Yes, earnings season is here, and Tuesday afternoon was one of the biggest days for earnings. There were some big names reporting, but we also got some key reports from some lesser known names. Let's look at five names that reported Tuesday afternoon.
Intel (INTC): Intel beat on both the top and bottom line. Revenues for the tech giant came in at $12.91 billion, slightly beating the $12.84 billion we were expecting. That is a very good number for the firm, as Intel has seen some revenue troubles recently. On the bottom line, Intel reported a GAAP number of $0.53, which beat street expectations by three cents. The non-GAAP number came in a few pennies higher, at $0.56. Intel's gross margins rose nicely from last year's period, increasing from 61.38% in the year ago period to 64.04% in this year's period. That is good for them.
In terms of guidance, Intel guided Q2 revenues to a midpoint of $13.6 billion, plus or minus $500 million. Their midpoint was ahead of street estimates, which are currently at $13.43 billion.
Intel's revenues were down 7% sequentially from Q4. PC Client Group revenues were $8.5 billion, down 7% sequentially. Data Center Group revenues of $2.5 billion were down 10% sequentially. Other Intel architecture group revenues were $1.1 billion, down 2% sequentially. The first quarter (of 2012) also included full quarter revenues of $935 million, which were contributed from last year's acquisitions of McAfee and Infineon Wireless Solutions.
Intel shares were down about 2.5% in after hours, but remember, they hit a new 52-week high during Tuesday's trading. Also remember, Intel closed at $28.47, and it started 2012 at just $24.06. It has had a huge move, so a slight pullback isn't a terrible thing. It might just be a small break in what could continue to be a large rally.
Intuitive Surgical (ISRG): The company behind the da Vinci Surgical System blew out earnings expectations again, sending shares to a new all-time high. Really, if you are surprised with the beat, you don't know this company. It has been known for its large beats, and Tuesday's earnings report was another one of them. In early February, I called this name a potential $700 stock in 2012, and that was at $500. It already is at $575 in after-hours, meaning my prediction is coming closer to reality.
First quarter revenues for the surgical robot giant came in at $495 million. That number was up 28% over the year ago period, and handily beat estimates of $464.7 million. Here's the breakdown of their three key units, all showing nice gains over last year's period.
- First quarter of 2012 instruments and accessories revenue increased 32% to $208 million from $157 million in the first quarter of 2011.
- First quarter of 2012 systems revenue was $207 million, an increase of 24%, compared with $167 million during the first quarter of 2011.
- First quarter of 2012 service revenue increased 27% to $81 million from $64 million during the first quarter of 2011, reflecting growth in the installed base of da Vinci Surgical Systems.
Procedure growth was up 29% year over year, and the company sold 140 da Vinci systems compared to 120 a year ago.
On the bottom line, the company posted an earnings per share number of $3.50, which crushed estimates of $3.14. That is up from last year's number of $2.59.
As I wrote this, the stock was up more than $32 to over $577. It might open around there Wednesday, and we've seen in the past that the stock has gained even more during the trading day. However, this name is now at an all-time high, so there is the chance of some profit taking.
Analysts will be rushing to change their estimates on the name after this report. After last quarter, 2012 earnings per share estimates rose from $14.17 to the $14.53 now expected, and I expect that number to be over $15 in the next few weeks. 2013 estimates have come up from $16.02 to $16.97 in the past three months, and I'm guessing they will be close to $18 before long.
This company continues to impress, and is now worth nearly $23 billion dollars. It is no longer a small cap growth name, although it still does not gain the attention it probably should.
Cree (CREE): The market leader in LED lighting has taken another hit after earnings, and this is not much of a surprise either. As Intuitive usually announces great numbers, Cree has been known lately for its earnings and revenue misses, along with disappointing guidance. Shares usually take a hit after earnings.
For the third quarter, Cree reported revenues of $284.8 million, which were well below the $300.76 million expected. That is a huge miss. In terms of earnings per share, non-GAAP earnings came in at $0.20, which missed expectations by a penny. GAAP earnings were just eight cents per share.
But again, Cree will be watched for its guidance, which was a bit below expectations as well. For the fiscal fourth quarter, Cree guided revenues to a range of $295 to $315 million, well below the $323.61 million analysts were currently expecting. Non-GAAP earnings per share were guided to a range of $0.20 to $0.26 cents, which is also below the $0.28 that was expected. GAAP earnings were forecasted in a range of $0.04 to $0.10.
Cree shares were down nearly 9% in after hours, erasing a bit of its recent rally. I still don't understand why this name has bounced (before this earnings report) more than 50% off of its 52-week low of $20.25. The company seems to miss each quarter, and guidance is always below expectations it seems. However, the stock has rallied, but is nowhere near the $80 or so it was at a few years ago. This name could easily trade down to $25 in the next few weeks, as this earnings report was less than unimpressive.
International Business Machines (IBM): IBM's first quarter numbers after the bell Tuesday might have the biggest impact on Wednesday's market action, given the price-weighted Dow Index. IBM had a huge rally into earnings, and was selling off afterwards. We have definitely seen that before, and it appears it is happening again, with the name down about $4 in after-hours.
The main culprit this time for IBM was the revenue numbers. They came in at $24.7 billion, slightly below the $24.77 billion expected (and I saw other consensus numbers at $24.81 billion). The $24.7 billion was up just slightly from last year's $24.61 billion. That is basically no revenue growth, and at some point, you need some growth.
Non-GAAP earnings per share, which is what most people look at, came in at $2.78, handily beating the $2.65 that was expected. GAAP earnings were at $2.61. The company also boosted its full year guidance on earnings, from at least $14.85 to at least $15, which is now ahead of the $14.93 that was expected.
IBM got some help on the bottom line from its stock buyback, and they bought back about $3 billion in the quarter. It also paid out about $0.9 billion in dividends, and the company says that its balance sheet remains very strong.
IBM sold off in after hours trading, and we've seen that story before. It could even pull back to around $200 in the near-term. If it drops below that level, you might consider entering the name. It will go up again, and it has continued to do so in recent times. You are getting a decent dividend, and the company is buying back plenty of stock.
Yahoo reported revenues (excluding traffic acquisition costs) of $1.077 billion, which were ahead of the $1.06 billion that analysts were expecting. Also, that number is up from last year's period, which does show some signs of life from the struggling firm. In terms of earnings per share, Yahoo reported $0.24, which significantly beat analyst expectations for just $0.17. That is the primary reason in my view that shares were up a few percent late Tuesday.
In terms of guidance, Yahoo gave a Q2 revenue number (excluding traffic acquisition costs) in the range of $1.03 billion to $1.14 billion. The midpoint of that number is $1.085 billion, which is slightly above the $1.08 billion analysts are expecting, and about in line to slightly above last year's period.
Yahoo has been struggling, but it seems that new CEO Scott Thompson may be starting to turn things around. Yahoo is undergoing a complete restructuring, and investors may be hoping the future is bright. Shares were up 2.5% in extended hours trading, but still seem to be stuck in a tight range. If Yahoo can post another decent quarter the next time it reports, shares might finally be able to break out of this range. Long term investors can only hope.
Summary / Final Thoughts: Intuitive Surgical and Yahoo were up in extended hours, but IBM, Intel, and Cree were down. Given their size in the market, IBM and Intel will have the most impact on the markets during Wednesday's trading. Strangely enough, these five names have a combined market cap of $426 billion (as of close Tuesday). These five combined are still worth $142.5 billion less than Apple (AAPL), so technically, you could make the argument that Apple could have more impact on indexes based off of market cap. We know that IBM will have a strong impact on the Dow, given that it is the highest priced stock in the index.
As for what to do: I would wait for IBM and Intel to come down a little, then would re-enter the names at lower levels. Intuitive Surgical is a great name to own, but entering at all-time highs can be risky. I would stay away from Cree for now, given their inability to put together a decent quarter. Yahoo is an interesting speculative play, if you think there is a potential buyout. If they can put together another good quarter, it might be a good buy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.