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Hewlett Packard, Cisco Systems, Lowea?s, IBM and Salix Pharmaceuticals

^{Published on 2010-05-18 15:10:43 - Market Wire}
 

CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Hewlett Packard Company (NYSE: [ HPQ ]), Cisco Systems Inc. (Nasdaq: [ CSCO ]), Lowea™s Companies Inc. (NYSE: [ LOW ]), International Business Machines (NYSE: [ IBM ]) and Salix Pharmaceuticals, Ltd. (Nasdaq: [ SLXP ]).

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Here are highlights from Mondaya™s Analyst Blog:

Earnings Preview: Hewlett Packard

Hewlett Packard Company (NYSE: [ HPQ ]) is scheduled to announce its second quarter 2010 results on May 18, 2010 and we dona™t see too much variation in analyst estimates at this point.

The company reported decent first quarter 2010 numbers, with EPS of $1.10 exceeding the Zacks Consensus Estimate by 4 cents.

HP delivered $31.2 billion in revenue, up 8.0% from $28.8 billion reported in the year-ago quarter. Revenue increased across all businesses excluding services. In particular, the Personal Systems Group (PSG) revenue was, up 20.0% year over year, helped by a 26.0% year-over-year increase in unit shipments.

Out of 28 analysts providing estimates for the second quarter, 2 have made upward estimate revisions in the last 30 days, while there were no downward revisions. For the July quarter, 4 analysts made upward revisions in the last 30 days, while 2 made downward revisions. This apart, out of 30 analysts tracking the stock for fiscal year 2010, there were 3 upward revisions in the last 30 days and 1 downward revision.

Most of the news flow relating to HP continues to be positive. As per the figures published by IDC, HP still rules the computing world, with the largest market share of 19.7% and registering a unit shipment growth of 19.9% in the first quarter of 2010. This apart, the company has completed the acquisition of networking major 3Com. HP will now be able to challenge networking leader Cisco Systems Inc. (Nasdaq: [ CSCO ]), and can gain market share in the networking business.

We are optimistic about the companya™s positive outlook for fiscal year 2010, its enhanced product portfolio, growing customer base and the revival in the macroeconomic scenario. Although we remain positive on the companya™s performance going forward given that demand is stabilizing and cyclical businesses (particularly consumer PC) are rebounding, we remain concerned about the long-term growth prospects of its printing unit. HP also plans to control costs and generate incremental savings, which is essential for the company to maintain growth in the upcoming quarters.

Lowea™s Outpaces Zacks Consensus

Lowea™s Companies Inc. (NYSE: [ LOW ]), the worlda™s second largest home improvement retailer, recently posted better-than-expected first-quarter 2010 results, showing signs of improvement with consumers willing to spend on remodeling projects and big ticket items.

The quarterly earnings of 34 cents a share came ahead of the Zacks Consensus Estimate of 31 cents, and climbed 6.3% from 32 cents posted in the prior-year quarter. Lowea™s said that it now expects second-quarter 2010 earnings in the range of 57 cents to 59 cents a share, and fiscal year 2010 earnings between $1.37 and $1.47 per share.

The companya™s second-quarter 2010 guidance fell short of the current Zacks Consensus Estimate of 62 cents a share. The stock fell $1.12 or 4.3% to $24.95 in pre-market trading on modest outlook despite stronger-than-expected results.

Net sales for the quarter rose 4.7% year-over-year to $12,388 million, after increasing 1.8% in fourth-quarter 2009. Management expects sales to increase between 5% and 7% in the second-quarter and fiscal year 2010.

IBM Faces Lawsuit Battle

International Business Machines (NYSE: [ IBM ]) and the State of Indiana have been suing each other in an Indianapolis courthouse over a terminated outsourcing deal, under which IBM was to overhaul and modernize Indiana's outdated and ineffective welfare eligibility system.

The State of Indiana sued its former welfare privatization partner, IBM, alleging a breach of contract, which includes intentional denial of Medicaid (the United States health program for eligible individuals and families with low incomes and resources) to a dying cancer patient and a nun.

The State is looking to recover a payment of $437.6 million to IBM (which it paid over the past three years) in lieu of costs incurred for third-party lawsuits, federal penalties and state employee overtime incurred as a result of the deal. Moreover, the State is seeking triple damages of more than $1.3 billion under the state law, citing intentional denial of welfare benefits. The Family and Social Services Administration (FSSA) is also looking to set aside IBMa™s claim of $83.4 million in cancellation penalties claiming that this clause in the agreement is unenforceable under state laws.

IBM then countersued the State of Indiana, claiming recovery of fees and expenses of $52.8 million due under a 10-year contract signed with the FSSA in 2006. IBM also wants cancellation penalties of $83.4 million. In October 2009, the State terminated the contract and removed IBM from the position of lead contractor for the deal.

Salix Pharmaceuticals Beats Estimates

Salix Pharmaceuticals, Ltd. (Nasdaq: [ SLXP ]) reported a net loss of 45 cents per share in the first quarter of 2010, 6 cents better than the Zacks Consensus Estimate. The company had guided towards a net loss of 50 cents. Salix reported a net loss of 29 cents in the year-ago period. Net loss increased from the year-ago period mainly due to an increase in costs and a slight decline in revenues.

First quarter revenues declined slightly (1.6%) to $44.1 million, mainly due to decreased unit sales of MoviPrep, OsmoPrep, Apriso and Pepcid. This was partially offset by increased unit sales of Xifaxan and price increases. Xifaxan sales increased 23.9% to $29.9 million with prescription demand growing 15% during the quarter. The bowel cleansing franchise, consisting of MoviPrep and OsmoPrep generated revenues of $10.5 million, down 17.1%. OsmoPrep prescriptions declined 38% mainly due to the boxed label warning announced by the FDA in late 2008.

Gross margin was almost flat from the year-ago period at 77.8%. While research and development expenses declined to $20.1 million during the quarter, Salix recorded an increase in selling, general and administrative expenses, which came in at $36.5 million.

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