Our coverage of Iomega continues today with a Special Section dedicated to the company's second quarter earnings numbers that were released yesterday, as well as a synopsis of the conference call with analysts. Also note that at 9 o'clock tonight, we will be holding an Auditorium Event on Iomega.
MF Merlin's Economic News today reports on The University of Michigan's preliminary estimate of consumer sentiment for July. 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 focuses on second quarter earnings jitters. Enjoy!
HEROES
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One man has made a $495 million difference in the market capitalization of SUNBEAM-OSTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SOC)") else Response.Write("(NYSE: SOC)") end if %> -- Al Dunlap. The restructuring whiz, late of Scott Paper, was hired as CEO of the appliance giant today, causing analysts to raise their estimates on the company just because he climbed on board. "People have made a lot of money with Dunlap," was one analyst's succinct comment. All of this news caused the shares of the beleaguered appliance manufacturer, recently near its 52-week low, to rally $6 to $18 1/2. Dunlap restructured Scott Paper and later sold it to KIMBERLY CLARK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KMB)") else Response.Write("(NYSE: KMB)") end if %> in fairly short order, and apparently investors are betting that he can do it again.
HOLOGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HOLX)") else Response.Write("(NASDAQ: HOLX)") end if %> today announced that it would issue 1.5 million shares to acquire FLUROSCAN <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FLRO)") else Response.Write("(NASDAQ: FLRO)") end if %> in a stock swap valued at roughly $58 million. Shares of Fluroscan shot up $2 7/8 to $10 3/4, close to the $12 1/4 implied value of the buy-out. Both companies are involved in the x-ray imaging industry, with Hologic measuring bone density and Fluroscan making low-intensity hand-held devices that can be used to look at extremities in the Emergency Room. Both companies can benefit from consolidating sales, general and administrative expenses and potentially generate some manufacturing efficiencies as well. Shares of Hologic closed down slightly, off $7/8 to $38 1/2 on the day.
Shares of AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMER)") else Response.Write("(NASDAQ: AMER)") end if %> finally broke out of their recent steep downward descent today, rising $2 3/4 to $32 3/4 after the company issued a press release announcing that upcoming quarterly earnings would be higher than the current $0.16 EPS consensus that analysts were expecting. The company stated that it ended the June quarter with 6.2 million subscribers, adding a net 700,000 users during the quarter. After America Online's Partner's Conference in June, MF Templar estimated that America Online would probably report $0.18 EPS if what it said about new advertising revenues among other sources of earnings was true. Unfortunately for America Online, the profit bug apparently has bitten it a little too hard -- the constant interrupt screens on sign-ons hawking this or that product are beginning to give the service a very undesirable Prodigy-like feel.
EARNINGS UPDATES: STANDARD REGISTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SR)") else Response.Write("(NYSE: SR)") end if %> rose $2 3/4 to $26 7/8 this morning after posting second quarter earnings of $0.56 EPS... CONSOLIDATED FREIGHT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CNF)") else Response.Write("(NYSE: CNF)") end if %> made mincemeat of Wall Street estimates of $0.13 EPS, rising $2 1/2 to $20 1/2 after it reported earnings of $0.24 EPS... FALCON BUILDING PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FB)") else Response.Write("(NYSE: FB)") end if %> rose $7/8 to $12 1/8 after reporting earnings that were up 33% to $0.40 EPS... VANTIVE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VNTV)") else Response.Write("(NASDAQ: VNTV)") end if %> shot past earnings estimates this morning, soaring $8 1/8 to $38 1/8 for it troubles... Investors are still accumulating shares of S&P indexing software maker INVESTMENT TECHNOLOGY GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ITGI)") else Response.Write("(NASDAQ: ITGI)") end if %> after the company posted solid quarterly results earlier in the week, boosting shares $2 to $14 3/4... TCSI CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TCSI)") else Response.Write("(NASDAQ: TCSI)") end if %> rose $3 3/4 to $22 3/4 on the strength of its second quarter numbers... CFI PROSERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PROI)") else Response.Write("(NASDAQ: PROI)") end if %> exploded $2 3/4 to $23 1/4 after beating consensus estimates by three cents... TSI INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TSII)") else Response.Write("(NASDAQ: TSII)") end if %> surged $2 5/8 to $19 3/4 after reporting $0.32 EPS and announcing a 2-for-1 split... SCHOLASTIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SCHL)") else Response.Write("(NASDAQ: SCHL)") end if %> rose $5 to $66 3/4 after beating estimates by $0.02 EPS ...
QUICK TAKES: Ethylene producer REXENE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RXN)") else Response.Write("(NYSE: RXN)") end if %> rose $4 1/4 to $13 3/8 after receiving a $14 a share merger proposal from privately-held Huntsman... J.P. Morgan rated the PROVIDENCE JOURNAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PRJ)") else Response.Write("(NYSE: PRJ)") end if %> an initial buy, causing the shares to rise $1 1/8 to $16 1/2... Privately-held American Enterprises had a unit initiate a cash tender offer of $14 a share for SPRECKELS INDUSTRIES, also known as YALE INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: YALE)") else Response.Write("(NASDAQ: YALE)") end if %>, boosting shares of Spreckels $2 3/4 to $18 1/4 today... MICROCHIP TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MCHP)") else Response.Write("(NASDAQ: MCHP)") end if %> soared $3 1/4 to $27 1/2 after it beat its numbers, interestingly saying that it believes that it has seen the bottom of the inventory correction in semiconductor components... CELLULAR TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CTSC)") else Response.Write("(NASDAQ: CTSC)") end if %> rose $1 3/4 to $14 3/4 after it announced that it would not do a proposed one million-plus secondary offering... MAXXAM INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: MXM)") else Response.Write("(AMEX: MXM)") end if %> announced that it was close to a deal in which it will swap a grove of ancient redwoods for dozens of acres of public land, pushing shares up $3 3/4 to $41 1/2.
GOATS
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IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %> was mashed for $5 1/2 to $22 1/2 today after posting results a penny better than expected. A build-up of finished goods inventory due to management difficulties in Europe caused the company to miss sales opportunities before the whole continent went on vacation in June. The $283.6 million in revenues and $0.11 EPS in earnings were higher than Street expectations, but it was this down talk about Europe that caused a number of Wall Street analysts to trim their estimates for the third quarter today. There is a lot of detailed analysis of the rebate and its effect on next quarter's sales in the folder, as well as speculation on Jaz demand. Fool News correspondent MF Raleigh is dutifully working on a synopsis of the conference call to appear later this evening. Zip component manufacturer IMP INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IMPX)") else Response.Write("(NASDAQ: IMPX)") end if %> dropped $1 7/16 to $8 5/8 as well.
REPORT WORSE THAN EXPECTED EARNINGS? LSI LOGIC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LSI)") else Response.Write("(NYSE: LSI)") end if %> missed profit projections by a penny, dropping $1 5/8 to $18 7/8 in heavy trading today... COMSAT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CQ)") else Response.Write("(NYSE: CQ)") end if %> dropped $1 3/4 to $21 1/8 this morning after reporting dismal second quarter results and saying that the second half would be even worse... SEVENTH LEVEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SEVL)") else Response.Write("(NASDAQ: SEVL)") end if %> dropped $1 5/8 to $6 3/8 after reporting a wider than expected lost, pulling competitor MAXIS CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MXIS)") else Response.Write("(NASDAQ: MXIS)") end if %> $1 3/4 to $14 as well... ROBERD'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RBDS)") else Response.Write("(NASDAQ: RBDS)") end if %> didn't report a loss, but forecast one for this quarter, knocking the shares $1 1/2 to $9.
REPORT BETTER THAN EXPECTED EARNINGS AND STILL GO DOWN? CENTEX CONSTRUCTION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CTX)") else Response.Write("(NYSE: CTX)") end if %> dropped $2 5/8 to $27 7/8 in spite of reporting earnings ten cents better than expected yesterday... UNIVERSAL FOOD CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UFC)") else Response.Write("(NYSE: UFC)") end if %> dropped $3 1/4 to $30 1/2 after reporting $0.61 EPS, which was in line with estimates... INTEGRATED MEASUREMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IMSC)") else Response.Write("(NASDAQ: IMSC)") end if %> dropped $3 to $18 1/4 today after reporting earnings in line with expectations... OAKLEY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:OO)") else Response.Write("(NYSE:OO)") end if %> reported earnings a penny better than expected and still dropped $2 3/8 to $33 7/8 for its troubles... PROJECT DEVELOPMENT SOFTWARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PSDI)") else Response.Write("(NASDAQ: PSDI)") end if %> dropped $7 3/8 to $32 7/8 after reporting results two cents better than expected... NETSCAPE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NSCP)") else Response.Write("(NASDAQ: NSCP)") end if %> dropped $3 1/2 to $53 after doing a penny better than anticipated... FORE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FORE)") else Response.Write("(NASDAQ: FORE)") end if %> slumped $5 1/8 to $29 1/2 after reporting results in line with expectations... XYLAN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: XYLN)") else Response.Write("(NASDAQ: XYLN)") end if %> dropped $6 3/4 to $39 after meeting its numbers as well... HARMONIC LIGHTWAVES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HLIT)") else Response.Write("(NASDAQ: HLIT)") end if %> dropped $3 1/4 to $20 after reporting results three cents better than expected.
An Investment Opinion by MF Templar
FOOL ON THE HILL: Second Quarter Blues
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The market's reaction to the second quarter certainly has the media confused. Throughout the day, various talking heads reported that the second quarter was better than expected, worse than expected or in line with expectations depending on what you were watching and where you were reading. Simply underscoring the degree of subjectivity that undergirds opinions about matters financials from individuals with journalism degrees, a Fool delves deeper into the numbers to get a clearer sense of what is going on.
Things went awry with the media's ability to perceive the quarter objectively when the major indexes started to head south for the summer. "Earnings must be bad, the markets are down," is the common assumption. And there is some degree of truth to that. A certain breed of company in technology-space, the semiconductor-related concern, has been wetting its pants about future quarters. Unfortunately for these commentators, this is mainly because their price points have collapsed, not because actual unit volume is down.
High profile disappointments at Motorola (semiconductors and cellular phones), Digital Computer (the personal computers subsidiary) and Hewlett-Packard (broad-based computer systems and measurement devices) all got the market in a sour mood at the start of the quarter and the wave of positive announcements since then has done nothing to dim the tide. Company after company has reported spectacular results and has been crushed anyway. Sometimes this has been legitimate, when they have forecast problems in future quarters. Other times it has just been opportunistic, as investors just decided that the good times were over and they should take their profits on good news.
Except for a few special situations a day, downside volume has absolutely dwarfed upside volume over the past few weeks. Money managers moving to cash, making bets on the bond market or just deciding to sit out a few weeks or months until they figure out what is going on have driven programmed selling block after programmed selling block. Earnings roll out with positive surprises and blammo, the company is mashed.
After a year and a half of great markets, there are a lot of profits on the table. Professional money managers who are paid directly or indirectly with those profits are starting to take them to ensure that they have a salary over the next few weeks. What does this mean for the individual investor? The high cost of commissions still is a tremendous tax on small portfolios. Blipping in and out of the market is ultimately an inefficiency waste of capital. Individual investors who have decided to become owners of a publicly traded company can let long-term returns on assets, equity and invested capital bouy their shares over the decades.
The world for a Fool has never looked better. Europe and Japan starting to get a little less sluggish, capitalism breaking out all over the world and a Federal Reserve worried about an uptick in inflation because the U.S. economy is doing fine -- not exactly a scenario where companies fail to grow their earnings. Some legitimate valuation concerns aside, this ain't the mid-70's and this is not the 30's. People who natter on about the markets in the '30s seldom make the simplest of correlations to a devastating worldwide depression tied to tight money and the gold standard that absolutely sapped the reserve of the 33% of the world engaged in democracy.
Bulls may make money, bears may make money, pigs may get slaughtered -- but owners pay less taxes, less in commissions and earn solid above-market returns if they have the intelligence and intestinal fortitude to buy right. Be an owner.
Transmitted: 7/19/96
Iomega in Fooldom Today!
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