Yowsa! Apparently the markets couldn't bear any more companies warning that their upcoming earnings would be below expectations. With technology, health care, and retail stocks leading the way Southward, the Dow fell more than 120 points and the Nasdaq over 45 points, before regaining a little ground late in the afternoon. Triggering the sell-off were Hewlett Packard warning of slowing orders (only days after Motorola reported disappointing earnings) and United Healthcare, which took much of the healthcare industry down with it. What's a Fool to think about all of this? One Fool, MF Templar, explores today's market drop in his "Fool on the Hill" feature below.
Also of interest in Fooldom today are The Lunchtime News's look at Hewlett-Packard's recent troubles and an Earnings Central collection featuring conference calls from Sallie Mae, Xilinx (thanks to investors' insistence), Atmel, Abbott Labs, and HMT Technology. We're covering the United Healthcare call, too, and we've got a Special Section on the broader HMO sell-off. Finally, Same Store Sales numbers are out, and the Fool has a big ol' list of company results, along with Foolish explanations about the retail numbers.
MF Merlin's Economic News today discusses the weekly report on new state unemployment insurance claims, and the June sales results for the nation's retail chains. 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. Enjoy!
CONFERENCE CALLS
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Want to listen in on a corporate conference call? Courtesy of MF Debit, here are replay numbers and times for some of today's conference calls:
Student Loan Association (Sallie Mae) <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:SLM)") else Response.Write("(NYSE:SLM)") end if %>
Est. $1.61 EPS
1-800-844-8666 (passcode: 2232)
5 pm on 7/11
11am on 7/12
11am on 7/15
Atmel Corporation <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ATML)") else Response.Write("(NASDAQ: ATML)") end if %>
Est. $0.48 EPS
1-312-864-2820 (passcode: 2865#)
Xilinx Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: XLNX)") else Response.Write("(NASDAQ: XLNX)") end if %>
Est. $0.43 EPS
1-800-633-8284 (passcode: 1791588)
HEROES
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Well, heroes were hard to find on a day like today. But GENESIS HEALTH VENTURES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GHV)") else Response.Write("(NYSE: GHV)") end if %> enriched shareholders of GERIATRIC & MEDICAL COS. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GEMC)") else Response.Write("(NASDAQ: GEMC)") end if %> this morning when it announced that it was acquiring the nursing home and skilled care provider for $5 3/4 per share, boosting Geriatric & Medical $1 11/32 to $5 11/32. Larger nursing home providers continue to gobble to grow, making the undervalued small companies in the industry quite interesting. For its part, Genesis Health Ventures was down $3/4 to $27.
Computer storage concern EXABYTE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EXBT)") else Response.Write("(NASDAQ: EXBT)") end if %> reported second quarter earnings of $0.16 per share, twice what it made in the year-ago quarter. Analysts were expecting a penny more, but apparently given the mood of the market, investors must have been happy with such a modest disappointment, as shares lifted $1 1/8 to $13 1/2.
QUICK TAKES: Activewear manufacturer RUSSELL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RML)") else Response.Write("(NYSE: RML)") end if %> beat estimates considerably today, reporting earnings per share of $0.42 for the second quarter when only $0.35 was expected, and rising $1 1/2 to $29 1/8... Casual apparel chain GADZOOKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GADZ)") else Response.Write("(NASDAQ: GADZ)") end if %> popped up $1 3/8 to $25 3/4 after Alex. Brown upped its rating from "buy" to "strong buy"... Robert W. Baird & Co. upgraded medical device company SOFAMORE/DANEK GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SDG)") else Response.Write("(NYSE: SDG)") end if %> from "moderately attractive" to "strong buy", based on price, sending shares up $2 3/8 to $24.
GOATS
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Where to start? Well, "technology" stocks got pounded today after Motorola and Hewlett-Packard instilled fear in the heart of Wall Street over the past few days:
HEWLETT PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> tanked $10 1/8 to $78 7/8;
SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SUNW)") else Response.Write("(NASDAQ: SUNW)") end if %> fell $3 3/8 to $50 1/4;
MOTOROLA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> gave up another $2 1/8 to $55 3/4;
MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MSFT)") else Response.Write("(NASDAQ: MSFT)") end if %> was off $5 to $114 1/2;
INTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INTC)") else Response.Write("(NASDAQ: INTC)") end if %> lost $3 3/8 to $69 1/2;
COMPAQ <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> slumped $2 7/8 to $43 3/4;
DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DELL)") else Response.Write("(NASDAQ: DELL)") end if %> was iced for $2 5/8 to $45 1/2;
GATEWAY COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GATE)") else Response.Write("(NASDAQ: GATE)") end if %> dropped $2 3/4 to $29;
CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CSCO)") else Response.Write("(NASDAQ: CSCO)") end if %> slid $3 1/8 to $54 3/4;
ANALOG DEVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ADI)") else Response.Write("(NYSE: ADI)") end if %> tumbled $1 1/8 to $19 5/8.
HEALTH MAINTENANCE ORGANIZATIONS (HMOs) were all smashed today when UNITED HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UNH)") else Response.Write("(NYSE: UNH)") end if %> warned of a second quarter disappointment this morning. This HMO sees operating earnings of $0.40 EPS to $0.45 EPS as a result of higher utilization -- well below the $0.66 EPS analysts were looking for. Shares slumped $13 1/4 to $31, pulling down the rest of the industry as well:
HEALTHSOURCE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HS)") else Response.Write("(NYSE: HS)") end if %> receded $1 1/4 to $14 1/2;
FOUNDATION HEALTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FH)") else Response.Write("(NYSE: FH)") end if %> down $1 7/8 to $29 1/2;
US HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USHC)") else Response.Write("(NASDAQ: USHC)") end if %> slipping $2 1/2 to $50 5/8;
SIERRA HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SIE)") else Response.Write("(NYSE: SIE)") end if %> tumbled $2 1/8 to $27 1/4;
ORNDA HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ORN)") else Response.Write("(NYSE: ORN)") end if %> dropped $2 1/4 to $22 3/8;
PHYSICIAN HEALTH SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PHSV)") else Response.Write("(NASDAQ: PHSV)") end if %> was waxed for $2 to $17 1/2;
UNIVERSAL HEALTH SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UHS)") else Response.Write("(NYSE: UHS)") end if %> greased for $7/8 to $24;
AETNA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AET)") else Response.Write("(NYSE: AET)") end if %> the large multi-line insurance company that is buying US Healthcare, fell $4 1/8 to $61 1/8;
PHP HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PPH)") else Response.Write("(NYSE: PPH)") end if %> reported estimate-beating numbers, but slid $3 1/2 to $24 1/2 anyway.
Retailers were not immune from the market trend du jour. GYMBOREE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GYMB)") else Response.Write("(NASDAQ: GYMB)") end if %> reported a 12% drop in same-store sales, and slid $5 to $21 1/2 as a result. A same-store sales drop at retailer ANNTAYLOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %> was responsible for a $2 5/8 to $13 7/8 drop in shares of the troubled women's clothier. Disappointing same store sales at WABAN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WBN)") else Response.Write("(NYSE: WBN)") end if %> caused the owner of B.J.'s, among other retail fronts, to give back $3 1/8 to $20 1/8. GARDEN BOTANIKA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GBOT)") else Response.Write("(NASDAQ: GBOT)") end if %> saw June same-store sales rise only 2% even as total sales soared 71%, causing the personal care products retailer to lose $6 to $14 1/4. Sluggish sales growth at stores open for more than one year was responsible for the $6 3/8 to $57 3/4 drubbing in WEST MARINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: WMAR)") else Response.Write("(NASDAQ: WMAR)") end if %> stock took today.
QUICK CUTS: AMERICAN ONCOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AORI)") else Response.Write("(NASDAQ: AORI)") end if %> was crushed for $6 1/4 to $8 after the company reported that second quarter earnings would be about nine to ten cents on $47 million in revenues compared to expectations of $0.11 EPS... A Prudential downgrade of Dow component EASTMAN KODAK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EK)") else Response.Write("(NYSE: EK)") end if %> is what is responsible for the $5 1/8 to $70 3/8 drop in shares of the imaging company... PANDA PROJECT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PNDA)") else Response.Write("(NASDAQ: PNDA)") end if %>, down $1 1/2 to $9 1/4, has just enough money to last until mid-September, its auditor reportedly told the Wall Street Journal yesterday. The company is trying to arrange a private placement, but this has been made difficult by the fact that the auditor will not sign off on the financial statements... Apparel-maker MARISA CHRISTINA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MRSA)") else Response.Write("(NASDAQ: MRSA)") end if %> revised expectations downward for the second quarter and full fiscal year today, dropping $5 7/8 to $9 5/8 after the news hit.
An Investment Opinion by MF Templar
FOOL ON THE HILL: When Bad Things Happen To Good Markets
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Don't you hate it when the market ruins a perfectly good column?
Despite the variety of subjects I could have spent a few hundred words discussing, my status as a "news" writer means that I have to pay extra-special attention to fundamentally random changes in abstract numerical market indices.
Yes, I am talking about the significant decline in the broader market averages today. The Nasdaq Composite was particularly interesting to watch, as it touched bottom at 2:23 PM down near an all-time record point loss -- only rivaled by some Monday in 1987. The Nasdaq did manage to rally off of the lows, closing down 3.00% on the day. The Dow Jones Industrial Average and S&P 500 fared a little better, off 1.28% and 1.46% respectively.
Now, let's get completely away from the numerical measurements of the drop and just look at the percentages. Line 'em up: 3.00%, 1.28%, 1.46%. Now look at the normal volatility of the stocks in your portfolio. Don't many of the stocks you own tend to click up and down within a 2.00% to 3.00% range every single day? So all of this excitement and attention is focused on abstract market averages that are actually moving roughly what any normal stock moves on any given day? Yup. Sure, the indices don't normally move this much in one direction or another -- because all of the stocks normally go different directions. On a day like today, however, when most headed in the same direction, they just happened to click down about the same amount as any portfolio of stocks moves on a day-to-day basis.
Yeesh.
So what the heck did happen here today? A couple of things. First, HEWLETT PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> announced yesterday that they had seen order growth slow from last quarter's 24% level across all product lines and geographical regions. On top of Motorola's so-called surprise earnings report (which actually just portrayed the reality of cellular competition and the semiconductor price implosion over the last few months), many took Hewlett-Packard as a confirmation that demand for "technology" was slowing. So what do you do if you are a hair-trigger portfolio manager constantly making huge industry bets? You sell those darn techs, whatever they are. Dump names like Microsoft and Intel and pile into names like Automated Data Processing, Johnson & Johnson and Merck. "They don't rely on technology." Yeah, sure they don't.
At about the same time, UNITED HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UNH)") else Response.Write("(NYSE: UNH)") end if %> was finally coming in line with the dozens of other HMOs that have reported disappointing results for this quarter, telling the Street that it would not make estimates of 30%-plus growth for the quarter. What a great short that was. I mean, almost every other company in the industry had guided down expectations but they had not. Unlike some of the specialty players, they were not just in one fast-growing market and they did not have any substantial qualitative edge. Plus, they got stuck with a bunch of contracts in the MetraHealth acquisition that apparently were woefully underpriced. The Street took this as a sign that healthcare as we know it is going to end and decided to crush all of those stocks as well.
These two bits of news simply exacerbated the already-palpable second quarter jitters. "If Digital Equipment, Motorola and Hewlett-Packard are having problems, then everyone must be..." went the whispers on trading floors as huge block sell orders were executed. "Look, look -- the indices are down big!" they cried at 1.00% to 3.00% moves. And staring into an abyss, their minds began to manufacture patterns of future earnings disappointments predicated on irrational connections to announcements made today. All in all, a pretty typical day, despite the fact that the direction was mostly down.
ANOTHER FOOLISH THING: Iomega in Fooldom Today!
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Transmitted: 7/11/96