Today's Fool Plate Special in the Lunchtime News featured a pre-call look at Applied Materials. We're offering a slew of conference call summary reports today, including Dell, Applied Materials, JC Penney, Wal-Mart, Office Max, and Home Depot. Also available tonight will be a Special Section on retailers, incorporating conference calls, same-store sales numbers, and a report on the government retail numbers due out today.
MF Merlin's Economic News today reports on news releases covering advance retail sales estimates, real earnings, and the Consumer Price Index 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 Dell. Enjoy!
The following calls are for today:
ALADDIN KNOWLEDGE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ALDNF)") else Response.Write("(NASDAQ: ALDNF)") end if %>
1-719-444-0803 (code: 265091)
APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMAT)") else Response.Write("(NASDAQ: AMAT)") end if %>
after 8:30 p.m. EDT
1-800-642-1782 (code: 951947)
HOME DEPOT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HD)") else Response.Write("(NYSE: HD)") end if %>
after 10:00 a.m. EDT
1-402-220-6028
J.C. PENNEY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JCP)") else Response.Write("(NYSE: JCP)") end if %>
8:00 a.m. EDT
1-800-232-8641 -- live
WAL-MART <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WMT)") else Response.Write("(NYSE: WMT)") end if %>
10:00 a.m. - 1:00 p.m. EDT
1-800-633-8284 (code: 1882323)
The following calls are for tomorrow, Wednesday, August 14th:
ANCOR COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ANCR)") else Response.Write("(NASDAQ: ANCR)") end if %>
after 11:00 a.m. EDT
1-800-633-8284 (code 1885446)
COMPUSA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPU)") else Response.Write("(NYSE: CPU)") end if %>
10:00 a.m. EDT
1-800-374-0192 -- live
1-800-374-1292 -- live
1-800-374-1296 -- live
1-800-642-1687 (ID# 963520) -- replay at 4:00 p.m. EDT
News from ARGYLE TELEVISION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ARGL)") else Response.Write("(NASDAQ: ARGL)") end if %> that it is "exploring alternatives" and is considering sale of the company is boosting shares $5 1/4 to $28 1/4, past the company's 52-week high. The company's seven television stations could fetch a pretty penny in the post-telecommunications reform universe. The company is finding the idea of putting itself on the block increasingly attractive because of "rapid consolidation" in the broadcast industry, which has created a "competitive imperative for the Argyle stations to become part of a larger group."
News that MICROSOFT'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MSFT)") else Response.Write("(NASDAQ: MSFT)") end if %> new Web browser has built in a YAHOO! <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: YHOO)") else Response.Write("(NASDAQ: YHOO)") end if %> autosearch feature pushed shares of the Internet-based search engine up $2 5/8 to $19 7/8. Microsoft's new Explorer 3.0 is positioned against Netscape's browser and the inclusion of Yahoo's search engine as the default search means that Yahoo will experience many more "hits", thereby boosting its potential advertising revenues. Yahoo recently agreed to integrate search technology from Digital Equipment in its offerings.
Research that indicates GENZYME'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GENZ)") else Response.Write("(NASDAQ: GENZ)") end if %> bioresorbable membrane Seprafilm reduces scar tissue and adhesions following abdominal surgery is behind the Food & Drug Administration's decision to grant approval for Genzyme to market the product for this purpose. Shares of Genzyme were up $3 1/4 to $26 1/2 as a result. The approval has not only come sooner than expected, but it also authorizes a broader-than-expected range of applications -- literally, for "any open abdominal or pelvic surgery" -- a market of some 3 million annual procedures. Seprafilm is already in use in Europe. To hear a replay of a company conference call discussing this news, dial 402-220-2253 between now and 6 pm, August 20th.
QUICK TAKES: Diversified manufacturer ESCALADE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ESCA)") else Response.Write("(NASDAQ: ESCA)") end if %> certainly escalated today, up $2 3/8 to $8 5/8 after the company announced that it was beginning a one-million-share Dutch auction, priced somewhere between $6 and $10 a share... Farm equipment manufacturer DEERE & CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DE)") else Response.Write("(NYSE: DE)") end if %> plowed ahead $2 1/4 to $38 3/4 this morning after besting Zacks estimates of $0.78 EPS by a penny. The company grew profits by 14% while revenues were up 9%... PACIFIC GATEWAY EXCHANGE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PGEX)") else Response.Write("(NASDAQ: PGEX)") end if %> rose $1 3/4 to $16 3/4 after PaineWebber initiated coverage of the company with a "strong buy" rating. PaineWebber was the international long distance provider's lead underwriter in its initial public offering (IPO) a month ago... QIAGEN NV <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QGENF)") else Response.Write("(NASDAQ: QGENF)") end if %> jumped $1 3/8 to $22 3/8 after a "buy" recommendation from Alex. Brown & Sons. The separator of nucleic acids has a defensible market position that will support strong growth in sales and earnings, according to the West Coast firm.
MORE QUICK TAKES: CFM TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CFMT)") else Response.Write("(NASDAQ: CFMT)") end if %> jumped $1 to $8 3/4 on an initial "buy" rating from Montgomery Securities, which set its 12-month target at $18... HADCO CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HDCO)") else Response.Write("(NASDAQ: HDCO)") end if %> benefited from slightly-better-than-expected earnings this morning, jumping up $2 7/8 to $22 1/4. The company's $0.72 EPS quarter apparently made some value investors realize that even if profits do slacken over the next year or so, the stock is still really cheap... Petroleum product concern EVANS SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EVSI)") else Response.Write("(NASDAQ: EVSI)") end if %> gushed up $1 to $6 5/8 on earnings of $0.37 per share versus $0.05 in the year-ago quarter... News that construction machinery firm GENCOR INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: GX)") else Response.Write("(AMEX: GX)") end if %> will buy INGERSOLL RAND'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IR)") else Response.Write("(NYSE: IR)") end if %> Process Equipment Division for $72 million sent Gencor shares soaring, up $4 3/4 to $15 3/8.
What happens when a company is expected by analysts to earn $0.14 per share in its second quarter but it ends up posting a loss of $0.46 per share? Well, in the case of Israel-based ALADDIN KNOWLEDGE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ALDNF)") else Response.Write("(NASDAQ: ALDNF)") end if %>, it means that share value drops 15%, or $1 7/8 to $10 1/2. Much of the loss was attributed to acquisition-related reorganization costs, with the software security specialist's President and Chairman, Yanki Margalit, noting that, "The results for the first half of 1996 do not fully reflect the anticipated future benefits of the business combination with FAST and the purchase of Glenco's software security related business." Those wishing to hear the company's conference call can find the necessary numbers listed above, in section II.
Warnings from MAXIM INTEGRATED PRODUCTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MXIM)") else Response.Write("(NASDAQ: MXIM)") end if %> that unless customers reduce inventories or order more, the company could see near-term declining revenues precipitated a $2 1/2 to $29 7/8 drop in the analog circuit-maker. The company reported fourth quarter earnings of $0.17 per share, considerably less than the $0.49 that it earned in the year-ago quarter and that it was expected to approach this quarter. Just last week Chicago Corp. initiated coverage of Maxim with a "buy" rating and a 12-month target price of $50 to $60. Competitor LINEAR TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: LLTC)") else Response.Write("(NASDAQ: LLTC)") end if %> slumped $2 1/8 to $31 7/8 in sympathy.
Morgan Stanley was taking money off the table in the gaming stocks this morning. HARRAH'S ENTERTAINMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HET)") else Response.Write("(NYSE: HET)") end if %> dropped $7/8 to $21 1/4 after being initiated with a "neutral" rating, CIRCUS CIRCUS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CIR)") else Response.Write("(NYSE: CIR)") end if %> was munched for $1 3/4 to $30 1/8 after being downgraded to "outperform," and MIRAGE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MIR)") else Response.Write("(NYSE: MIR)") end if %> lost $1 to $22 in sympathy, with GRAND CASINOS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GND)") else Response.Write("(NYSE: GND)") end if %> slipping $1 5/8 to $14 3/4. Bear Stearns quickly got in on the action, though, with analyst Jason Ader calling the sell-off in Circus Circus "short-sighted," pointing to the company's strong management, balance sheet, and growth prospects.
QUICK CUTS: COVENTRY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CVTY)") else Response.Write("(NASDAQ: CVTY)") end if %>, down $7/8 to $13, joined the list of healthcare maintenance organizations posting worse-than-expected earnings when the company reported this morning that it actually managed to lose money in the last quarter... RECOTON <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: RCOT)") else Response.Write("(NASDAQ: RCOT)") end if %> slumped $1 1/8 to $15 1/4 after reporting a negative surprise, posting $0.05 EPS compared to consensus expectations of $0.21 EPS... Tobacco concern PHILIP MORRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MO)") else Response.Write("(NYSE: MO)") end if %> was dragged down $3 5/8 to $90 on further anxiety about potential legal liabilities... CHAMPION HEALTHCARE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CHC)") else Response.Write("(NYSE: CHC)") end if %> shares retreated $1 to $9 after the company approved a merger with Paracelsus Healthcare... SCIENTIFIC TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: STIZ)") else Response.Write("(NASDAQ: STIZ)") end if %> plunged $2 3/8 to $8 1/8 after reporting $0.10 per share compared with $0.17 in the year-ago period.
An Investment Perspective by
Randy Befumo
(MF Templar)
FOOL ON THE
HILL
Dell's Amazing Run
Some of you might think it is fun to analyze companies on a regular basis. You get paid to learn all sorts of cool stuff and you get to spend all day at work coming up with ideas for your investment portfolio. Well, I am sure none of you are crying for me, but there are days when it is quite frustrating to do this day in and day out. Poor job satisfaction? Nah. Lots of stress? Nope. All sorts of great ideas you never got around to doing the homework on that have doubled while you were not looking? Yepper. That's the one.
DELL COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DELL)") else Response.Write("(NASDAQ: DELL)") end if %> reported absolutely blow-out earnings today after the bell, posting $1.15 per share before a charge versus $0.66 EPS a year ago. Estimates were for $0.85 EPS, meaning that Dell overshot this goal by 35%. Dell has been in my "take a look at it" pile since early March, when COMPAQ COMPUTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> announced that it would not make its sales targets. (For details, check out the collection in the FoolWire area called: "3/1: Compaq Misses Sales Targets".) Investors will recall that Dell sat in the high $20s (adjusted for the recent 2-for-1 split) back then, after getting as low as $23 a stub only a month and a half before, during January's panic-driven decline.
Back then, people were worried about demand for personal computers and were afraid that after two fat years we would see the lean cow come trucking in. When DIGITAL EQUIPMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DEC)") else Response.Write("(NYSE: DEC)") end if %> pre-announced a weak third quarter less than three weeks later (see: 3/20: Weak 3Q at Digital Equipment), people freaked out again and Dell Computer hit $31 a share. At that time, co-founding Fool Tom Gardner was singing the praises of cash-rich, debt-free deals and the valuation looked compelling, assuming first quarter PC demand was not as bad as everyone thought. With HEWLETT-PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %> stealing share from the high end (hitting Compaq disproportionately) and Packard Bell, Acer and a number of others engaged in a death match at the low end, it seemed that the problem was not market growth but too much competition crushing the vulnerable.
When the numbers for first quarter demand finally came out (see 4/29/96: PC Demand: Where's It At? for details), things did not look nearly as bad as Compaq had made them sound. A concurrent inventory correction in the semiconductor universe had made many pundits conflate the two markets -- an assumption that has turned out to be erroneous. Yes, competition has apparently heated up in the personal computer arena. But come on folks, Dell just reported sales were up 40% to $1.69 billion. There are not that many companies with more than a billion in quarterly revenues growing at 20%-plus, let alone 40% without a speck of debt on the balance sheet and $910 million in "marketable securities."
It would have been nice to ride Dell up from its lows in the mid-to-high $20s to today's perch of $56 5/8. And because the company still trades at only 16.5 times trailing earnings after today, you could almost argue that the company is still undervalued based on the cash that it generates quarter after quarter. Dell's direct sales model emphasizes high margins and low working capital needs, allowing its free money to generate sale after sale without tying it up in inventory. Dell turns its inventory roughly 12.0 to 14.0 times a year, far above indirect sales concerns like Compaq that are happy if they break the 10.0 threshold. More inventory turns means less cash in inventory which means more cash in "marketable securities," always a nice place to save for a rainy day.
And you know, you could have had Dell for the low $40s in mid-July, at 9 times then-current estimates (which will probably get notched up in the next few days). Heck, the stock trades at 13 times next year's estimates, which probably will be going up in the coming days. With $5.8 billion in trailing sales, the company still trades at less than 1.0 times sales and 0.78 times enterprise value, low even considering the size of the operation. Given its growth and cash-generation powers, Dell could probably support a valuation of $70 without stretching all that much in the next six to twelve months, based on today's blitzkrieg performance alone.
"But box makers should only trade at 12 to 14 times earnings... they are a commodity business." This has been the refrain that has kept Dell pinned down to a low double digit multiple for years now. People used to say the same thing about shoes as well. For years, no one would pay more than 15 times earnings for Nike despite the free cash flow because shoes were commodities. Living proof that things change, Nike sits now at 28 times trailing earnings with plenty of happy shareholders. Anyone who recognized the real value in the company before the Street stood to profit substantially over the long haul. Shareholders of Dell for more than the past seven months have seen close to a double and will probably continue to hang on, as they obviously see 25%-plus long term growth in the underlying asset as well as the potential for the valuation of the asset itself to trend higher, virtually guaranteeing solid long-term results.
Now, if only *I'd* bought the darn thing knowing all of this, I would think I was really smart.
Randy Befumo (MF Templar),
a Fool
Fool On the Hill
Selena Maranjian (MF Selena),
a Fool
Heroes & Goats & Editing
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