Friday, April 24, 2015
- After barely moving in response to its Q1 numbers yesterday, Proto Labs (NYSE:PRLB) sold off today in the wake of downgrades to neutral ratings from Piper and Craig-Hallum. Needham downgraded ahead of the report.
- Though the custom parts maker narrowly beat Q1 revenue estimates and posted in-line EPS, it guided for on its CC (transcript) for Q2 revenue of $61M-$64M and EPS of $0.46-$0.50, below a consensus of $63.4M and $0.49 at the midpoints. Forex is expected to have a $2M impact on sales, up from Q1's $1.75M.
- Proto's North American revenue rose 36% Y/Y in Q1 (23% excluding the FineLine acquisition). Japanese revenue rose 23% (43.5% in constant currency), and European revenue fell 5% (up 10% in constant currency). Unique product developers/engineers served rose 44% to 11K.
- Gross margin fell 280 bps Y/Y to 60.2% - lower additive manufacturing margins had a 110 bps impact, and forex a 220 bps impact. GAAP operating expenses rose 33% to $19.4M (compares with 27% revenue growth).
- Q1 results, PR
- Though NetSuite (NYSE:N) beat Q1 estimates, it guided on its Q1 CC (transcript) for Q2 revenue of $170M-$172M and EPS of $0.03-$0.04, below a consensus of $172.1M and $0.06. A strong dollar is blamed (26% of Q1 revenue was international).
- Not counting the impact of the Bronto Software acquisition (announced yesterday morning, expected to close in early June), full-year revenue and EPS guidance of $715M-$725M and $0.32 is maintained. Counting Bronto, guidance is now at $730M-$743M and $0.23. Bronto is expected to contribute $40M-$45M to 2016 revenue.
- Calculated billings rose 28% Y/Y in Q1 to $174M, topping revenue of $164.8M. However, growth slowed from Q4's 34%, and was below revenue growth of 34%. NetSuite thinks forex had a 5% impact on billings growth, up from Q4's 2%.
- The deferred revenue balance rose 3% Q/Q and 36% Y/Y to $323.4M. GAAP operating expenses rose 29% Y/Y to $131.4M. A record number of $250K+ deals were struck.
- NetSuite also guided light in January.
- Q1 results, PR
- Marketo (NASDAQ:MKTO) sold off today in spite of beating Q1 estimates and issuing above-consensus sales guidance: The cloud marketing automation software provider expects Q2 revenue of $49.5M-$50.5M (consensus was at $49.2M) and 2015 revenue of $208M-$210M (consensus was at $205.5M).
- The Street might have been looking for better EPS guidance in light of the top-line strength: Q2 EPS guidance is at -$0.22 to -$0.24 (-$0.22 consensus), and full-year guidance at -$0.81 to -$0.85 (-$0.82 consensus).
- Calculated billings rose 37% Y/Y in Q1 to $49.9M, topping revenue of $46M (+42%), and the deferred revenue balance grew 6% Q/Q and 47% Y/Y to $66.9M. GAAP operating expenses rose 44% Y/Y to $48.5M. The customer count rose by 198 Q/Q to 3,972.
- Q1 results, PR
- Windstream Holdings (WIN -5.6%) has completed the spinoff of telecom assets into its REIT Communications Sales and Leasing (Pending:CSAL).
- The tax-free transaction means that share distribution and a reverse split will execute this weekend: Windstream shareholders will receive one share of CSAL for every five Windstream shares they held of record at 5 p.m. ET on April 10, with an ex-date of April 27.
- After that, at 8 p.m. Sunday, Windstream will execute a one-for-six reverse split of its common stock. CSAL shares should be deposited into accounts by April 30.
- CSAL will begin trading on Nasdaq on Monday.
- As expected, Windstream shareholders of record April 10 will get a cash dividend of $0.0659. After the reverse split, the company expects to pay $0.60 annually via quarterly dividends.
- Also: Windstream repaid $2.4B in debt and received cash proceeds of $1.035B to retire additional debt, and boardmember Francis X. Frantz will leave Windstream's board to serve as chairman of CSAL's board.
- Related: Windstream Announces Redemption of Debt
- Marvell (NASDAQ:MRVL) now expects FQ1 revenue of $710M-$740M, well below prior guidance of $810M-$830M and an $816.3M consensus. All other guidance has been withdrawn.
- The chipmaker blames "weaker than previously expected PC and storage markets and lower than expected emerging market demand." The former is presumably a reference to hard drive/SSD controller sales; the latter might be a reference to Chinese baseband chip sales.
- PC sales were down sharply in Q1, thanks in large part to weak corporate and Japanese demand. Meanwhile, analysts have voiced concerns about soft chip orders from Chinese smartphone OEMs.
- Shares have fallen to $13.50 AH. They fell 1.6% in regular trading after several peers offered soft guidance. Full FQ1 results arrive on May 21.
- Moody's confirms its ratings on VimpelCom (VIP -3%) at Ba3 on the expectation that the telecom's financial metrics will be recovering in 2016.
- The ratings agency notes that risks from the company's leverage (via VimpelCom Holdings) raising above a key threshold will be limited.
- "Despite challenges, we expect VimpelCom to remain the third largest mobile operator in Russia in terms of subscriber numbers," says Moody's Artem Frolov.
- The agency expects only a low single-digit percent decline in ruble revenues and earnings, for economic reaosns, and that VimpelCom has a solid cash balance, particularly after drawing $3.8B for the sale of its stake in Algeria's Djezzy.
- Previously: VimpelCom completes sale of Algerian stake for $2.6B (Jan. 30 2015)
- Southern Copper (SCCO +2.7%) reports Q1 earnings of $0.35/share, beating the analyst consensus estimate of $0.29, on revenues that fell 6% Y/Y to $1.27B, below the $1.32B consensus, as copper prices fell.
- Q1 EBITDA declined 16.9% Y/Y to $556.1M, and margin fell from 49.4% to 43.6%.
- SCCO's Q1 copper production rose 8.9% Y/Y to 177.6K tons, and says it expects its copper output to nearly double to 1.15M tons in 2017 from last year.
- Separately, Peru's energy and mines minister says the government could ask SCCO to make additional changes to its $1.4B Tia Maria project after protests turned deadly this week.
- Today's notable tech gainers include Chinese microblogging leader Weibo (WB +9.4%), VoIP/4G signaling infrastructure provider Sonus (SONS +5.9%), Chinese mobile game publisher Sky-mobi (MOBI +7.2%), Chinese auto site Bitauto (BITA +5.6%), and cloud e-mail encryption software provider Zix (ZIXI +3.2%). The Nasdaq is up 0.7%.
- Notable decliners include set-top/pay-TV infrastructure provider Arris (ARRS -4.5%), M2M/fleet management hardware and software provider CalAmp (CAMP -6.6%), and optical component vendor NeoPhotonics (NPTN -5.9%).
- Weibo, Sky-mobi, and Bitauto are taking part in a fresh Chinese tech rally. Weibo, also up strongly on Wednesday, is now up 21% from Tuesday's close. Zixi is up 11% since posting Q1 results and reiterating its full-year sales guidance on Tuesday; a 14.7% Y/Y Q1 increase in orders to $14.3M is going over well. Sonus' gains come two days after the company posted Q1 results that were slightly better than the guidance provided in its March 24 warning.
- Arris is giving back some of the huge Thursday gains seen on account of its $2.1B deal to buy set-top rival Pace (and take advantage of its lower tax rates); Synergy Research estimates Arris/Pace will have a combined 17% global video infrastructure share (nearly even with Cisco's 18%), and a set-top share of ~30%. CalAmp is returning some of the huge Wednesday gains seen due to its FQ4 beat and solid FY16 guidance.
- Previously covered: Chip stocks (a lot of them), Amazon, Microsoft, 3D Systems, Unisys, Silicon Motion, Rackspace, Netgear, AMSC, Verisign, Acacia, Infosys, Juniper, Ubiquiti, Maxwell, Synaptics, HomeAway, Gigamon
- American Electric Power (AEP +1.9%) is upgraded to Buy from Hold with a $62.50 price target at Deutsche Bank, which believes AEP has made great strides toward becoming a more predictable, higher quality regulated utility, with improved execution and a clearer strategy in place.
- The firm sees the trend continuing in 2015 as AEP likely will exit its merchant generation business, which should reduce volatility and allow for multiple expansion.
- AEP trades in line with regulated peers absent any value for the generation segment, DB says, implying minimal downside even if the sale price or proceeds deployment disappoint.
- Unisys (NYSE:UIS) is down sharply after missing Q1 revenue estimates (while beating on EPS) thanks to a 16% Y/Y drop in non-U.S./Canada revenue. A strong dollar exacted a heavy toll: Non-U.S./Canada sales were down only 5% in constant currency.
- Along with its results, the mainframe/IT services provider (4 months removed from getting a new CEO) has announced it's launching a restructuring expected to cut headcount by 8%, and yield $200M/year in savings by the end of 2016. $300M in restructuring charges are expected over the next several quarters.
- The services backlog was $4.5B at the end Q1, -$300M Q/Q (seasonality) but flat Y/Y. Services revenue fell 6% Y/Y to $639M, while Technology (mainframe/server) revenue rose 3% to $82M. U.S. federal revenue +13%,, other public sector -10%, financial industry -10%, commercial industry -7%.
- Gross margin fell 130 bps Y/Y to 16.2%, and operating expenses fell 4% to $147M. $128.8M was spent on SG&A, and $18.2M on R&D.
- Q1 results, PR
- "By calendar 2016, we believe organic [constant currency] growth returns to low single digits with growing cloud business and earnings growth can potentially be restored to 10% or so with the leverage of share repurchase, and continued strong cash flow generation," writes Nomura's Rick Sherlund, upgrading Microsoft (NASDAQ:MSFT) to Buy following its FQ3 beat. His target remains at $50.
- Sherlund, who downgraded in January on account of Microsoft's FQ2 numbers, still thinks the company will be in a transition period for a few quarters, and notes certain core businesses (e.g. Windows, traditional Office licenses) were soft. However, he thinks total Office revenue (traditional + 365) could start rising again in 2016 "given high interest and migrations among business users to Office 365 and new cross platform productivity tools for Windows, iOS and Android."
- "In our view, Microsoft is well ahead of its large cap value peer group in the transition to the cloud," says UBS' Brent Thill (Buy, $50 target). Pac Crest's Brendan Barnicle (Outperform, $50 target) observes Office 365 still covers less than 10% of the Office installed base, leaving plenty of room for growth. He estimates Azure is on a $1.5B/year revenue rate (compares with $5.16B in trailing revenue for AWS and a $6.3B/year run rate for Microsoft's broader commercial cloud ops).
- On the CC (transcript), CFO Amy Hood stated Microsoft's FY15 (ends in June) opex guidance ($32.4B-$32.5B) is now $2B lower than where it initially was. Adjusting for forex and the Nokia deal, opex rose just 1% Y/Y in FQ3 thanks to job cuts. Satya Nadella mentioned Office iOS/Android app downloads have topped 100M.
- Prior Microsoft earnings coverage
- Petrobras (PBR +6%) racks up a second straight day of strong gains after it released financial statements that had been delayed by the corruption scandal and on news that it will report Q1 earnings on May 15.
- Providing some short-term relief to investors, Fitch Ratings says PBR had averted the risk of an imminent credit downgrade but could still lose its investment grade over the next couple of years.
- Cowen analysts raise their price target on PBR shares to $11.50 from $9, applauding the company's "new emphasis" on de-leveraging, capital discipline and a "more shareholder friendly strategy."
- However, J.P. Morgan says it is "not very convinced" with PBR's plan and says further strength would provide an opportunity for investors to reduce risk on the bonds.
- Shake Shack (SHAK +6.6%) is up 7% on strong volume to carve out yet another all-time high.
- Traders think the momentum run-up in shares today is tied to a broader rally in restaurant stocks after Starbucks, Chipotle, Domino's Pizza, and Dunkin' Brands all reported strong growth.
- The market cap of Shake Shack and its 64 stores now exceeds the valuation level of Denny's and Red Robin Gourmet Burgers combined.
- Though the Nasdaq is up 0.7% thanks to market-pleasing earnings from Google, Microsoft, and Amazon, chip stocks (SOXX -2.1%) are adding to their Thursday losses after Freescale, Altera, Microsemi, and Maxim joined the ranks of chipmakers offering soft Q2 guidance; Texas Instruments, Xilinx, and Qualcomm did so on Wednesday afternoon.
- NXP (NXPI -4.3%), set to merge with Freescale in a cash/stock deal, is selling off ahead of its April 29 Q1 report. RF chipmakers Skyworks (SWKS -3.8%), Qorvo (QRVO -4.4%), and Avago (AVGO -5.2%) are also seeing steep declines.
- Other decliners include a slew of telecom/networking, microcontroller, and analog/mixed-signal chipmakers. The group includes Marvell (MRVL -3%), ON Semi (ON -6.9%), Atmel (ATML -3.3%), Cypress (CY -4%), Lattice (LSCC -3.9%), Semtech (SMTC -6.9%), Cavium (CAVM -6%), PMC-Sierra (PMCS -2.9%), InPhi (IPHI -3.8%), and Silicon Labs (SLAB -2.9%). Chip packaging/testing firm Amkor (AMKR -5.7%) is also off; its Q1 report arrives on Monday.
- As was the case with TI and Xilinx, soft telecom equipment chip demand was often blamed by those guiding light yesterday afternoon. Freescale (FSL -3.5%) stated it expects network processor division sales to be down Q/Q and RF (base station power amplifier) division sales to be flat. Microcontroller, automotive, analog, and sensor division sales are expected to rise.
- Altera (ALTR -3.3%) stated its "telecom and wireless business, and particularly our wireless business globally looks to be quite weak in [Q2], while the rest for our business will in aggregate be flat to slightly up." Regarding its Q1 miss, the company notes "Industrial, test, compute and storage, and to a lesser extent military, fell short of our forecast" (share loss to Xilinx?).
- Maxim reports seeing "broad-based softness in communications infrastructure demand" and soft industrial bookings to go with healthier mobile/auto demand. The Galaxy S6 appears to be giving a lift to Maxim's mobile sales.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
- In addition to missing FQ3 revenue estimates (while beating on EPS), Maxim (NASDAQ:MXIM) has guided for FQ4 revenue of $570M-$610M and EPS of $0.35-$0.41, below a consensus of $618.5M and $0.44.
- On its CC (transcript), the analog/mixed-signal chipmaker stated telecom/data center chip sales are expected to fall in FQ4, thanks to "broad-based softness in communications infrastructure demand" - TI, Xilinx, and Altera have also reported seeing soft telecom equipment chip sales.
- Maxim also said it's "taking a cautious view" on industrial chip sales (they're expected to be flat Q/Q) due "weaker than seasonal bookings trends." Mobile chip sales (lifted by Samsung's strong Galaxy S6 sales) are expected to be healthier, as are automotive sales.
- FQ3 results, PR
- A mid-morning slide in gold has it lower by 1.5% on the session to $1,176 per ounce. The metal is down by about 2.5% for the week.
- After opening the year at about 1,200 per ounce and rallying to more than $1,300 by the end of January, gold reversed and bottomed at $1,150 in mid-March.
- In the news today is another soft economic report from the U.S. and comments out of Greece suggesting the government is prepared to make whatever concessions are necessary to prevent a default and/or EMU exit.
- GLD -1.6%
- ETFs: GLD, IAU, SGOL, UGL, DGP, GLL, UGLD, DZZ, GLDI, OUNZ, DGL, DGZ, DGLD, AGOL, TBAR, GEUR, UBG, GYEN, BAR
- Turtle Beach (NASDAQ:HEAR) has sold a $5M subordinated note to an affiliate of P-E firm Stripes Group (the company's controlling shareholder). The note carries a 10% interest rate through April 20, 2016, and a 20% rate afterwards.
- The gaming headset/audio system maker declares the sale "temporarily strengthens our balance sheet without excessive shareholder dilution and underscores our largest shareholder's confidence in the Company's future growth prospects" It had just $7.9M in cash at the end of 2014, and $44.6M in debt.
- In addition to slightly missing FQ2 revenue estimates (while beating on EPS), Microsemi (NASDAQ:MSCC) has guided for FQ3 revenue of $302M (+/- 2%); the midpoint is below a $303.7M consensus. EPS guidance of $0.67-$0.71 is in-line with a $0.69 consensus.
- The high-end analog/mixed-signal chipmaker was up 26% YTD going into earnings, aided by enthusiasm about the Vitesse acquisition. Several peers have also provided soft sales guidance.
- Driving the FQ2 EPS beat: Gross margin (non-GAAP) rose to 57.1% from 56.2% in FQ1 and 55.2% a year ago. Op. margin rose to 25.6% from 24.4% and 20.7%.
- FQ2 results, PR
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