The earnings reports of several major retailers, including J.C. Penney, Home Depot, and Wal-Mart, are featured in a Special Section, complete with some conference call reports. We've also covered Johnson & Johnson's conference call announcing its new home AIDS test. Stay tuned for a Special Section on the earnings of Dell and Applied Materials tomorrow.
MF Merlin's Economic News today covers reports on the Consumer Price Index (CPI), real earnings, and retail sales. You'll find the Economic News, as well as all our Special Sections, FoolWires, and earnings reports, on either the Evening News or Stock Research screens. In tonight's Fool on the Hill, MF Templar examines a modern-day Philosopher's Stone. Enjoy!
Most major retailers reporting earnings today met their estimates, but a few chains outperformed. TJX Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TJX)") else Response.Write("(NYSE: TJX)") end if %>, for example, blew away estimates of $0.27 by reporting earning $0.33 per share (EPS), sending their shares up $1 5/8 to $33 5/8. TJX is the parent of T.J. Maxx, Hit or Miss, and Marshall's. More upscale retailer Williams-Sonoma <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WSGC)") else Response.Write("(NASDAQ: WSGC)") end if %> lost a penny less than it was expected to, and rose $2 to $28 1/2 on management's confidence that later quarters will show profits. And not to be outdone, Tiffany & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TIF)") else Response.Write("(NYSE: TIF)") end if %> outdid estimates by 50%, posting earnings of $0.30 per share and driving the share price screaming up $7 1/8 to $74 1/2.
Online commerce appears to be a hot-ticket item these days. News that CyberCash <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CYCH)") else Response.Write("(NASDAQ: CYCH)") end if %>, a developer of secure Internet payment systems, is reportedly talking with Netscape <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NSCP)") else Response.Write("(NASDAQ: NSCP)") end if %> about developing electronic consumer shopping systems sent shares up $2 1/2 to $49. It's instructive to note that CyberCash came public in February of 1996, priced in the mid-teens, and has not yet begun to show profits. Last week CyberCash was added to the American Stock Exchange's Interactive Week Internet Index.
As usual, the fortunes of many stocks rose and fell according to analyst upgrades and downgrades. Interactive multimedia company 3DO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: THDO)") else Response.Write("(NASDAQ: THDO)") end if %> reported earnings far above estimates and got upgraded by Morgan Stanley from "neutral" to "outperform" as shares soared $2 3/8 to $12 3/8. Communications company Ortel <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ORTL)") else Response.Write("(NASDAQ: ORTL)") end if %> was raised from "outperform" to "strong buy" by Morgan Stanley, with analyst Neil Danziger pointing to a new and more diverse product line boosting revenues. Shares were up $2 1/2 to $19 1/2. Fellow communications concern Qualcomm <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QCOM)") else Response.Write("(NASDAQ: QCOM)") end if %> was boosted from "hold" to "buy" by Hambrecht & Quist, as shares rose $3 61/64 to $48 45/64. BT Office Products <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTF)") else Response.Write("(NYSE: BTF)") end if %> was raised from "neutral" to "strong buy" by Morgan Stanley, lifting shares $2 3/4 to $22 3/8. Even ValuJet <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VJET)") else Response.Write("(NASDAQ: VJET)") end if %> benefited from an upgrade today, with PaineWebber raising the rating from "attractive" to "buy" and shares from $1 5/16 to $15.
QUICK TAKES: STRUCTURAL DYNAMICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SDRC)") else Response.Write("(NASDAQ: SDRC)") end if %> boosted its stock today by $1 1/2 to $31 3/8 after announcing that it expected to meet analyst estimates of $0.21 or $0.22 per share. . . After signing a patent license deal with Skydata yesterday, frame relay specialist ACT NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ANET)") else Response.Write("(NASDAQ: ANET)") end if %> continued its spectacular rise, jumping $3 to $46 1/2. . . CORNING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GLW)") else Response.Write("(NYSE: GLW)") end if %> was up $2 3/4 to $37 7/8 today, on the heels of an announcement that it would spin off its clinical labs and pharmaceutical divisions to shareholders. . . Software company TRIPLE P TELEMATICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TPPPF)") else Response.Write("(NASDAQ: TPPPF)") end if %> rose $3/4 to $7 despite being cut by Cowen from "strong buy" to "buy". . . SPECTRUM SIGNAL PROCESSING'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SSPIF)") else Response.Write("(NASDAQ: SSPIF)") end if %> OfficeF/X (TM) computer telephony products received a "best of show" award at the 1996 Computer Telephony Expo, lifting shares $1 19/64 to $10 23/64.
Isn't it strange how everyone gets all worked up when people make comments about stocks online, but no one blinks when this happens in the print media? Yesterday in the New York Post, Louis Ehrenkrantz, president of a brokerage house, mentioned that medical imaging concern Del Global Technologies AMEX: DEL) was underappreciated. His position on the stock was never made clear, but his comments that Wall Street has "failed to understand the true value" of Del caused the stock, which closed at $9 9/16 on Friday, to open at a 52-week high of $20 on Monday before closing at $14 1/4 on nearly three times normal volume. He also gave the stock a mention on PBS's "Nightly Business Report." Today, shares took a breather, falling $1 1/4 to $13.
Hadco Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HDCO)") else Response.Write("(NASDAQ: HDCO)") end if %> posting earnings of $0.71 per share, beating estimates slightly. But it also revealed a decreasing backlog, which alarmed investors enough to send shares down $4 5/8 to $22 7/8. The manufacturer of computer and telecommunication equipment made $0.49 in the year-ago quarter. Genesis Merchant Group analyst Steve Ossad noted that in the conference call, the management appeared more conservative than usual, but he maintained his "strong buy" rating on the company.
Several earnings letdowns led to plunging shares today. Marine container company Cronos Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CRNSF)") else Response.Write("(NASDAQ: CRNSF)") end if %> was cut from "strong buy" to "buy" by Alex. Brown, after posting earnings of $0.21 per share versus expectations of $0.27. Shares slumped $1/4 to $7 5/8. Creative Biomolecules <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CBMI)") else Response.Write("(NASDAQ: CBMI)") end if %>, instead of losing $0.09 per share, lost $0.12, sending shares down $5/8 to $9 1/4. The company develops proprietary protein-based therapeutics.
QUICK CUTS: ADC TELECOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ADCT)") else Response.Write("(NASDAQ: ADCT)") end if %> was cut from "strong buy" to "outperform" by Morgan Stanley, sending shares down $1 3/4 to $47 1/4. The company has nearly doubled in the past year. . . CENTRAL EUROPEAN MEDIA (NADSAQ: CETV) posted losses of $0.42 per share, compared with losses of $0.24 in the year-ago quarter and estimates of a $0.35 loss this quarter. It noted that broadcast flow was significantly lower than last year, and shares tumbled $2 3/4 to $25 1/4 on the news. . . Healthcare consulting firm UNITED AMERICAN HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAH)") else Response.Write("(NYSE: UAH)") end if %> dropped $2 3/8 to $12 1/8 on a sizable loss of $0.13 per share.
The Philosopher's Stone
Much has been made in literature of the medieval alchemist's quest to find a substance -- the Philosopher's Stone -- that would transmute lead to gold. Those who sought the Philosopher's Stone believed that they would achieve their results through divine intervention -- the discovery of the miracle would be the crowning achievement of a life spent in dutiful pursuit of wisdom and purity. Carl Jung made much of the astrological symbols with which many alchemists imbued their work, reading an underlying tale of transformation of soul instead of the overt materialism many less thoughtful commentators had attributed to the ancient pursuit. For the alchemist, discovering the Philosopher's stone was as much about perfecting themselves as it was about untold riches.
Much has been made recently of the news that management at a number of public companies has stumbled upon their own Philosopher's Stone -- the Internet. Apply this magical substance liberally to the downtrodden shares of any ailing company bleeding red from their balance sheet and you suddenly have a stock doubling or tripling inside a few days. Of course, more often than not management has anything but achieving purity of the soul as their main objective. I doubt that from this Philosopher's Stone even Carl Jung could detect much more than personal enrichment of a bank account.
For some time, it has seemed that the Philosopher's Stone was without flaw. Even a company like L. L. Knickerbocker <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: KNIC)") else Response.Write("(NASDAQ: KNIC)") end if %> could gain altitude after the word "online" was whispered. A thinly-traded concern that pedals Marie Osmond teddy bears and limited edition Farah Fawcett posters, Knickerbocker is actually most famous for being one of Rafi Khan's favorite stocks. Mr. Khan is a West Coast broker who has been known to push stocks along, throwing outrageous future profit projections out on over-the-counter and American Exchange companies with small floats and putting dozens of other investors into them based purely on the story.
Knickerbocker, which started an Internet mall and began to sell Camelot Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CAML)") else Response.Write("(NASDAQ: CAML)") end if %> Internet Phone, has been as high as $15 1/4 this year, much to the dismay of many a short-seller. When the company posted flat earnings of $0.02 EPS a share today, the share price deflated -- down $1 3/4 to $11 7/8. Net income was actually up 50%, believe it or not, but it appears the company issued about 50% more shares during the period, completely diluting the gain. Knickerbocker apparently realizes that one day the Internet sun might set for it -- and to that end it has gotten involved with an outfit called Pure Energy and is apparently working on alternative fuels.
It is difficult for many to understand how a company like Knickerbocker could come to trade for 131 times trailing earnings. Those same people were also astounded by Zenith's incredible seven day-long rise from $5 to $25 two weeks ago. Although Zenith has hit a nadir in the last few days, dropping another $1 1/8 to $13 7/8 today, its portfolio of digital products ranging from cable modems to Internet enabled televisions has certainly grabbed many imaginations. All Curtis Mathes <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CRTM)") else Response.Write("(NASDAQ: CRTM)") end if %> had to do to double their share price recently was to announce in a press release that they were working on an Internet-enabled television. Forget the fact that most video-game machines will have Internet add-ons in a few months and more established manufacturers are hard at work on the same thing. Curtis Mathes was suddenly rewarded with a market cap higher than Aseco <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ASEC)") else Response.Write("(NASDAQ: ASEC)") end if %>, the second-largest manufacturer of semiconductor automated test-handling equipment in the world.
Although the Philosopher's Stone appears to be wearing off of late, it is still disappointing and frustrating to see investors so perplexed by a new medium that they cannot separate the hype from the truth. Although everyone "knows" the signal-to-noise ratio is high when people start talking about the Internet, they just cannot seem to get down to talking actual economics and earnings, eschewing stories and pie-in-the-sky projections. Even companies that appear to have more legitimate ventures like Edify <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EDFY)") else Response.Write("(NASDAQ: EDFY)") end if %> can soar $11 3/4 to $54 on top of a significant rise the day before on news that Visa Interactive will market Edify's automated call, e-mail and Internet answering service as a back-end for online banking.
Of course, the companies with back-ends for the same darn thing already in the field like Intuit <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTU)") else Response.Write("(NASDAQ: INTU)") end if %> and Checkfree <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CKFR)") else Response.Write("(NASDAQ: CKFR)") end if %> did not budge. Nor did a company about to unveil a pretty significant online banking venture, America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMER)") else Response.Write("(NASDAQ: AMER)") end if %>, which if it saw 10% of its customers migrate to member banks would have the most online banking customers in the world. We won't even mention the fact that Cardinal Bancshares <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CARD)") else Response.Write("(NASDAQ: CARD)") end if %>, representing a small savings and loan about to spin-off its online Security First National Bank operations as a separate company almost closed up $4 today after rising about 10% the day before. Suffice to say, the early reports from the two or three *thousand* customers have been mixed.
The schizophrenia the Internet enables can only be explained by magic. With short-sellers broken against the rocks by incessant waves of buyers, one can only smile at many of the stories that have garnered market caps measured in the hundreds of millions. Look for the Philosopher's Stone to become increasingly applied -- how would news that McDonald's allows ordering over the Internet affect their share price? If Coca-Cola Enterprises took a stake in America Online, what might we see there? One wonders if the completion of a corporate web site has any noticeable effect on share price -- perhaps some academician can do some work there. The only problem I see here is that unlike the true Philosopher's Stone, that turns base metal into gold, the leaden balance sheets of many of these companies will eventually cause them to sink. Until then, however, it makes for great copy.
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