CONFERENCE CALLS
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FOOL PLATE SPECIAL
On Cisco and H-P
Investors reading the tea leaves today are getting conflicting signals from two massive growth stocks that reported earnings yesterday. CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CSCO)") else Response.Write("(NASDAQ: CSCO)") end if %> produced another blow-out quarter last night. It posted earnings a penny ahead of expectations in spite of one-time costs and dilution from the completion of the merger with STRATACOM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: STRM)") else Response.Write("(NASDAQ: STRM)") end if %>. If you assume that the estimates for Cisco did not account for the Stratacom deal, they did even better, posting $0.45 EPS versus last year's $0.24 EPS, a full nickel ahead of expectations. The shares are unchanged at $57 3/4.
Donaldson, Lufkin & Jenrette upgraded earnings estimates for Cisco this morning, implying that the current $1.98 EPS consensus estimate number that Zacks had should be clicking upward in the next few weeks. At about $58 a stub, the stock trades at roughly 29 times next year's earnings. With the industry growing in the 30% to 50% range next year and Cisco consistently growing faster than the overall market, some pundits think that there is a good chance that Cisco could trade at a high multiple if they do make those numbers. Although the risk-reward is higher when a company trades at 30 times forward earnings, buying leaders in high-growth industries has never been called a bad strategy.
HEWLETT PACKARD <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HWP)") else Response.Write("(NYSE: HWP)") end if %>, on the other hand, came in exactly at expectations and was down year-over-year, reporting $0.40 EPS (after charges related to its exit from the disk-mechanism business) versus $0.55 EPS a year ago. This negative charge cut third quarter earnings by $0.13 EPS, eight cents for disposal of the unit and five cents for the loss from the unit during the quarter. Investors attempting to plug through the results today are having a hard time piecing together a full picture of the quarter, which is why the stock is down only about $1 from its close on the New York Stock Exchange yesterday at close to $43. The shares look like they are up $2 to $42 right now only because there was a sell-off before the Pacific Stock Exchange closed at 4:30 PM EDT.
The reason why Hewlett is not getting out-and-out killed is an 18% rise in revenues at its continuing operations. Hewlett trades at about 17 times trailing earnings with a yield of 1.1%. The company indicated in last night's conference call that earnings would have grown by 15% in the third quarter had there not been a number of extenuating circumstances. Take their statement that growth in the "mid- to high- teens is certainly plausible" in conjunction with consensus estimates for next year of $3.02 and you have a company trading at 15 times forward earnings.
Wheat First got the car jack out of the trunk today, raising its rating on PHYSICIAN SALES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PSSI)") else Response.Write("(NASDAQ: PSSI)") end if %> from "outperform" to "buy" and sending shares up $2 1/4 to $17 1/4. Of course, everyone is wondering, if the distributor of medical goods to office-based physicians was going to outperform the market, why people would not have bought it earlier.
LASER INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: LASRF)") else Response.Write("(NASDAQ: LASRF)") end if %> jumped $7/8 to $14 1/2 after Oppenheimer initiated coverage of the medical equipment firm with a "buy" rating.
A solid performance at big dog networker CISCO SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CSCO)") else Response.Write("(NASDAQ: CSCO)") end if %> is responsible for the gains at NEWBRIDGE NETWORKS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NN)") else Response.Write("(NYSE: NN)") end if %> today, rising $2 5/8 to $48 3/8 this morning.
Morgan Stanley initiated coverage of M. A. HANNA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MAH)") else Response.Write("(NYSE: MAH)") end if %> with a "buy" rating this morning, boosting shares of the plastics and rubber manufacturer $1 1/2 to $22. Morgan sees the cyclical commodity company earning $1.25 EPS next year.
COLLAGEN CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CGEN)") else Response.Write("(NASDAQ: CGEN)") end if %> plumped up $1 1/8 to $18 5/8 after posting earnings of $0.70 EPS versus $0.29 EPS a year ago. A one-time gain for the sale of some investments helped to buffer a 9.4% decrease in revenues.
CHILDREN'S COMPREHENSIVE SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: KIDS)") else Response.Write("(NASDAQ: KIDS)") end if %> was dunked for $1 3/16 to $16 1/16 after it offered 2.3 million shares this morning at $16 a share. The offering was decreased from the original 2.5 million shares, however.
Morgan Stanley broke out the orange-handled kitchen shears this morning, snipping the rating of ACC CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ACCC)") else Response.Write("(NASDAQ: ACCC)") end if %> from "outperform" to "neutral." Morgan said that its downgrade of the telecommunications holding company was based on price and shares slid $2 to $40 1/4.
EPIC DESIGN TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EPIC)") else Response.Write("(NASDAQ: EPIC)") end if %> was knocked down $3 3/4 to $18 this morning after Alex.Brown downgraded the stock from "strong buy" to "buy." The company develops software for semiconductor electronic design automation.
Shares of specialty retailer BORDER'S GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BGP)") else Response.Write("(NYSE: BGP)") end if %> dropped $1 5/8 to $34 1/8 this morning after the firm posted a $0.05 EPS loss excluding a charge versus an $0.11 EPS loss in the prior year. Merrill downgraded the shares this morning.
Fool Portfolio holding MEDICIS PHARMACEUTICALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MDRX)") else Response.Write("(NASDAQ: MDRX)") end if %> was rocked for $2 to $39 today after the dermatological medicine concern filed for a 1.85 million secondary offering. The move will increase the number of shares outstanding by 28.5%.
Transportation and logistics specialist CALIBER SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CBB)") else Response.Write("(NYSE: CBB)") end if %> slipped $1 1/2 to $19 1/4 after warning that consolidation-related expenses would lead to disappointing third quarter earnings.
FOXMEYER HEALTH <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FOX)") else Response.Write("(NYSE: FOX)") end if %> shares tumbled $1 to $7 after the company announced that its wholesale drug service division, responsible for a significant percentage of sales, is up for sale.
Trucking wireless communication concern HIGHWAYMASTER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HWYM)") else Response.Write("(NASDAQ: HWYM)") end if %> backed up $1 1/2 to $11 after being downgraded from "buy" to "neutral" by Smith Barney.
Internet access provider NETCOM ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: NETC)") else Response.Write("(NASDAQ: NETC)") end if %> warned it expects substantial losses for "the foreseeable future," pushing shares down $2 1/8 to $19 1/2. The implications for consumer providers of Internet service are grim if Netcom cannot make money.
EMULEX CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EMLX)") else Response.Write("(NASDAQ: EMLX)") end if %> was dunked for $2 1/8 to $13 1/4 after posting a $0.09 EPS fourth quarter loss on a 21% drop in revenues. The company makes network-communications products and sells them to original equipment manufacturers.
A market rumor that US ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: USRX)") else Response.Write("(NASDAQ: USRX)") end if %> will be cutting prices on some of its components sent shares spiraling down $3 11/16 to $48 1/4 today as nervous institutions continued to dump the shares.
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Randy Befumo (MF Templar), a Fool
Selena Maranjian (MF Selena) another Fool
Prem Kumar (MF Prem) another
Fool