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Amidst today's landslide of retail sales figures, women's clothing retailers and former snow jobs AnnTaylor Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ANN)") else Response.Write("(NYSE: ANN)") end if %> and Talbots Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TLB)") else Response.Write("(NYSE: TLB)") end if %> led the way with some sparkling results. AnnTaylor jumped $5 to $26 3/4 after reporting a 23.2% rise in July same-store sales, allowing the former problem child to pre-announce second quarter earnings of $0.24 to $0.27 a share. Analysts had been calling for earnings of $0.17 per share. Not to be outdone, Talbots Inc. picked up $2 5/16 to $24 1/16 after saying strong sales of its fashionable sportswear and sweaters will result in fiscal Q2 earnings between $0.02 and $0.04 a share, a substantial improvement over last year's loss of $0.35 a share and well ahead of analysts' expectations of a loss of $0.08 for the period.
Disk drive maker Seagate Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> rose $2 9/16 to $24 9/16 after computer products distributor CHS Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CHSE)") else Response.Write("(Nasdaq: CHSE)") end if %> made comments in its earnings conference call last night that it is seeing spot shortages for 3-4 gigabyte disk drives for desktop PCs. It also said that it may see shortages in coming quarters, all of which helped the ailing drive makers and component suppliers. It's been over a year since Seagate started to report problems and three quarters since Quantum Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QNTM)") else Response.Write("(Nasdaq: QNTM)") end if %> and Western Digital Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WDC)") else Response.Write("(NYSE: WDC)") end if %> started their sickening slides precipitated by Asian manufacturers' problems and inventory backups. The news helped not only Seagate, the juggernaut of drive industry, but boosted even more the number two and three players in the industry. Quantum gained $2 1/2 to $17 1/2 and Western Digital jumped $1 11/16 to $12 1/4.
Disk drive component suppliers made even larger moves than disk drive makers, with disk drive head company Read-Rite <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RDRT)") else Response.Write("(Nasdaq: RDRT)") end if %> gaining $1 13/16 to $7 9/16, HMT Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HMTT)") else Response.Write("(Nasdaq: HMTT)") end if %> rising $1 5/16 to $8 7/8, suspension assembly company Hutchinson Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HTCH)") else Response.Write("(Nasdaq: HTCH)") end if %> gaining $3 1/4 to $22 7/8, and lead-wire supplier Innovex <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INVX)") else Response.Write("(Nasdaq: INVX)") end if %> up $3/4 to $13 1/4. As encouraging as the news may be, investors should take the information with a grain of salt. CHS distributes storage products to smaller PC assemblers in Europe, Latin America, and the Middle East. The trends for those customers may not necessarily match that of the large PC original equipment manufacturers. Finally, extra capacity hasn't exactly been disposed of like the choppers pushed off the decks of U.S. aircraft carriers off the coast of South Vietnam in 1975. Capacity can come back very quickly. Nevertheless, the incremental news was encouraging and even spilled over into the PC industry, where Compaq <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> gained $3 to $34 15/16 and Gateway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> climbed $6 to $59.
QUICK TAKES: Motion picture company Metro-Goldwyn-Mayer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MGM)") else Response.Write("(NYSE: MGM)") end if %> roared $13/16 higher to $17 15/16 after confirming it is considering various "strategic alternatives" in its quest to become an integrated global entertainment company. The company also said it is holding informal talks with unidentified firms regarding possible business combinations... Business software company Computer Associates International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %> advanced $4 7/8 to $38 1/2 after announcing that RadioShack Canada has chosen the company's Unicenter TNG to manage its diverse enterprise computing environment... Help desk solutions specialist Remedy Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RMDY)") else Response.Write("(Nasdaq: RMDY)") end if %> jumped $2 1/8 to $13 3/4 after announcing plans to buy back up to 3 million shares, or roughly 10% of its total outstanding shares, over the next 12 months.
Satellite maker and systems operator Loral Space & Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LOR)") else Response.Write("(NYSE: LOR)") end if %> was lifted $2 1/16 to $25 7/16 after Bear Stearns started coverage of the stock with a "buy" rating... Death care company Equity Corp. International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: EQU)") else Response.Write("(NYSE: EQU)") end if %> picked up $2 13/16 to $24 15/16 after announcing it has agreed to merge with Service Corp. International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SRV)") else Response.Write("(NYSE: SRV)") end if %>, the world's largest funeral and cemetery company, for $27 a share in Service Corp. stock. Service Corp. rose $2 3/8 to $36 3/8... Communications equipment maker Scientific-Atlanta <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SFA)") else Response.Write("(NYSE: SFA)") end if %> climbed $2 15/16 to $23 15/16 after announcing that a TCI Ventures Group subsidiary will buy "substantial quantities" of advanced digital set-top devices and supporting network equipment from the company for an unspecified sum.
Satellite-based radio system developer CD Radio <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CDRD)") else Response.Write("(Nasdaq: CDRD)") end if %> beamed up $5 3/16 to $27 15/16 after Bear Stearns started coverage with a "buy" rating... Cable TV and telecommunications company Cox Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COX)") else Response.Write("(NYSE: COX)") end if %> moved ahead $2 13/16 to $46 5/16 after The Wall Street Journal reported that the firm has started offering cable-based phone service in Orange County, California, and plans to offer the service in nine other markets... Semiconductor photomask maker DuPont Photomasks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DPMI)") else Response.Write("(Nasdaq: DPMI)") end if %> tacked on $2 7/8 to $33 7/8 after Credit Suisse First Boston started coverage with a "buy" rating... Fibre channel and network access products maker Emulex Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EMLX)") else Response.Write("(Nasdaq: EMLX)") end if %> gained $2 3/16 to $9 1/2 courtesy of a Morgan Keegan upgrade to "market outperform" from "market perform."
Hotel real estate investment trust (REIT) MeriStar Hospitality Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MHX)") else Response.Write("(NYSE: MHX)") end if %> added $1 to $19 1/8 after selling a 14-story Houston office building for an unspecified sum. The company's CFO also told Bloomberg News that it plans to sell 12 of its less profitable hotels... Tel-Save Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TALK)") else Response.Write("(Nasdaq: TALK)") end if %> rang up $1 7/8 to $13 1/16 after Deutsche Bank Securities reiterated its "buy" rating, saying the long-distance phone service company may have sold 1 million new lines during July... Discount general merchandise retailer Family Dollar Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FDO)") else Response.Write("(NYSE: FDO)") end if %> gained $1 15/16 to $18 1/4 after reporting a 12.1% rise in July same-store sales compared to the same month a year ago.
Online discount brokerage E*Trade Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EGRP)") else Response.Write("(Nasdaq: EGRP)") end if %> rose $2 5/8 to $27 1/8 after signing marketing deals with Web portal company Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> and Ziff Davis' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ZD)") else Response.Write("(NYSE: ZD)") end if %> ZDNet website. Ziff Davis added $1 3/16 to $11 3/4 and Yahoo! tacked on $3 1/2 to $87 3/8. Japan's SOFTBANK holds stakes in all three companies... Western Atlas <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WAI)") else Response.Write("(NYSE: WAI)") end if %> climbed $4 11/16 to $61 3/8 after fellow oilfield services firm Baker Hughes <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BHI)") else Response.Write("(NYSE: BHI)") end if %> said its shareholders will vote on the proposed merger of the two companies on Monday. Baker Hughes, which rose $1 7/16 to $22 13/16 today, reportedly expects to close the deal shortly after the vote.
Earnings Movers
Crystal Systems Solutions <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CRYSF)") else Response.Write("(Nasdaq: CRYSF)") end if %> up $1 1/8 to $10 15/16; Q2 EPS : $0.20 vs. $0.12 last year; No estimates
Global TeleSystems Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GTSG)") else Response.Write("(Nasdaq: GTSG)") end if %> up $3 21/32 to $50 3/4; Q2 EPS: $0.48 loss vs. $0.63 loss last year; No estimates
Kendle International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KNDL)") else Response.Write("(Nasdaq: KNDL)") end if %> up $1 3/8 to $26 3/8; Q2 EPS: $0.17 vs. $0.12 last year; Estimate: $0.15
Protein Design Labs <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PDLI)") else Response.Write("(Nasdaq: PDLI)") end if %> up $3 1/8 to $23 1/4; Q2 EPS: $0.05 loss vs. $0.16 loss last year; Estimate: $0.22 loss
Sunterra Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OWN)") else Response.Write("(NYSE: OWN)") end if %> up $1 15/16 to $11 3/4; Q2 EPS: $0.27 vs. $0.18 last year; Estimate: $0.27
Managed care provider United HealthCare <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UNH)") else Response.Write("(NYSE: UNH)") end if %> tumbled $15 to $37 7/8 after reporting fiscal Q2 operating EPS of $0.66, which was on target with the Street's mean estimate. (That's good!) However, the company also reported a $900 million pre-tax charge for a reorganization. (Ouch, that's bad!) The charge surprised almost everybody -- including Merrill Lynch, which quickly downgraded the company to "neutral" from "buy." It also threw United's planned merger with Humana <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HUM)") else Response.Write("(NYSE: HUM)") end if %> into a state of flux, prompting a $6 5/8 decline in Humana's shares to $19 1/8. Humana refused to comment on the release until it had a chance to sit down and chat with United. Regardless of what effect the disclosure will ultimately have on the merger, today's bombshell appears to lend credence to the view that sustainable, predictable growth in the managed care business is probably still a ways off.
Leading premium cigar distributor and retailer 800-JR Cigar <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: JRJR)") else Response.Write("(Nasdaq: JRJR)") end if %> was smoked for a $4 1/2 loss to $14 following last night's release of disappointing second quarter results. JR delivered earnings of just $3.9 million, or $0.31 per share, well below the two-analyst consensus of $0.37. Sales increased to $70 million, up 15.9% from last year's $60.4 million. However, gross margins fell to 19.5% from 20.5% in the year-ago period. Though the faddishness of cigar bars has faded some, sales of premium smokes remain relatively strong according to most industry analysts. The problem is that inventories continue to be too high. Indeed, though some observers believed the glut would abate by the fourth quarter of this year, it now looks like the smoke won't clear for JR and its buddies Consolidated Cigar <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CIG)") else Response.Write("(NYSE: CIG)") end if %> and General Cigar <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MPP)") else Response.Write("(NYSE: MPP)") end if %> until at least the first quarter of 1999.
QUICK CUTS: Credit card and travel services giant American Express Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AXP)") else Response.Write("(NYSE: AXP)") end if %> lost $7 3/8 to $101 1/16 after chairman Harvey Golub told analysts yesterday that the Asian financial crisis is hurting the firm's travel business in that region and may result in the company missing some of its internal growth goals for the fiscal year... Investors in Stage Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SGE)") else Response.Write("(NYSE: SGE)") end if %> exited stage left today, dropping the clothing retailer $13 1/8 to $10 3/8 after it said fiscal Q2 EPS will come in between $0.02 to $0.05, way below the $0.28 expected by analysts surveyed by First Call... Pacemaker manufacturer Medtronic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDT)") else Response.Write("(NYSE: MDT)") end if %> skipped a beat, falling $5 15/16 to $53 7/16 after saying it sees fiscal Q1 EPS of $0.32, "beating" last year's $0.31 but short of the Street's estimate of $0.34.
Online services provider America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> lost another $2 to $105 3/8 after saying yesterday that it is talking with the SEC about how to properly account for its recent acquisitions of Mirabilis and NetChannel... Oil exploration and production firm Royal Dutch Petroleum <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RD)") else Response.Write("(NYSE: RD)") end if %> was drilled for $3 7/16 to $45 11/16 after saying that falling oil prices resulted in a 17% decline in second quarter earnings from a year ago to $1.54 billion... Consumer products giant Sara Lee Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLE)") else Response.Write("(NYSE: SLE)") end if %> slid $2 to $50 1/16 after reporting fiscal Q4 EPS of $0.62, missing the First Call mean estimate by a penny... Motor oil maker and Jiffy Lube oil change center operator Pennzoil Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PZL)") else Response.Write("(NYSE: PZL)") end if %> leaked $5/8 to $40 1/2 after reporting fiscal Q2 EPS of $0.17, a penny ahead of the IBES mean estimate but down from the $0.51 reported a year ago.
High oxygen implanters and semiconductor wafers supplier Ibis Technology Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IBIS)") else Response.Write("(Nasdaq: IBIS)") end if %> glided $2 lower to $11 3/4 after reporting fiscal Q2 EPS of $0.01, missing the Street's mean estimate by $0.02... Corporate meeting and event planner Caribiner International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CWC)") else Response.Write("(NYSE: CWC)") end if %> slipped $2 3/4 to $11 1/2 after reporting fiscal Q3 EPS of $0.25, a penny shy of the Street's mean estimate. The company said its "focus" is on bringing its costs "in line with ongoing revenue growth"... Automated industrial production equipment maker DT Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DTII)") else Response.Write("(Nasdaq: DTII)") end if %> moved down $1 1/4 to $17 1/8 after reporting fiscal Q4 EPS of $0.68, missing the Street's mean estimate by a penny. The firm said softness in the electronics and agricultural industries will continue to hamper results in the next two quarters.
Internet marketing firm Think New Ideas <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: THNK)") else Response.Write("(Nasdaq: THNK)") end if %> dropped $1 7/16 to $19 1/16 after reporting fiscal Q4 EPS of $0.09, which was in line with the Street's expectations. However, the results excluded $21.7 million in charges to release shares held in an escrow account for the firm's founders and a $1.69 million severance package for former CEO Scott Mednick... Applied Graphics Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AGTX)") else Response.Write("(Nasdaq: AGTX)") end if %> was knocked down $13 5/8 to $32 7/8 after Goldman Sachs reportedly cut its fiscal 1998 estimates for the digital prepress services provider to $1.50 per share from $1.55 per share... Eyeglass lens maker Sola International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SOL)") else Response.Write("(NYSE: SOL)") end if %> dropped another $1 1/4 to $16 1/4 after saying late Tuesday that earnings growth will be slowed by soft U.S. sales, prompting a downgrade from Merrill Lynch yesterday.
Specialty underwriter and commercial insurance products distributor Paula Financial <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PFCO)") else Response.Write("(Nasdaq: PFCO)") end if %> sank $2 1/2 to $10 after reporting a Q2 loss of $1.26 per share yesterday, missing analysts' expectations of earnings of $0.40 per share... Marks Brothers Jewelers <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MBJI)") else Response.Write("(Nasdaq: MBJI)") end if %> was stoned $1 3/4 to $16 after saying Q2 same-store sales rose 3% from a year ago, which was "slightly below plan"... Milk and dairy products distributor Suiza Foods Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SZA)") else Response.Write("(NYSE: SZA)") end if %> was spoiled for a $3 3/4 loss to $46 1/4 after saying yesterday that it would increase its future ad and marketing spending in an attempt to launch a national brand of milk.
FOOL
ON THE HILL
An Investment Opinion
by
Alex Schay
Sunbeam's Cloudy Future
When newly anointed Sunbeam <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SOC)") else Response.Write("(NYSE: SOC)") end if %> CEO Jerry Levin took his post he adamantly asserted that he wouldn't have taken the position if he didn't believe he could be successful at restoring the company's fundamental health and viability. Although this goal still may be achievable, the time frame for doing so got pushed out a bit today when Sunbeam announced that it will restate Q1 1998 results, all of 1997, and possibly 1996 as well. If you think the lawsuit volume at Cendant <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %> is going to be bad, this event will likely precipitate the greatest litigious deluge known to corporate man -- on top of all the Sunbeam lawsuits already in progress. Almost everyone will want their souvenir piece of the ole' chainsaw. Even though Al Dunlap is gone, today's announcement will aid Sunbeam's efforts to prevent him from getting his $27 million severance package (valued at the time of his firing).
Up until today, investors had been busily attempting to assess the scope of the adjustments to trade channel and company inventory that would be made in the upcoming second quarter -- thanks to Sunbeam's recent Dunlap-engineered history of pushing too much inventory into the system in order to meet aggressive expectations. Taking into account the seasonal nature of some of its products, like grills and electric blankets, some felt that Sunbeam would probably need until mid-year 1999 to return to normal levels. Sunbeam's reluctance to do any deals (perhaps a result of Levin's focus at Coleman of sustaining margins over an all-out sales push) and the expectation by retailers that Sunbeam would have to provide incentives in order to meet earnings had resulted in a standoff. The first to blink, however, were analysts who began to lower Q2 expectations in late July, assuming that retailers would gain the upper hand.
Perhaps the most disturbing shock to the financial analysis process comes from the revisionist history of audit committees. Since expectations are built on the bedrock of past results, which have ostensibly endured the crucible of incremental scrutiny, an investor's world is turned upside down when it is suggested that the world is even more uncertain than the day before. Nowhere is this more the case than at Sunbeam, where 1997 results became the feather in Dunlap's cap, allowing him to justify a lot of his business practices on the basis of restored profitability for Sunbeam.
Income Statement 1996 1997
Segment Est.Op. Est.Op.
Breakdown: Sales Profits Sales Profits
Kitchen
Appliances $325.0 $16.0 $384.0 $70.4
Outdoor Cooking $250.0 $8.0 $298.0 $48.0
Personal
Care & Comfort $200.0 $11.0 $243.0 $47.0
Health Care $129.0 $9.0 $150.0 $27.0
Professional
Pdt's $80.0 $7.0 $93.2 $22.0
Total $984.0 $2.2 $1,168.2 199.4
Pretax Income ($12.7) $189.3
Taxes ($5.0) $66.2
Net Income ($7.7) $123.1
(Numbers in millions)Please see the Motley Fool's Conference Calls page for call information and links to synopses.
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool
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