Novellus: September bookings guidance.
Novellus is seeing a weak June quarter thanks to the order push-outs following the Japan earthquake. Topline and EPS are expected to be around mid point of the management guidance (revenue $330-372 mn, EPS $0.70-0.80). However, June quarter orders will likely come at the lower end of guidance (10-25% QoQ decline). The biggest question is the outlook for September bookings and the analyst community is widely varied their opinions. On the bullish side, analysts from Bank of America-Merrill Lynch expect a 10-15% bookings growth guidance for the September quarter and a Stifel Nicolaus analyst has his numbers around 10-30% bookings growth. On the bearish side, Mehdi Hosseini of SIG expects a double digit decline in 3Q bookings. A Credit Suisse analyst expects 3Q bookings guidance to be flat, as compared to 2Q.
Given the large deviation in sell side analysts' opinions with respect to September bookings guidance, the stock is likely to see a significant jump up or down depending on the actual guidance for the September booking.
Alcoa: Aluminum market outlook and Alcoa’s ability to control costs
Alcoa’s unit volumes are expected to increase with a higher alumina production ramp up in Suriname and Point Comfort, as well as higher production of primary metals with the restart of idle facilities. This, coupled with ~4% QoQ increase in aluminum prices, will help Alcoa’s topline. However, the rise in electricity costs, increasing fuel oil and caustic soda prices, are expected to affect the bottomline. In addition, the stronger currencies in Brazil, Canada, Australia and Europe are expected to have an adverse effect.
I believe that cost concerns are already built in the sell side models to some extent. The consensus 2Q estimate has been declining from a high of $0.36 in mid-May and currently stands at $0.34. Going forward, the prospects for the shares depend on the outlook for the aluminum market and Alcoa's ability to control costs.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.