CONFERENCE CALLS
07/24/96 (Thursday)
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INVESTMENT OPINION
US Robotics Get Busy Signal
US ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USRX)") else Response.Write("(NASDAQ: USRX)") end if %> dropped $9 1/4 to $56 3/4 this morning after posting earnings of $0.66 EPS for the fiscal third quarter, two cents ahead of expectations. US Robotics posted 130% revenue growth and 120% earnings per share growth when compared to last year and 20% revenue growth and 20% earnings per share growth when compared to last quarter. The company failed to beat estimates by a much slimmer margin than the 17% last quarter and 13% the quarter before because the company guided analysts to expect 15% sequential revenue growth last quarter.
The real problem for shares of US Robotics this morning was what the company had to say about the fourth quarter. US Robotics said that earnings and revenues ''may not increase at the same rate as in recent quarters," spooking out the so-called momentum investors. A great example of momentum investors jumping off was the rumor that 20th Century Fund Advisers was dumping shares at the $50 level on the Instinet last night.
Twentieth Century Fund Advisers is said to have sold somewhere between 600,000 and 2.6 million shares before the market opened this morning. Twentieth Century is a premiere quantitative investment advisory group, which uses an approach that focuses on how well the company is doing on a percentage basis versus: (a) last year, (b) last quarter and most importantly (c) analyst expectations. Normally labeled "momentum" by the popular press, "quants" buy and sell based solely on the numbers their models spit out, the reason why Twentieth Century was willing to dump shares so much lower than the market opened today.
The economics behind the US Robotics comments are simple. First, companies just cannot grow at 100%-plus rates forever. Inevitably, they come up against what is called by some the "law of big numbers." In addition, with Hayes Microcomputer selling modems again, another brand has entered the picture and will potentially slow US Robotics growth in that sector. Yet, US Robotics is doing a heck of a lot better than Zoom Telephonics and has a very strong systems business in the intelligent hub arena to support its overall growth as a company. With $547 million, the company has a $2.2 billion dollar revenue "run-rate" and a $5.5 billion dollar market capitalization. Essentially, US Robotics ran into the same problem today that Iomega hit last week and America Online hit last quarter -- momentum investors are bailing out because of comments about slow sequential growth.
Storage technology concern WESTERN DIGITAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WDC)") else Response.Write("(NYSE: WDC)") end if %> reported earnings that were significantly higher than expected, boosting the entire drive-making industry. Shares of Western Digital were up $3 1/8 to $26 7/8, SEAGATE TECH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> rose $2 7/8 to $43 1/4, QUANTUM CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: QNTM)") else Response.Write("(NASDAQ: QNTM)") end if %> popped up $7/8 to $11 7/8 and KOMAG <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: KMAG)") else Response.Write("(NASDAQ: KMAG)") end if %> surged $1 to $21 3/8.
LIVING CENTERS OF AMERICA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LCA)") else Response.Write("(NYSE: LCA)") end if %> reported earnings in line with consensus expectations this morning, adding that it would buy back up to $20 million in stock to fund employee stock purchase plans. Shares rose $1 1/2 to $23 7/8.
A tremendous turnaround continues at GALOOB TOYS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GAL)") else Response.Write("(NYSE: GAL)") end if %> as shares rose $1 5/8 to $24 1/2 today after losing significantly less than expected in its off summer quarter. The stock has almost quadrupled in the past 52 weeks.
CALIFORNIA FEDERAL BANCORP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAL)") else Response.Write("(NYSE: CAL)") end if %> rose $7/8 to $21 after news broke this morning that First Nationwide was in talks to buy the thrift. In The Evening News on July 1st, the Fool On The Hill column detailed why California thrifts would probably be acquired in the coming months by regional and national banking powers.
Just goes to show how much estimates really matter over the short term. IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> popped up $8 7/8 to $100 5/8 today after it beat consensus estimates by seven cents, despite the fact that its $2.51 EPS was below last year's $2.97 EPS.
INTELLIGENT ELECTRONICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: INEL)") else Response.Write("(NASDAQ: INEL)") end if %> announced this morning that its XLConnect unit would file to become public, selling 20% of its equity to outside investors. Intelligent Electronics rose $11/16 to $5 7/8 on the news.
A surprise profit at FUISZ TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FUSE)") else Response.Write("(NASDAQ: FUSE)") end if %> is responsible for the $2 3/4 to $13 3/4 gain in the shares this morning. Fuisz reported earnings of $0.03 EPS when analysts were anticipating a $0.04 EPS loss.
P-COM INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PCMS)") else Response.Write("(NASDAQ: PCMS)") end if %> rose $2 5/8 to $21 1/2 after it reported that it had received a purchase order to supply British-based Nortel, Ltd. with $1.4 million worth of GHz and 38 GHz digital radio wave systems.
DANKA BUSINESS SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DANKY)") else Response.Write("(NASDAQ: DANKY)") end if %> reported earnings today that were in line with the $0.25 EPS that it told investors to expect on June 26th and was rewarded $2 5/8 to $26 5/8. Investors were heartened by signs of improvement in the company's cost structure that they did not expect.
Strong earnings of $0.24 EPS versus year-ago results of $0.06 EPS for personal computer product catalog retailer MULTIPLE ZONES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MZON)") else Response.Write("(NASDAQ: MZON)") end if %> caused the shares to rally $1 1/4 to $15 today.
FISERV <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FISV)") else Response.Write("(NASDAQ: FISV)") end if %> rose $1 7/8 to $31 5/8 this morning when EVEREN Securities upgraded the shares to "near-term outperform" from "near-term market perform".
NASCAR continues to wow Wall Street. PENSKE MOTOR SPORTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SPWY)") else Response.Write("(NASDAQ: SPWY)") end if %> rose $1 to $21 1/4 after Merrill Lynch reinstated coverage with a "near-term accumulate, long-term buy." Investors are probably now asking, "Are there any pure-plays on 'professional wrestling' now?"
GT BICYCLES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GTBX)") else Response.Write("(NASDAQ: GTBX)") end if %> rose $1 3/8 to $13 this morning after reporting earnings of $0.22 EPS with an 18% sales rise. The stock is recovering from news last week that its CEO had been killed in an accident.
Earnings of $0.08 EPS and a 49% sales increase were behind the surge in VERILINK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VRLK)") else Response.Write("(NASDAQ: VRLK)") end if %> today, rising $2 1/4 to $25 1/2 as Oppenheimer raised its estimates for future quarters. Oppenheimer recently underwrote the wide-area network (WAN) product developer.
ELECTRONIC ARTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ERTS)") else Response.Write("(NASDAQ: ERTS)") end if %> rose $1 5/8 to $27 3/8 this morning after posting breakeven earnings and no growth in revenues. Apparently, the company made positive comments about future quarters in the conference call, but as a policy does not let individual investors listen in on this information.
Shares of the "document company", XEROX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XRX)") else Response.Write("(NYSE: XRX)") end if %> soared $3 1/2 to $50 today after the company reported earnings of $0.85 EPS on a meager 4% rise in revenues.
BROWNING FERRIS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BFI)") else Response.Write("(NYSE: BFI)") end if %> dropped $2 1/4 to $22 3/4 after reporting third quarter earnings of $0.31 EPS versus $0.53 EPS last year. Merrill Lynch cut the stock to a "long-term neutral" from a "long-term buy" shortly after the results hit the Street.
Pill delivering and bottled water selling MCKESSON CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCK)") else Response.Write("(NYSE: MCK)") end if %> dropped $3 5/8 to $39 this morning after the company missed its quarterly numbers, posting $0.66 EPS versus consensus estimates of around $0.72 EPS.
POWERCERV (NASDAQL PCRV) just has not had a very good time since it came public a few weeks ago. Shares tanked $5 to $4 today after the company posted earnings of only $0.01 EPS versus $0.03 EPS last year. Alex Brown slashed the stock to "neutral," effectively abandoning the company it brought public.
Well, first off, we think the Nasdaq should change the ticker of DIGI INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DGII)") else Response.Write("(NASDAQ: DGII)") end if %> to DIGI, giving DSC COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: DIGI)") else Response.Write("(NASDAQ: DIGI)") end if %> DGII. Second off, DIGI International tumbled $2 1/2 to $12 5/8 today after missing quarterly earnings estimates by $0.17 EPS, reporting only $0.13 EPS.
MEDAR INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MDXR)") else Response.Write("(NASDAQ: MDXR)") end if %> dropped $1 to $7 3/4 after reporting earnings of $0.10 EPS. Apparently, Wall Street was just not cool with those numbers.
In spite of beating its numbers by about 10%, or $0.02 EPS, FRIEDMAN'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: FRDM)") else Response.Write("(NASDAQ: FRDM)") end if %> dropped $1 1/8 to $21 3/4 this morning.
NETWORK GENERAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NETG)") else Response.Write("(NASDAQ: NETG)") end if %> dropped $2 5/8 to $18 1/2 after it met its quarterly earnings estimates this morning, posting $0.19 EPS a share.
After posting a much wider loss than the Street expected, shares of GENZYME TISSUE REPAIR (NADSAQ: GENZL) dropped $1 1/2 to $7 5/8 this morning. Brown Brothers cut the stock to "short-term hold." Those interested in the difference between the three publicly traded companies with Genzyme in their name might want to check out a Fool News article written on this very subject not too long ago.
SECURE COMPUTING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SCUR)") else Response.Write("(NASDAQ: SCUR)") end if %> was mashed today after the company posted a large loss due to a one-time charge relating to spending on a new product. The firewall developer slumped $1 1/4 to $16 1/2.
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