30pm.
Tuesday, February 26
Office Depot (NYSE:ODP) to report Q4 earnings; conference call at 9:00am.
FCC to hold Open Commission Meeting at 9:30am.
Macy's to report Q4 earnings; conference call at 11:00am.
Wednesday, February 27
FDA to hold Anti-Infective Drugs Advisory Committee Meeting at 8:00am.
BP plc (NYSE:BP) to hold business update at 9:00am.
Toll Brothers (NYSE:TOL) to report Q1 earnings; conference call at 2:00pm.
Vale (NYSE:RIO) to report Q4 earnings; conference call at 10:00am.
PDUFA Date for Jazz Pharma (NASDAQ:JAZZ) and Solvay Pharma's (SVYSY) Luvox CR for treatment of Obsessive Compulsive Disorder and Seaosnal Affective Disorder.
MOST NOTEWORTHY: UBS AG (UBS), Network Appliance (NTAP) and Semiconductors were today's noteworthy downgrades:
Deutsche Bank downgraded UBS AG (NYSE:UBS) to Hold from Buy following the company's earnings reports to reflect its large new risk exposures.
Citigroup lowered Network Appliance (NASDAQ:NTAP) to Hold from Buy, as they believe the company's lackluster outlook will weigh on shares in the near-term.
Semiconductors Micron Tech (NYSE:MU) and Novellus (NASDAQ:NVLS) were downgraded to Sell from Neutral at Goldman citing expectations of excess DRAM supply.
OTHER DOWNGRADES:
Goldman removed Intel (NASDAQ:INTC) from its Conviction Buy List.
JP Morgan lowered Knot Inc (NASDAQ:KNOT) to Neutral from Overweight.
Morgan Stanley lowered Boardwalk Pipeline (NYSE:BWP) to Equal Weight from Overweight.
On today's STOP TRADING! segment on CNBC, Jim Cramer made a call for a pairs trade on chemical and technology stocks: Cramer said that traders can ring the register in chemical stocks and they can throw the money into tech stocks now that these big ones have been acquired. He thinks the trade for next few days is into technology. He thinks that both Applied Materials (NASDAQ: AMAT) and KLA-Tencor (NASDAQ: KLAC) have a lot of room still to run. He noted how Novellus Systems Inc. (NASDAQ: NVLS) wasn't that great and didn't even make the lowered guidance and is still trading up. He also noted how Motorola Inc. (NYSE :MOT) is basically up after its warning.
Anyhow, you get the idea. Fighting the tape is the worst idea out there as the easiest way to lose money, and the tape has been showing major inflows of cash into these stocks. Even on bad news, traders are buying stock. Imagine what happens on good news. The old tech titans have been doing very well, despite Cramer a few weeks ago naming the "New Four Horsemen of Tech" in one of his features.
This morning, Novellus Systems Inc (NASDAQ: NVLS) announced that it anticipates second quarter bookings, shipments, revenues and earnings per share to come in at the low end of the guidance range it previously provided on May 31st. The semiconductor equipment maker previously forecast Q2 results of 42c-45c/$410M-$420M vs. Reuters consensus of 44c/$415.61M.
The company, which makes equipment to help turn silicon wafers into computer chips, believes its earnings will be lower because of a weak semiconductor market. Novellus said theses industry declines will lead to cost cutting initiatives in the second half of the year, including a reduction in executive salaries for the rest of the year and company shutdowns in the third and fourth quarters.
Novellus is one company among several that have lowered expectations for the rest of the year. Due to a surplus in chips, companies have had to cut prices. Applied Materials Inc (NASDAQ: AMAT), for example, also predicts declines in global chip sales growth for the rest of 2007.
In the technology sector this morning, the profit warning from Novellus was offset by an upgrade of Intel Corporation (NASDAQ: INTC) by Lehman Brothers.
MOST NOTEWORTHY: CheckFree Corp (CKFR), Sprint Nextel Corp (S) and the semiconductor capital equipment sector were some of today's more noteworthy downgrades:
Piper Jaffray downgraded Checkfree Corp (NASDAQ: CKFR) to Market Perform from Outperform after transferring coverage of the payment processor company.
Sprint Nextel Corp (NYSE: S) was cut to Outperform from Strong Buy at Raymond James.
ThinkEquity cut Jones Soda Co (NASDAQ: JSDA) to Source of Funds from Buy based on valuation.
Goldman is now cautious on the biofuel sector, downgrading the group to Cautious from Neutral.
William Blair downgraded shares of Medimmune, Inc (NASDAQ: MEDI) to Market Perform from Outperform.
Credit Suisse downgraded shares of Big 5 Sporting Goods Corp (NASDAQ: BGFV) to Underperform from Neutral citing valuation.
Wachovia dropped Inkeepers USA Trust (NYSE: KPA) to Underperform from Outperform based on the acquisition from Apollo Investment Corp (AINV). Citigroup cut Inkeepers to Hold from Buy.
As in most industrial endeavors, profits in the semiconductor manufacturing business are a direct function of production efficiency. A leader in the art of creating the automated systems used to make quality chips is headquartered in Chelmsford, Massachusetts.
Brooks Automation (NASDAQ: BRKS) provides production tools and factory automation products for semiconductor makers and suppliers of chip-making equipment. Products include the vacuum systems, wafer handling systems and thermal conditioning modules necessary to efficient chip manufacturing. The company also sells specialty equipment to manufacturers of flat-panel displays and data storage devices. Major customers include Lam Research (NASDAQ: LRCX) and Novellus Systems (NASDAQ: NVLS).
The BRKS share price rose last week, following completion of the company's sale of its Brooks Software unit to Applied Materials (NASDAQ: AMAT) for $125 million in cash. The move popped the shares out of a late March "cup" into the early April "handle" of a Cup & Handle formation. The price is showing signs of completing the pattern with a bullish rise from the right-hand side of the "handle".
Brokers recommend the issue with one "strong buy", four "buys," six "holds" and one "sell." Analysts see a 15% average annual growth rate, through the next five years. The BRKS Price to Sales ratio (1.75), Price to Book ratio (1.61), Price to Cash Flow ratio (15.43), Sales Growth rate (76.38%) and EPS Growth rate (258.78%) compare favorably with industry, sector and S&P 500 averages.
Institutions own about 89% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $10.56 and $18. A stop-loss of $15.25 looks good here. Note that the firm is next expected to release quarterly results in late April.
The earnings crunch begins in earnest this coming week, with companies from Johnson & Johnson (NYSE: JNJ) and PepsiCo Inc. (NYSE: PEP) to Southwest Airlines Co. (NYSE: LUV) and Harley-Davidson Inc. (NYSE: HOG) scheduled to report results for the quarter just ended. But with the ongoing turmoil in the markets, much attention is on the tech and financial sectors. This week will provide plenty to mull over on both counts..gif){kind=logo}
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$125 million in cash. The move popped the shares out of a late March "cup" into the early April "handle" of a Cup & Handle formation. The price is showing signs of completing the pattern with a bullish rise from the right-hand side of the "handle".
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