Small Caps Deliver Earnings

123jump.com Staff
09 Feb, 2006
New York City

Today''''s rally can take market ony so far. The early morning momentum did not last till the end of the day. Strong batch of earnings from large insurance and small tech companies provided suport for broader averages. Labor conditions were reported again tight in the recent initial unemployment claims. Akamai, Navteq, Cognizant and Amkor Tech deliver positive earnings surprises. Whole Foods and K-swiss fell on earnings news.

U.S. MARKET AVERAGES

Market’s early enthusiasm for the day was lost towards the end of the session.

Strong earnings from Aetna ((AET)), Marriott ((MAR)), Coca-Cola Enterprises ((CCE)), Prudential ((PRU)) and improved sales and earnings forecast from Best Buy ((BBY)) helped to charge the early rally in the market. However, as day progressed most of the momentum was lost as traders focused on macro economic issues.

Initial claims of jobless were reported by Labor Department at below 300,000 for the previous week indicating that labor conditions remain tight in several key industries. Chicago Fed Governor commented that inflation remains near the upper end of his comfort zone.

Oil traded higher by 7 cents on no apparent news and natural gas rose by 3.5% during the day.

Tech, semiconductor stocks and especially hardware sector stocks faltered at mid-day. Gateway ((GTW)) said that its CEO will resign immediately ‘to pursue other interests’, Chairman of the company will take over as CEO until the replacement is found. Apple Computer ((AAPL)) fell another 5.6% and continued its decline that started five days ago. Other tech stock including Microsoft ((MSFT)), Dell ((DELL)), IBM ((IBM)) and EDS ((EDS)) fell during the day.

Akamai ((AKAM)) closed higher by 18% on earnings news and broker recommendations.


MOVERS AND SHAKERS

Amkor Technology ((AMKR)), advanced semiconductor assembly services provider, reported Q4 net earnings of $54 million, or 30 cents a share, reversing from last-year loss of $36.1 million, or 21 cents a share. Revenue surged 42% to $643.5 million from $453.3 million a year ago. The company’s shares jumped 26.5%.

Akamai Technologies ((AKAM)), Internet content technology company, reported Q4 net earnings of $25.8 million, or 16 cents a share, up 92% from $13.4 million, or 10 cents a share a year ago. Revenue rose to $82.7 million from $57.6 million last year. Analysts had forecast earnings of 15 cents a share on revenue of $79 million. The stock jumped 18.5%.

Navteq Corp ((NVT)), provider of navigable digital maps, reported Q4 net earnings jump of $27.7 million, or 29 cents a share, up 79% from $15.4 million, or 17 cents a share a year ago, meeting estimates. The company posted revenue of $146 million vs. $119 million. The stock climbed 13.7%.

Best Buy ((BBY)) lifted its Q4 earnings from continuing operations forecast to $1.25 to $1.30 a share, from its prior forecast of $1.06 to $1.16 a share. The company projects same-store sales gain for Q4 of 6% to 7%, up from the range of 3% to 5% previously forecast. Best Buy also said it plans to open nearly 90 new stores in the U.S. and Canada during its 2007 fiscal year. The stock rose 8.7%.

EResearch Technology ((ERES)) reported Q4 net earnings fall of $5.3 million, or 10 cents a share, down from $6.96 million, or 13 cents a share, last year, beating estimates of 8 cents a share. Revenue fell to $25.4 million from $27.1 million, in line with expectations. The provider of technology and services to the pharmaceutical, biotech and medical device industries also said that the chief executive plans to retire before the end of 2006. The company’s stock dropped 15.5%.

ECONOMIC NEWS

Thursday morning, the Department of Commerce released its report on wholesale trade in the month of December, showing increases in both wholesale sales and wholesale inventories. The increase in wholesale inventories exceeded economist estimates.

The report showed that wholesale sales rebounded by 1.0 percent in December after falling 0.7 percent in November. The growth came as wholesale sales of durable goods rose 1.3 percent while wholesale sales on non-durable goods rose 0.7 percent.

Wholesale inventories also increased in December, rising by 1.0 percent after an upwardly revised increase of 0.5 percent in November. Economists had expected wholesale inventories to increase by 0.5 percent compared to the 0.4 percent increase originally reported for November.

Subsequently, the December wholesale inventories-to-sales ratio came in at 1.15, unchanged from November. The ratio was down compared to the ratio of 1.17 reported for December of 2004.

The Department of Labor released its report on initial jobless claims in the week ended February 4 on Thursday, showing that jobless claims rose much less than expected. The report also showed that the 4-week moving average fell to its lowest level in almost six years.

The Labor Dept. said that jobless claims rose to 277,000 from the previous week''s unrevised figure of 273,000. Economists had been expecting jobless claims to rebound to 285,000 after showing notable declines in recent weeks.

The report also showed a continued decline by the less volatile 4-week moving average, which fell to 276,500 from the previous week''s unrevised average of 284,250. With the decrease, the moving average fell to its lowest level since April of 2000.

INTERNATIONAL MARKETS NEWS

Asian-Pacific benchmarks recovered from Wednesday’s sharp declines to finish largely in the positive, following the Bank of Japan decision to hold rates steady. Strength on Wall Street also lifted optimism. The Nikkei led gainers, rising 1.03%. Across the region, Australia’s All Ordinaries climbed 0.9%, South Korea’s Kospi rose 0.8%, and London’s FTSE 100 gained 0.3%.

European stocks finished with solid gains, boosted by higher start of U.S. markets, strength in metals and energy stocks, as well as positive earnings news from BT Group and Unilever. The German DAX 30 climbed 1.2%, the French CAC 40 advanced 1.2%, and London’s FTSE 100 surged 1.4%, nearing a new 44-month high.

OIL, METALS, CURRENCIES

Crude oil prices advanced after three sessions of decline. Light sweet crude for March delivery advanced 95 cents to $63.50 a barrel. Heating oil gained 3 cents to $1.6930 a gallon, while gasoline added 1 cent to $1.56. Natural gas dropped 26 cents to $7.48 per 1,000 cubic feet.

European gold traded higher Thursday, following yesterday’s decline. In London gold advanced to $559.60 bid per troy ounce, up from $550. In Zurich the precious metal traded at $559.10, up from $551.10. In Hong Kong gold climbed $7.30 to close at $556.40. Silver closed up at $9.56, up from $9.40.

The U.S. dollar gained against other major currencies. The euro was quoted at $1.1952, down from $1.1969. The dollar bought 118.54 yen, up from $118.53. The British pound stood at $1.7389, down from $1.7392.

EARNINGS NEWS

Aetna Inc, ((AET)), health care company, reported Q4 net income of $1.42 a share, up from 98 cents in the year-ago period on 14% revenue growth, topping analyst forecasts of $1.23 a share. Operating earnings on an adjusted basis were $1.26 a share for Q4, up from the prior year''s 91 cents. Aetna raised its financial forecast on stronger projected membership growth.

Marriott International, ((MAR)), hotel chain, reported a 25% rise in Q4 net income to $1.07 a share on a 16% revenue growth, beating analyst estimate of 98 cents a share. Revenue per available room rose 11.2% during the quarter.

Watson Wyatt Worldwide Inc, ((WW)), management consulting firm, reported that Q2 net income climbed 55.4% to 41 cents a share on 79.8% revenue growth, due to the acquisition of the consulting operations from its European partner Watson Wyatt LLP, along with growth in the technology and human capital consulting sectors. The company topped analysts’ estimate of 42 cents a share.

EarthLink Inc, ((ELNK)), internet service provider, reported Q4 profit of 22 cents a share, down a penny from 23 cents a year ago revenue decline, beating analysts’ forecasts of 21 cents a share.

Timberland Co, ((TBL)), footwear and apparel company, reported that Q4 net income advanced to 71 cents a share, from 64 cents a share in the same period a year ago. The results included pre-tax costs of $1.7 million related to the previously disclosed restructuring of its Caribbean manufacturing facilities. If not for these restructuring charges earnings were 73 cents a share, beating analyst estimate of 62 cents a share.

Coca-Cola Enterprises Inc, ((CCE)), soft drink distributor, reported a Q4 loss of 12 cents a share, down from a year-ago profit of 17 cents a share, missing analyst estimate of 15 cents a share. The results include a charge of 27 cents a share, related to the repatriation of foreign earnings. If not for items, the company earned. Revenue increased 2% in Q4.

Central Parking Corp, ((CPC)), parking facilities company, reported Q1 earnings of 54 cents a share, up from 8 cents a share in the same period a year earlier despite revenue decline. If not for discontinued operations, earnings would have been 51 cents a share.

Rural/Metro Corp, ((RURL)), emergency services provider, reported Q2 earnings of 11 cents a share, down from 13 cents a share in the same period a year earlier despite 12% revenue growth. The provision for doubtful accounts as a percentage of revenue increased to 17.7% from 15.5%.

CORPORATE NEWS

State and federal authorities announced a $1.64 billion pact with the world’s largest insurer AIG Inc over alleged accounting improprieties. The deal, which is one of the largest finance-industry regulatory settlements with a single company in U.S. history, will result in an after-tax charge of about $1.15 billion for Q4 of 2005. The huge payout includes fines, restitution and business-practice changes. Despite its regulatory problems, AIG posted steadily rising profits and boosted its dividend over the past three quarters.