DJIA 7966.20 +28.06 (+0.35%) S&P 500 1002.02 +7.22 (+0.73%) Nasdaq 1526.78 +17.33 (+1.15%) Value Line ndx 742.63 +4.43 (+0.60%) 30-Year Bond 106 30/32 +21/32 5.05% Yield
Lunchtime News | |
Related Items | |
|
FOOL PLATE SPECIAL
An Investment Opinion
by Dale Wettlaufer
Honeymoon's Over at BankAmerica
The new BankAmerica <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %> got off on the wrong foot today, falling $5 1/16 to $48 7/8 after reporting pretty ugly third quarter results. The first coast-to-coast U.S. bank reported "operating income" of $893 million, which excludes the after-tax cost of merging BankAmerica and NationsBank. However, ongoing earnings for the company's third quarter were far smaller than the "operating earnings" indicated, as the company took a pre-tax gain of $479 million related to the sale of B of A's manufactured home finance unit. Assuming a 35% tax rate, operating earnings were more like $581.6 million, or $0.33 per share (diluted), down from $1.02 a year ago. Adjusting net income for the substantial amount of goodwill amortization that the former NationsBank brings along (and B of A to a lesser extent), cash EPS for the quarter looked to be more in the range of $0.42. With average shareholders equity per share over the course of the quarter, this results in a 6.5% return on equity, which explains the $9 billion hit to the company's market cap this morning.
Even adding back everything one could think of as a one-time event this quarter, one can't help but lament the change in the fundamentals for investors coming into BankAmerica as former NationsBank investors. With NationsBank they were humming along with great profitability numbers and a nicely diversified mix of consumer and commercial banking, capital markets, and asset management -- and now the company runs into serious write-downs related to BankAmerica's hedge fund exposures and trading losses. Although it's not clear which write-downs relate to which exposures for simple proletarian investors who get about 1% of the detail form the company that institutional investors receive, credit loss provisions for the quarter equaled about 70% of what the combined company reported over the last twelve months (our estimates are used when combining the two companies' financials).
Meanwhile, across town at the Big Green Machine, things are humming along at First Union <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FTU)") else Response.Write("(NYSE: FTU)") end if %>. The company reported a return on tangible assets of 1.9%, up from 1.67% last year. Combined with a return on tangible shareholders' equity of 35.7% and a strong quarter-ending tier 1 capital ratio of 7.12%, First Union showed the virtues of staying the heck away from committing billions of dollars of shareholders' money to hedge funds and similar quackery. A couple things might be said as an addendum to that comment, though. BankAmerica Chief Hugh McColl isn't really Mr. Fast and Loose with badly performing capital markets investments. Also, with the Money Store operations folded into First Union, an increase in profitability isn't that surprising, though more than a few investors still have doubts about the quality of gain-on-sale accounting in general.
In all, First Union looked steady as she goes, but BankAmerica investors are pretty much left hanging with a dry press release and awful results. If there's any investor relations department of a widely held U.S. corporation that should be spammed with letters and calls about letting shareholders listen to the replay of the quarterly conference call, it's BankAmerica. Feel free to give their IR a call at (704) 386-5000.
Specialty insurer American Bankers Insurance Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABI)") else Response.Write("(NYSE: ABI)") end if %> gained $2 3/4 to $38 1/4 after agreeing to call off its proposed merger with consumer services company Cendant <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %>. Advest celebrated the news with an upgrade on American Bankers to "strong buy" from "market perform" this morning. For its part, Cendant gained $3/16 to $10 15/16. More details on the breakup are available in this morning's Breakfast With the Fool.
Automaker Ford Motor Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: F)") else Response.Write("(NYSE: F)") end if %> motored ahead $2 1/8 to $46 3/16 after reporting fiscal Q3 EPS of $0.80 versus $0.73 last year, which was adjusted to exclude earnings from the since spun-off Associates First Capital <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AFS)") else Response.Write("(NYSE: AFS)") end if %> unit. The results were in line with the Street's expectations. In its conference call with analysts this morning, the company also reportedly indicated that it is comfortable with analysts' expectations of earnings of $1.22 per share in Q4.
Number one PC maker Compaq Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPQ)") else Response.Write("(NYSE: CPQ)") end if %> tacked on $1 3/16 to $25 11/16 after reporting fiscal Q3 EPS of $0.07 versus $0.34 (pro forma) last year, which beat the Street's mean estimate by a penny. Revenues increased 36% to $8.8 billion compared to the same period last year. The company added that it expects "continued strong growth" in fiscal Q4.
Drugmaker Pfizer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> picked up $3 13/16 to $91 5/16 despite reporting fiscal Q3 EPS of $0.51 last night, which was up from the $0.45 posted a year ago but $0.06 below the Street's mean estimate. However, no less than four Wall Street firms reiterated their "buy" or "strong buy" ratings this morning.
Cable network operator USA Networks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USAI)") else Response.Write("(Nasdaq: USAI)") end if %> climbed $15/16 to $19 1/2 after Goldman Sachs started coverage of the stock and placed it on its much ballyhooed "recommended list."
Outsourced accounting and human resources services provider Century Business Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CBIZ)") else Response.Write("(Nasdaq: CBIZ)") end if %> advanced $1/2 to $13 1/4 after acquiring six privately held accounting and tax services firms, which are expected to add more than $60 million in annual revenues to the company's top line.
Pharmaceutical company King Pharmaceuticals <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KING)") else Response.Write("(Nasdaq: KING)") end if %> was crowned with a $2 13/16 gain to $13 3/4 after saying its fiscal Q3 revenues and earnings will both be more than 200% higher than last year's results, resulting in EPS above analysts' forecasts of $0.21.
High-performance bicycle maker Cannondale Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BIKE)") else Response.Write("(Nasdaq: BIKE)") end if %> shot $1 5/16 higher to $8 15/16 after saying that due to strong demand for its products, fiscal Q1 revenues will come in about 20% higher than the $34.3 million reported a year ago. Earnings are expected to be at the high end of the range expected by analysts. The four analysts surveyed by IBES called for results ranging from a $0.09 per share gain to a $0.03 per share loss in the period.
Online development services firm USWeb Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USWB)") else Response.Write("(Nasdaq: USWB)") end if %> rose $1 7/16 to $10 3/16 after reporting fiscal Q3 EPS of $0.02 (excluding acquisition-related charges) versus a $1.10 loss a year ago, beating the Street's mean estimate of a $0.01 per share loss for the quarter. Revenues totaled $34 million, up 34% sequentially and nearly five times higher than a year ago, according to the company.
Microcontrollers and embedded control products maker Microchip Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCHP)") else Response.Write("(Nasdaq: MCHP)") end if %> moved up $1 11/16 to $23 after reporting fiscal Q2 EPS of $0.33 versus $0.34 a year ago, matching analysts' estimates. Despite "exceptionally low order visibility" from its clients, the company said it is "confident" that it will increase its microcontroller market share in calendar 1998.
Healthcare management software developer QuadraMed Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QMDC)") else Response.Write("(Nasdaq: QMDC)") end if %> climbed $2 3/8 to $20 5/8 after saying strong demand for its coding and compliance products resulted in a record number of contract signings in fiscal Q3. The company added that more than 70% of its new sales were created by cross-selling its products to its installed customer base of 3,700 healthcare providers.
Earnings Movers
Adtran Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADTN)") else Response.Write("(Nasdaq: ADTN)") end if %> up $1/2 to $21 1/4; Q3 EPS: $0.29 vs. $0.28 last year; Estimate: $0.28
Advent Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ADVS)") else Response.Write("(Nasdaq: ADVS)") end if %> up $2 1/8 to $23; Q3 EPS: $0.35 vs. $0.25 last year; Estimate: $0.34
Alpha Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AHAA)") else Response.Write("(Nasdaq: AHAA)") end if %> up $1 5/8 to $12 7/8; Q2 EPS: $0.39 vs. $0.22 last year; Estimate: $0.38
Arvin Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ARV)") else Response.Write("(NYSE: ARV)") end if %> up $3 9/16 to $35 1/4; Q3 operating EPS: $0.69 vs. $0.58 last year; Estimate: $0.66
General Cable Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GCN)") else Response.Write("(NYSE: GCN)") end if %> up $1 9/16 to $16 11/16; Q3 EPS: $0.59 vs. $0.46 last year; Estimate: $0.57
Plantronics Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PLT)") else Response.Write("(NYSE: PLT)") end if %> up $2 1/16 to $53 1/2; Q2 EPS: $0.74 vs. $0.51 last year; Estimate: $0.69
Teradyne <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TER)") else Response.Write("(NYSE: TER)") end if %> up $2 1/16 to $22 1/16 Q3 EPS: $0.20 (before charges) vs. $0.45 last year; Estimate: $0.20
Beverage and snack maker PepsiCo <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEP)") else Response.Write("(NYSE: PEP)") end if %> fizzled for a $3/4 loss to $31 1/4 after reporting Q3 EPS of $0.37, up from $0.35 in the same prior-year period and short of analysts' expectations of $0.40. The company's net earnings of $0.50 a share were boosted by a $200 million, or $0.13 a share, tax credit. The company said results were held back by an unexpected slowdown in volume growth this summer in its U.S. Frito-Lay operations and the global economic crisis.
Color printer servers maker Splash Technology Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLH)") else Response.Write("(Nasdaq: SPLH)") end if %> belly flopped $5 3/4 to $7 3/8 after warning it expects Q4 operating results to be below a year ago mainly due to the continuing economic uncertainties in Asia, especially Japan. The company reported Q3 EPS of $0.32, compared with $0.40 last year and analysts' mean estimate of $0.30. BT Alex. Brown slashed its rating on the company to "market perform" from "strong buy."
Cambridge Technology Partners <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CATP)") else Response.Write("(Nasdaq: CATP)") end if %> tanked $4 7/8 to $14 1/2 after reporting Q3 EPS of $0.25 (before charges), up from $0.17 for the same period last year and right in line with estimates. Including merger costs, the company earned $0.16 a share. The company said its domestic business was hurt by customers deferring or canceling orders to focus on Year 2000 problems, increased competition, and a decline in new business win rates.
Computer components maker SBS Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBSE)") else Response.Write("(Nasdaq: SBSE)") end if %> plunged $8 to $9 3/4 after late yesterday saying that it is "comfortable" with current estimates for its fiscal first quarter, but that Q2 revenue and earnings likely will be flat with Q1. The company now expects fiscal 1999 EPS of $1.70 to $1.85 (before charges), modestly higher than the $1.64 it earned in fiscal 1998 and below analysts' expectations of $2.07.
Enterprise resource planning software developer Platinum Software Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PSQL)") else Response.Write("(Nasdaq: PSQL)") end if %> dropped $1 11/16 to $6 7/16 after announcing it will acquire manufacturing software company DataWorks Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DWRX)") else Response.Write("(Nasdaq: DWRX)") end if %> in a stock swap in which DataWorks shareholders will receive 0.794 of a Platinum share for each DataWorks share. That values DataWorks at about $6.45 a share, a 20% premium to its closing price yesterday of $5 3/8.
Consumer products direct seller Amway Asia Pacific <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AAP)") else Response.Write("(NYSE: AAP)") end if %> took a hit of $1 to $8 11/16 after announcing it has suspended its quarterly dividend "due to the decline in the performance in several key markets and the need for Amway China to retain its available cash for planned capital needs."
Mutual fund, asset-management, and gold mining company Pioneer Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PIOG)") else Response.Write("(Nasdaq: PIOG)") end if %> tumbled $1 13/16 to $11 after warning it expects "disappointing losses" for the third and fourth quarters of this year. For Q3, it expects a loss of $0.55 to $0.65 a share due to trading losses in Russian securities.
Earnings Movers
Aspect Development <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASDV)") else Response.Write("(Nasdaq: ASDV)") end if %> down $5 1/8 to $16 1/4; Q3 EPS: $0.13 vs. loss of $0.01 last year; Estimate: $0.11
At Home Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATHM)") else Response.Write("(Nasdaq: ATHM)") end if %> down $1 5/8 to $39 7/8; Q3 EPS: $0.08 loss vs. $0.11 loss last year; Estimate: $0.08 loss
CryoLife Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CRY)") else Response.Write("(NYSE: CRY)") end if %> down $2 3/4 to $11 7/8; Q3 EPS: $0.15 (excluding one-time items) vs. $0.15 last year; Estimate: $0.18
Kuhlman Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KUH)") else Response.Write("(NYSE: KUH)") end if %> down $1 1/2 to $24 11/16; Q3 EPS: $0.56 vs. $0.45; Estimate: $0.58
Linear Technology Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LLTC)") else Response.Write("(Nasdaq: LLTC)") end if %> down $7/16 to $46 1/2; Q1 EPS: $0.56 vs. $0.51; Estimate: $0.54
Seagate Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> down $1 5/8 to $24 1/4; Q1 EPS: $0.19 (before charges) vs. $0.08 (before charges) last year; Estimate: $0.17
For more earnings announcements, see today's Breakfast With the Fool.
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
Click here for continually updated Portfolio Numbers.
See something moving a stock that we didn't cover?
E-mail the Fool News Team
and we will start working on the story.
Unfortunately, we cannot answer every e-mail
or respond to individual questions.
|
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 |