Investing For Growth
Investing For Growth
by Robert Sheard (MF DowMan) LEXINGTON, Ky. (May 22): After setting record highs this week, Computer Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CA)") else Response.Write("(NYSE:CA)") end if %> was cut off at the knees today, despite posting record earnings for its fiscal fourth quarter and beating estimates by two cents a share. CA posted earnings of $1.05 versus $0.85 in the year-ago quarter. First Call's consensus estimate was for $1.03. So why the sell-off?
CA president and COO Sanjay Kumar told Reuters that meeting Street expectations in the first quarter (traditionally CA's weakest) might be difficult. First Call's consensus for the first quarter (ending in June) is currently $0.42 versus $0.35 a year ago. The first quarter "is a very tough comparison quarter for us because we didn't have Legent this time last year, so we are comparing numbers without Legent to our smallest quarter with Legent," Kumar said.
After Kumar's comments, the market took Computer Associates's stock down over 6%, but several analysts think the sell-off may have been unjustified. In an analysts meeting today, Computer Associates officials said they remained comfortable with the current range of Wall Street estimates of $0.40 to $0.42 a share, according to Merrill Lynch analyst Steve McClellan.
After the meeting, several analysts said they wondered what the company's reticence was all about since they had already factored in the impact of the acquisition of Legent Corp on results for the June and future quarters.
McClellan said he had no plans to alter his current earnings estimate of $0.41 per share for the June quarter. He also said he planned to stick with his estimate of $3.65 per share for the fiscal year ending in March 1997, but that this figure may prove too conservative if the company continues growing as it did in the fourth quarter. McClellan said he would wait for another quarter before he considers whether to boost his fiscal 1997 estimate.
Cowen analyst Drew Brousseau, who was also present at the meeting with CA officials, said executives were comfortable with a consensus estimate of $0.42 per share for the June quarter, and he had no plans to lower his own $0.44 estimate. Brousseau also said he was looking to boost his 1997 fiscal year estimate to $3.70 from his previous $3.65, based on the strength of the company's core earnings growth.
In other IFG stock news, RoTech Medical <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ROTC)") else Response.Write("(NASDAQ:ROTC)") end if %> split 2-for-1 this morning. And for those of you following the Relative Strength models, or have bought the current list of IFG stocks, Paychex (PAYX) will also split on Friday, granting shareholders 3 shares of PAYX for every 2 they currently hold.
Transmitted: 5/22/96 | ||||||||
INVESTING FOR GROWTH MODEL (5/22/96) | ||||||||
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