The Motley Fool, 04/24/97: The Evening News

HEROES

IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> jumped $11 3/8 to $153 3/4 after reporting Q1 earnings per share (EPS) of $2.37, beating estimates of $2.28 by a small margin. Investors were quite happy with the company's progress in the face of a strong dollar, as well as IBM's performance in PCs and disk drives. Despite the generally held belief that the dollar will continue to remain strong, the company's chief financial officer said IBM is comfortable with analysts' models going forward. While a number of heavyweight analysts were tweaking those models today, the bottom of the published earnings estimate range today was about $12.25 per share for the 1997 fiscal year, which ends in December. Institutional investors evidently feel fine directing dollars into Big Blue when it's selling at less than 13 times this year's estimated earnings.

Transaction processing company CHECKFREE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CKFR)") else Response.Write("(Nasdaq: CKFR)") end if %> climbed $2 1/4 to $12 7/8 on reporting a Q3 operating loss of $0.10 per share (zapping out acquisition costs and other one-time items), beating expectations for a loss of $0.12 per share. The company said its core rate of subscriber growth year-over-year was 300% and 15%, sequentially. The per-subscriber valuation has come down to $430 per head at the end of the quarter from over $1,700 last year. Ongoing revenues coming from transactions, servicing, and maintenance grew 166% over that same period, suggesting that there could be room for some of the newer users to discover new services. However, one disturbing trend year-over-year was the 34% decline in transaction and maintenance fee revenues per subscriber.

Supply chain management software company I2 TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ITWO)") else Response.Write("(Nasdaq: ITWO)") end if %> gained $2 1/4 to $36 1/4 after reporting Q4 revenues of $26.5 million and EPS of $0.09, up 187% and 125% respectively over Q4 1996. This is another company that makes client-server applications used by a vendor and its customers to track inventory through the supply and production process. These products, which are advertised as offering internal rates of return of 500% on the software investment, have swiftly become need-to-have rather than nice-to-have. According to I2's statistics, inventories can be reduced 60%, order lead times can be cut 10% to 40%, and late orders can be reduced 25% to 50%. In the last four trading sessions companies in this sector have made nice gains: I2 is up 6.6%, BAAN CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BAANF)") else Response.Write("(Nasdaq: BAANF)") end if %> is up 9.2%, PEOPLESOFT INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSFT)") else Response.Write("(Nasdaq: PSFT)") end if %> has gained 20%, and ASPECT DEVELOPMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASDV)") else Response.Write("(Nasdaq: ASDV)") end if %> is up 18%. All reported earnings this week, as did market leader SAP AG.

QUICK TAKES: Digital video editing equipment company AVID TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AVID)") else Response.Write("(Nasdaq: AVID)") end if %> gained $5 to $20 on reporting Q1 EPS of $0.08, beating estimates of a loss of $0.09 per share... EDIFY CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EDFY)") else Response.Write("(Nasdaq: EDFY)") end if %> gained $2 5/8 to $12 after the self-service helpdesk software company reported Q1 EPS of $0.03 on revenues of $12.3 million... Construction company GUY F. ATKINSON CO. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATKN)") else Response.Write("(Nasdaq: ATKN)") end if %> gained $1 1/2 to $7 after announcing a $37 million 30-month contract with Queens College... LEASING SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LSSI)") else Response.Write("(Nasdaq: LSSI)") end if %> jumped $1 3/4 to $11 1/2 after the PC and computer gear leasing company reported Q1 EPS of $0.30, surpassing the mean estimate of $0.28... Restaurant company RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %> climbed $3 1/16 to $21 1/8 after reporting Q1 operating EPS of $0.16, beating estimates of $0.13... SELECT SOFTWARE TOOLS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SLCTY)") else Response.Write("(Nasdaq: SLCTY)") end if %> added $1 1/2 to $14 1/2 after the application tools software company reported Q1 EPS of $0.05 on a 146% increase in revenues... Disk drive media company STORMEDIA INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: STMD)") else Response.Write("(Nasdaq: STMD)") end if %> rose $1 3/8 to $14 1/4 after the company reported a 33% sequential decline in revenues but said production had bounced back in the current quarter... MERCURY INTERACTIVE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MERQ)") else Response.Write("(Nasdaq: MERQ)") end if %> rose $1 3/8 to $11 7/8 as the software testing tools maker reported Q1 EPS of $0.11, ahead of estimates of $0.10... Online brokerage company E*TRADE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGRP)") else Response.Write("(Nasdaq: EGRP)") end if %> picked up $1 3/8 to $17 11/16 after reporting Q2 EPS of $0.09 on revenues of $32.2 million... MEMC ELECTRONIC MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WFR)") else Response.Write("(NYSE: WFR)") end if %> rose $3 3/8 to $26 1/2 after the silicon wafer manufacturer reported a Q1 loss on revenues of $222 million, but said it expects the second quarter to bring a sales revival... Cosmetics company REVLON INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: REV)") else Response.Write("(NYSE: REV)") end if %> gained $2 to $35 1/4 after reporting a 6.1% increase in Q1 revenues and a 4.9% increase in operating earnings... DONCASTERS PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DCS)") else Response.Write("(NYSE: DCS)") end if %> rose $2 3/8 to $22 1/8 after the British aerospace company reported Q1 revenues of $54 million and a 33% increase in earnings per share... COMPUTER ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %> rose $4 3/8 to $48 1/2 after the mainframe and client-server software company yesterday pre-announced Q4 EPS of $0.90, ahead of estimates of $0.86 per share, apparently having dealt effectively with European problems and product transitions... Business travelers airline MIDWEST EXPRESS HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MEH)") else Response.Write("(NYSE: MEH)") end if %> gained $2 7/8 to $41 5/8 after reporting Q1 EPS of $0.67, buzzing estimates of $0.59... THIOKOL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TKC)") else Response.Write("(NYSE: TKC)") end if %> gained $4 1/8 to $66 after the aerospace company reported solid profits yesterday.

GOATS

Long-distance company ACC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ACCC)") else Response.Write("(Nasdaq: ACCC)") end if %> fell $5 1/4 to $17 1/4 after reporting Q1 EPS of $0.23, meeting estimates, but revenues were below some investors' expectations. The company's results really didn't reflect the pricing pressures in the commodity business of long-distance services that have brought down competitors such as AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %>, LCI <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LCI)") else Response.Write("(NYSE: LCI)") end if %>, and FRONTIER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRO)") else Response.Write("(NYSE: FRO)") end if %>. ACC's revenues per billable minute only declined 3.2% year-over-year, while network costs per billable minute declined 8.5%. The company said it expects its strong results to continue. Investors must think differently, including Wheat First Butcher Singer, which took ACC off its "action list" today.

US AIRWAYS GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: U)") else Response.Write("(NYSE: U)") end if %>, formerly USAir, nee Allegheny Airlines, fell $2 5/8 to $31 1/2 after yesterday's killer earnings report as investors realized all is not well with the company's labor relations. The Air Line Pilots Association took umbrage with the company's verbiage in yesterday's earnings report and in interviews in which Chair Steven Wolf said: "The lack of progress in reducing US Airways' costs to competitive levels leaves us no choice but to conclude that the company must promptly implement the appropriate steps to address the issue." The pilots contend that they have an offer on the table. The pilots also said negotiators have made progress in the latest round of talks, which began on Tuesday. Investors feel caught in the middle of the never-ending drama of the company's labor relations, which is the only factor marring an otherwise nearly flawless earnings report.

QUICK CUTS: Satellite company COMSAT CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CQ)") else Response.Write("(NYSE: CQ)") end if %> lost $2 to $20 3/8 after announcing that it is suing its former CEO, alleging that he was involved with an investment group that has threatened a proxy fight with the company... TOMMY HILFIGER CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOM)") else Response.Write("(NYSE: TOM)") end if %> lost $3 3/8 to $41 3/8 after Robertson Stephens cut its rating on the apparel company to "long-term attractive" from "buy"... Medical products maker SUNRISE MEDICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SMD)") else Response.Write("(NYSE: SMD)") end if %> slid $1 to $10 1/4 after reporting EPS of $0.14 (before extraordinary items), which missed estimates of $0.15... XOMA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XOMA)") else Response.Write("(Nasdaq: XOMA)") end if %> lost $1 3/8 to $3 15/16 after announcing a delay in a kidney transplant drug study... Norwegian telecom equipment company NERA AS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NERAY)") else Response.Write("(Nasdaq: NERAY)") end if %> fell $11 1/8 to $33 1/4 on reporting flat year-over-year growth in pre-tax earnings of approximately $3.75 million... SANGSTAT MEDICAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SANG)") else Response.Write("(Nasdaq: SANG)") end if %> lost $5 1/8 to $16 3/8 after announcing an expansion in "its clinical trial program and sales and marketing team to further its near-term product commercialization strategies"... Short- and medium-haul trucking company KNIGHT TRANSPORTATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KNGT)") else Response.Write("(Nasdaq: KNGT)") end if %> was dragged down $5 to $21 1/2 after Alex. Brown lowered its rating on the company from "strong buy" to "buy" following its Q1 earnings report... Semiconductor equipment manufacturer TRIKON TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TRKN)") else Response.Write("(Nasdaq: TRKN)") end if %> fell $1 1/8 to $5 7/8 before the company reported a Q1 loss of $11.6 million after bell... READ-RITE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RDRT)") else Response.Write("(Nasdaq: RDRT)") end if %> lost $3 5/8 to $27 5/8 even though the disk drive headmaker reported Q2 EPS of $0.48, beating estimates of $0.38... RATIONAL SOFTWARE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RATL)") else Response.Write("(Nasdaq: RATL)") end if %> fell $1 13/16 to $10 15/16 after the software test tools company reported a 27% year-over-year decline in Q4 pre-charge operating income, which also dragged down merger partner PURE ATRIA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PASW)") else Response.Write("(Nasdaq: PASW)") end if %> $1 1/4 to $7... Management consultants RENAISSANCE SOLUTIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RENS)") else Response.Write("(Nasdaq: RENS)") end if %> lost $3 5/8 to $21 1/8 after reporting Q1 EPS of $0.23, beating estimates of $0.22.

FOOL ON THE HILL
An Investment Opinion by Randy Befumo

Hit the Deck!

DECKERS OUTDOOR CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DECK)") else Response.Write("(Nasdaq: DECK)") end if %> bounded $1 15/16 to $8 after the sports sandal manufacturer delivered stronger-than-expected earnings. Shareholders in the maker of Teva, Simple and Ugg sandals have been treated to a horror show over the past five months as the stock plunged from around $10 to the $6 level it occupied until yesterday. Heavy competition in the sports sandal market in early 1995 initially pushed the stock into the valley of darkness. Deckers still trades well below its May 1995 high of $18 before dozens of imitators flooded the sports sandal market with Teva knock-offs.

Deckers reported EPS of $0.22 on $34.4 million in sales, 10% better than consensus estimates of $0.20 per share. Although this represents strong growth from last year's $0.16 per share in profits on $28.8 million in revenues, this is still well below the Deckers peak of $0.49 per share in profits on $36.1 million in revenues in the first quarter of 1995. To be fair, in fiscal 1995 Deckers only did $21.8 million in revenues the second quarter compared to $27.6 million in the second quarter of 1996. Should Deckers post similar revenue growth in this year's second quarter, it will top 1995's first half revenues by roughly 14%.

Wall Street has long viewed the shoe business as one of the more stable consumer industries. Although packaged foods and other consumables tend to get a lot of attention when economic hard times appear, shoes also remain fairly consistent sellers. While you can put off additions to your wardrobe, shoes have an unfortunate tendency to wear out. Witness the presence of Dexter Shoes in the portfolio of Warren Buffett and Charlie Munger's BERKSHIRE HATHAWAY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRK)") else Response.Write("(NYSE: BRK)") end if %>. The only problem with Deckers is the trendy nature of the sports sandal -- do the Teva, Simple and Ugg brands have what it takes to withstand the multi-pronged assault from their competition over time?

Operating margins at Deckers improved substantially in the quarter, rising to 10.7% in the fiscal first quarter. This compares favorably with the 9.5% operating margins that the company posted in the first quarter of 1996. In addition to making headway in its operations, the company has been pretty good about using its cash to the advantage of shareholders. Deckers recently completed the repurchase of 300,000 shares, leaving it with roughly 9.04 million outstanding, although it still only has a little more than a million in cash on the balance sheet. If Deckers can maintain the sales momentum it posted today through the rest of the year, sales for the full year could hit around $115 million. The company's market capitalization is currently about $70.1 million, putting it at 0.65 times trailing sales and 0.60 times forward sales.

Current estimates assembled by First Call show that analysts expect Deckers to post $0.53 EPS this year and a $0.65 in fiscal 1998, putting it at 14.6 times next year's estimate and 11.9 times the 1998 estimate. If the company can continue to keep its operating margins up 1.2% over last year through the full fiscal year, the 1997 estimate may prove to be low -- $0.57 to $0.60 EPS may be a better range. This would allow the company to increase profits by almost 50% over last year's $0.39 EPS on revenue growth of about 15% to 20%. If Deckers can post these kind of numbers without getting walloped by knock-off competition, $10 to $12 a share would probably not be out of the question.

CONFERENCE CALLS

US ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USRX)") else Response.Write("(Nasdaq: USRX)") end if %>
Available after 7:00 PM EDT
(800) 696-1563 (code: 164010) -- replay

THE MONEY STORE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MONE)") else Response.Write("(Nasdaq: MONE)") end if %>
(800) 964-4236

WILD OATS MARKETS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OATS)") else Response.Write("(Nasdaq: OATS)") end if %>
(800) 329-0171 (code 2678083) -- replay available through 5:00 PM April 25

RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %>
(402) 222-9939

HEWLETT PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>
VERIFONE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: VF)") else Response.Write("(NYSE: VF)") end if %>
Replay available from 4:15 PM EDT today through 8:00 PM EDT on 4/25, and from 10:00 AM EDT on 4/28 through 8:00 PM EDT on 4/30
(800) 633-8284 (reservation # 2699996)

UNITED COMPANIES FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UC)") else Response.Write("(NYSE: UC)") end if %>
(800) 475-6701 (code 336752)
(321) 365-3844 -- outside US

COMPUTER ASSOCIATES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %>
Replay available from 9:00 PM EDT through 6:00 PM EDT on 4/25
(888) 243-0816 (password: 4647) -- Note: number is toll-free

IONA TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IONAY)") else Response.Write("(Nasdaq: IONAY)") end if %>
(800) 475-6701 (code: 338970)
(320) 365-3844 (code: 338970) -- outside US

RTW INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RTWI)") else Response.Write("(Nasdaq: RTWI)") end if %>
replay available from 2:00 p.m. EDT through 4/28
(800) 475-6701 (code: 338849)
(320) 365-3844 (code: 338849) -- outside US

FORCENERGY INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: FGAS)") else Response.Write("(Nasdaq: FGAS)") end if %>
(800) 475-6701 (code: 338955) -- replay avail. through 4/29
(320) 365-3844 (code: 338955) -- replay (outside US)

MATTSON TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MTSN)") else Response.Write("(Nasdaq: MTSN)") end if %>
(402) 220-6969 -- replay available through 5/6

ACE CASH EXPRESS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AACE)") else Response.Write("(Nasdaq: AACE)") end if %>
(800) 642-1687 (code 355311)
From 6 PM EDT, replayed every two hours

OLSTEN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OLS)") else Response.Write("(NYSE: OLS)") end if %>
(800) 475-6701 (code: 338904) -- replay through 4/24
(320) 365-3844 (code: 338904) -- replay (outside US)

GENZYME TISSUE REPAIR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GENZL)") else Response.Write("(Nasdaq: GENZL)") end if %>
(402) 220-5189 (confirmation # 664581) -- replay through 4/30

THIS WEEK'S CONFERENCE CALL SYNOPSES

TEXAS INSTRUMENTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %> Q1 Conference Call
MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> Q3 Conference Call

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