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FOOL PLATE SPECIAL
An Investment Opinion
by Dale Wettlaufer
At the Tragic Kingdom
Walt Disney Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> took a $1 1/8 hit to $24 11/16 this morning after announcing on Friday afternoon that it expects to report lackluster Q4 1998 earnings. Due to down results for the theatrical and international home video segments of the creative content unit, the company expects fourth quarter earnings per share of $0.15 to $0.16 (before charges), compared with $0.19 reported in Q4 1997. Further, Disney expects flattish full-year EPS of $0.88 to $0.89, compared with fiscal 1997 EPS of $0.86. The company didn't quantify very clearly its revenue forecasts for the year, but through three quarters things were already looking unspectacular.
For the first nine months of the year, revenues were flat due to a $282 million decline in international home video revenues. For the third quarter, creative content revenues rose 1%, to $2 billion, held back by a $105 million drop in domestic home video sales. The bright spot for the year looks like cable, with the company's franchise ESPN and A&E networks leading as standard bearers. Cable network revenue growth has accounted for near three-quarters of the broadcasting segment -- Disney's highest margin and probably best return on invested capital business segment.
Numerous sell-side analysts downgraded the company this morning, which is certainly interesting given that the course and the velocity of the business haven't changed that much. Of course, we plebian investors would have no idea of these things, given the company's stubborn refusal to allow individual investors to listen to its conference calls. The guidance available to analysts, then, is most likely a heck of a lot more informative than the spartan details given in the company's press release. With the stock now selling for about 23 times earnings before goodwill amortization and 28 times enterprise value to earnings before amortization, the company becomes somewhat more interesting. It would be oh so magical if investors could only know what the forward plan is at Walt Disney Co.
Air carrier Northwest Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NWAC)") else Response.Write("(Nasdaq: NWAC)") end if %> rose $2 1/4 to $30 1/8 after its pilots' union approved a new four-year contract on Saturday, ending a two-week strike at the airline. However, the machinists union representing 27,000 Northwest ground support personnel rejected a tentative labor agreement with the airline over the weekend, which could lead to yet another crippling strike. On Friday, the company warned that it expects to report a loss for the fiscal third and fourth quarters, as well as for the full year, because of the pilots' strike.
Business Internet infrastructure provider and consultant Icon CMT Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ICMT)") else Response.Write("(Nasdaq: ICMT)") end if %> moved up $3 3/8 to $10 5/8 after agreeing to merge with fiber optic network operator Qwest Communications International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QWST)") else Response.Write("(Nasdaq: QWST)") end if %> in a stock swap valued at about $185 million. Qwest gained $1 1/8 to $29 15/16 on the news.
Wireless communications, semiconductors, and advanced electronics systems maker Motorola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOT)") else Response.Write("(NYSE: MOT)") end if %> gained $2 5/16 to $43 11/16 after unveiling a new multimedia set-top box, which can support Internet access, 3-D graphics, broadband networking, and other features. The company will begin production shipments of the device, code-named "Blackbird," in fiscal Q4, with commercial deployments slated for Q1 of 1999.
Computer-based medical diagnostic equipment maker Elscint Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ELT)") else Response.Write("(NYSE: ELT)") end if %> rose $3 to $12 1/4 after agreeing to sell its Computed Tomography Division to Britain's General Electric Co. PLC for about $275 million in cash. The company also agreed to sell its nuclear medicine and magnetic resonance imaging (MRI) business to General Electric's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GE)") else Response.Write("(NYSE: GE)") end if %> GE Medical Systems unit for $100 million.
Aluminum and plastic containers maker Crown Cork & Seal Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCK)") else Response.Write("(NYSE: CCK)") end if %> uncorked a $2 3/8 gain to $37 1/2 after being upgraded by CS First Boston to "strong buy" from "buy."
The Wall Street Journal reported that the Organization of Petroleum Exporting Countries (OPEC) came close to its goal of cutting oil supply by about 3.5% of the world total in August. OPEC members, excluding Iraq, reduced supplies by 2.16 million barrels per day, or 83% of their 2.6 million-barrel target. Oil services firms rose on the news. Schlumberger <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLB)") else Response.Write("(NYSE: SLB)") end if %> gained $1 11/16 to $52 13/16, Halliburton <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HAL)") else Response.Write("(NYSE: HAL)") end if %> added $1 9/16 to $34 3/8, Baker Hughes <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BHI)") else Response.Write("(NYSE: BHI)") end if %> advanced $1 3/16 to $22 11/16, and Cooper Cameron Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RON)") else Response.Write("(NYSE: RON)") end if %> climbed $2 5/8 to $34 5/8.
Paine Webber Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PWJ)") else Response.Write("(NYSE: PWJ)") end if %> picked up $2 13/16 to $36 5/16 this morning after a German newspaper reported that the investment bank and brokerage firm is on the agenda for Germany's Dresdner Bank's board meeting scheduled for today. Dresdner has been mentioned as a possible suitor in prior merger rumors regarding Paine Webber.
K-12 educational software developer Advantage Learning Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALSI)") else Response.Write("(Nasdaq: ALSI)") end if %> tacked on $6 13/16 to $31 3/8 after saying strong demand for its products will result in fiscal Q3 EPS between $0.22 and $0.24, ahead of the $0.15 expected by the Street. Revenues are expected to come in 55% to 60% higher than last year's levels.
Cardiac medical devices maker St. Jude Medical <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STJ)") else Response.Write("(NYSE: STJ)") end if %> paced ahead $1 1/16 to $20 9/16 after the company told Reuters that CS First Boston presented a review of the firm's strategic options to St. Jude's board on Friday.
Automation, avionics, and semiconductor systems maker Rockwell International Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ROK)") else Response.Write("(NYSE: ROK)") end if %> rose $2 3/4 to $41 5/16 after saying it will record about $265 million in special charges and after-tax operating losses in fiscal Q4 related to the resizing of its semiconductor unit. The company is resizing the business in preparation of its eventual spin-off to Rockwell's shareholders by the end of the year.
Electrical connectors maker AMP Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMP)") else Response.Write("(NYSE: AMP)") end if %> jumped $2 1/4 to $41 1/4 after hostile suitor AlliedSignal <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALD)") else Response.Write("(NYSE: ALD)") end if %> said 72% of AMP's common shares have been tendered to AlliedSignal, which shows that AMP's shareholders have "no confidence" in the company's current management. AlliedSignal added that it will buy about 18% of AMP's shares at the $44.50 per share offering price, which will not be enough to trigger AMP's so-called "poison pill" anti-takeover provision. AlliedSignal rose $1 11/16 to $35 1/4.
Ciena Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %> tanked $2 13/16 to $13 1/8 after announcing it has agreed to call off a proposed merger with Tellabs <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLAB)") else Response.Write("(Nasdaq: TLAB)") end if %>, with neither owing the other a breakup fee. Tellabs said the breakup was due to "changes in Ciena's financial outlook," which is a nice way of saying that the wavelength division multiplexing equipment maker looked a lot less attractive to Tellabs after it lost potential contracts with AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> and privately held Digital Teleport. Tellabs lost $1 7/8 to $43 1/8.
Hotel and casino operator Hilton Hotels Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HLT)") else Response.Write("(NYSE: HLT)") end if %> dropped $1 1/16 to $18 1/16 after saying its fiscal Q3 earnings will be in the low $0.30 per share range, lower than the $0.35 per share earned last year and below the First Call mean estimate of $0.38 per share. The company blamed the shortfall on the Asian financial crisis, which has hurt Hilton's domestic and international properties.
Information technology training software developer CBT Group PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CBTSY)") else Response.Write("(Nasdaq: CBTSY)") end if %> dropped $9 3/8 to $46 after its CEO reportedly said that the company's sales and marketing expenses rose to 46% of revenues in the first half of fiscal 1998, which is higher than last year's 42% ratio and the company's stated goal of a 40% figure for the year.
Information technology outsourcer and consultant Alternative Resources Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALRC)") else Response.Write("(Nasdaq: ALRC)") end if %> sank $15/16 to $5 1/8 after saying it will take a $25 to $30 million charge in fiscal Q3 to account for a restructuring and the costs of two recent acquisitions. The firm said EPS will be between $0.08 and $0.10 for the quarter, lower than the $0.21 expected by the Street.
Cleveland-based office supplies retailer OfficeMax <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OMX)") else Response.Write("(NYSE: OMX)") end if %> was shredded $1 3/8 to $9 5/8 after saying it has ended talks about a possible business combination with an unidentified company. The firm said it will resume its $200 million share buyback program, which had been halted last month.
Chemical pigments maker NL Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NL)") else Response.Write("(NYSE: NL)") end if %> was whitewashed for a $1 1/4 loss to $19 11/16 after Donaldson, Lufkin & Jenrette downgraded the firm to "market perform" from "buy."
Oil and gas exploration equipment company Input/Output Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IO)") else Response.Write("(NYSE: IO)") end if %> slid $5/16 to $9 11/16 after reporting fiscal Q1 EPS of $0.05 compared with $0.26 a year ago, missing analysts' expectations of $0.12. Lower sales of its seismic data acquisition recording equipment, falling oil prices, and lower margins due to an inappropriate product mix were blamed for the shortfall.
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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
Editing |