April 15th, 2007
The Week Ahead (15 April 2007)
The Economic Calendar shows three potentially important news releases this week:
- Monday’s retail sales report (Consensus 0.6%, 0.9% less autos)
- CPI on Tuesday (Consensus 0.2% core, 0.6% headline)
- Housing Starts on Tuesday (Consensus 1.49 million, SA)
Earnings season is quite active this week as well.
Tuesday
- IBM (IBM - Annual Report) – Consensus expects $1.21 on $21.86 billion in revenue and next-quarter guidance of $1.46 on $23.04 billion. Given that these numbers represent sales growth of 5.8% and 5.2%, respectively, it would be a near-disaster if they miss.
- Intel (INTC - Annual Report) – Consensus wants $0.22 on $9 billion this quarter and $0.22 on $8.9 billion next. We think that next quarter sales figure, which represents 10.8% year/year growth, is too optimistic.
- Linear Technology (LLTC) – Consensus wants $0.32 on $254 million this quarter and $0.34 on $263 million next.
- Yahoo! (YHOO) – Consensus expects $0.11 on $1.21 billion this quarter and $0.13 on 1.28 billion next.
Wednesday
- Motorola (MOT - Annual Report) – Consensus expects $0.02 on $9.3 billion this quarter and $0.08 on $10 billion next. They already preannounced, so the guidance is the important bit. Numbers have come down dramatically but may have further yet to go.
Thursday
- Armor Holdings (AH) – Consensus wants $1.11 on $841 million this quarter and $0.92 on $775 next. There may well be a guidance beat since the numbers expect a significant growth slowdown year/year.
- Advanced Micro Devices (AMD - Annual Report) – Expected to lose $0.46 on $1.34 billion in sales this quarter and $0.36 on $1.35 billion next. Given how disastrous the current outlook is, we may be getting near the bottom for estimates. Valuation, however, remains questionable. We hate negative P/E multiples.
- Google (GOOG - Annual Report) – Consensus expects $3.30 on $2.5 billion in revenue this quarter and $3.41 on $2.63 billion next. The Double-click acquisition may help next quarter. Without it, the estimates seem more realistic (less room for upside surprise) than they have been recently.
- Landstar (LSTR - Annual Report) – Consensus expects $0.40 on $590 million this quarter and $0.54 on $656 million next. We think they will beat.
- Nokia (NOK) – Consensus expects $0.32 on $13.1 billion this quarter, $0.34 on $13.9 billion next. We take the under.
Friday
- SAP (SAP - Annual Report) – Consensus expects $0.36 on $2.93 billion this quarter and $0.44 on $3.17 billion next. Both seem on the high side.
- Xerox (XRX) – Consensus expects $0.20 on $3.82 billion this quarter and $0.27 on $4.09 next. The estimates have come down but are at the high end of revised guidance.
[...] We don’t know how much the estimates incorporated currency issues, but the $22 billion was slightly ahead of consensus estimates for sales. However, 4% growth on a constant currency basis (or even 7% growth as reported) is hardly anything to write home about. The stock traded down after market hours. Our assessment that “it would be a near-disaster if they miss” appears to have been narrowly averted. Although sales in the Global Services division (IBM’s largest) were up 8% year/year, contract signings were 2% lower than last year. This will make it difficult to maintain the current growth rate, particularly since businesses already appear to be pulling back. In response to a conference call question about the fairly weak growth during the quarter in the U.S. management replied: And the U.S. had actually a pretty good January and a pretty good February. The falloff was really in the last month of the quarter. And as I said earlier Toni, that was predominantly in our enterprise customer set. [...]
[...] Consensus estimates were for $1.21 billion in sales – nearly 25% higher than Yahoo! reported. There is no way 7% year/year growth can support a 62x trailing P/E multiple. When the stock rallied in October on the imminent release of the new “Panama” search marketing system, we said: Ultimately it will hinge on whether Panama is truly a better mousetrap. If it is (we’ll know in a couple of quarters) then yes, the worst is probably over. If Panama falls flat, however, things could get much uglier. Given that the Panama system only really launched on March 30 it is a bit premature to say it has fallen flat. However, comments on the conference call that “we expect that this year our growth will be broadly consistent with the U.S. display market” (i.e. not the search market) suggest it isn’t particularly fizzy either. For more information, see all articles on: Stock Market, YHOO [...]
[...] So that’s where Yahoo’s revenue’s went. As we noted in our earnings preview, consensus expected $3.30 (non-GAAP) on $2.5 billion in revenue (net of TAC) this quarter and $3.41 on $2.63 billion next. Despite being twice Yahoo’s size, Google grew its revenues nine times as fast. The financial statements yielded virtually nothing worth criticizing, so we’re stuck with Google’s practice of not issuing guidance. For more information, see all articles on: Stock Market, GOOG, YHOO [...]
[...] When we issued our earnings preview, we said: Xerox (XRX) – Consensus expects $0.20 on $3.82 billion this quarter and $0.27 on $4.09 next. The estimates have come down but are at the high end of revised guidance. [...]
[...] When we previewed the report, we said “consensus expects $0.36 on $2.93 billion this quarter and $0.44 on $3.17 billion next. Both seem on the high side.” According to Yahoo’s currency converter, they did $2.99 billion in revenue and $0.35 in EPS. SAP continued to gain share for the first quarter of 2007. Based on software and software related service revenues on a rolling four quarter basis, SAP’s worldwide share of Core Enterprise Applications vendors(3), which account for approximately $34.8 billion in software and software related service revenues as defined by the Company based on industry analyst research, increased to 25.1% for the four quarter period ended March 31, 2007 compared to 24.5% for the four quarter period ended December 31, 2006. Compared to the four quarter period ended March 31, 2006, the year-over-year share gain was 2.4 percentage points. We believe it. Sales growth at other major vendors of software and services has not been nearly so strong. IBM (IBM – Annual Report), for example, grew 4% constant-currency and 7% as reported. Acquisitions make it difficult to ascertain Oracle’s (ORCL – Annual Report) underlying growth. Guidance was also strong: The Company expects full-year 2007 software and software related service revenues to increase in a range of 12% – 14% at constant currencies compared to 2006 growth of 12% at constant currencies. [...]