Science & Technology
Science and Technology
Science and Technology
Wed, July 21, 2010
Tue, July 20, 2010 Texas Instruments, Apple, AT&T, Verizon Communications and Sprint Nextel
CHICAGO--([ BUSINESS WIRE ])--Zacks.com Analyst Blog features: Texas Instruments (NYSE: [ TXN ]), Apple Inc. (Nasdaq: [ AAPL ]), AT&T (NYSE: [ T ]), VerizonCommunications Inc. (NYSE: [ VZ ]) and Sprint Nextel (NYSE: [ S ]).
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Here are highlights from Mondaya™s Analyst Blog:
TI Just Meets, Gets Pounded
Reporting 2nd quarter earnings results after the closing bell on Monday, Texas Instruments (NYSE: [ TXN ]) managed to meet the Zacks Consensus Estimate of 62 cents per share, on revenues of $3.5 billion in the quarter. This marks the first time in the past 5 quarters that Texas Instruments failed to post a positive surprise.
However, year over year, the company's numbers are very impressive: its 62 cents per share in the quarter beat Q209's 25 cents per share by 148%. First quarter EPS amounted to 52 cents, for a 19.2% improvement.
Analysts had been busy upwardly revising estimates prior to the earnings report. In the past month, 3 analysts had raised estimates for the quarter and 5 had done so for fiscal 2010. What's more, the magnitude of the Zacks Consensus Estimate was notable -- up nearly 20% for the June quarter over the past 90 days, and up from $2.09 per share to $2.39 per share for the fiscal year.
Texas Instruments also raised its expectations for earnings in the 3rd quarter to 64-74 cents per share. The Zacks consensus has been sitting at 64 cents for the past month.
Disappointingly, however, Texas Instruments did not provide any change to fiscal 2010 guidance. At $2.39 per share for the year, this would imply 4th quarter earnings of only 51-61 cents. Perhaps the company is planning to upwardly revise 4th quarter and fiscal year numbers when it updates 3rd quarter expectations on September 9th.
In the meantime, Texas Instruments has a Zacks #2 Rank (Buy), reflecting the positive estimate revisions leading up to today's earnings report. We also have a longer-term Neutral recommendation on TXN shares. That said, however, investors do not appear too impressed with Texas Instruments merely hitting their target. Shares are down 5.6% after-hours.
Earnings Preview: Apple Inc.
Apple Inc. (Nasdaq: [ AAPL ]) is slated to release its third quarter 2010 results on July 20, after the market close. Since the beginning of the year shares have risen 19%. We believe that AAPL could continue to provide earnings above expectations despite its current premium valuation.
Earnings Estimate Revisions - Overview
The earnings outlook for AAPL remains extremely strong ahead of its quarterly results. We expect AAPL to post beat by a wide margin and are encouraged by the fact that both the third quarter and full year estimates are clearly going up, implying that analysts see positive catalysts. The estimate revision trends and the magnitude of such revisions justify the strength in the stock.
Agreement of Analysts
A majority of the analysts agree that Applea™s third quarter and fiscal 2010 earnings will exceed previous expectations.
Estimates are trending upward, as analyst opinion has turned increasingly bullish over the last 30 days. Out of the 38 analysts providing estimates, 18 have raised them for the upcoming quarter over the last 30 days, with 5 analysts making positive revisions over the last week. However, 2 analysts moved in the opposite direction in the last 30 days while 1 has lowered estimates in the last 7 days.
Estimate revisions for full-year 2010 were even more encouraging, as 24 of the 41 analysts providing estimates lifted their forecasts in the last 30 days, 8 of which were raised in the last 7 days. There were no negative revisions.
The positive revisions are attributable to the strong demand for the company's iPhone and Mac, as unit shipments remain robust. Some analysts had previously expressed caution regarding Mac shipments, believing that the iPad would cannibalize Mac sales. But this has been limited so far. Instead, AAPL has been taking share in the PC market and analysts remain extremely positive about the companya™s continued growth in desktops.
While the outlook for the Mac, iPad and iPhone 4 remain extremely strong -- fueled by demand in both the domestic and international markets -- analysts have expressed some caution regarding the European crisis and near-term supply chain constraints. However, judging from the fact that full-year estimates are up, the supply chain pressure could alleviate in the current quarter.
Earnings Preview: AT&T
AT&T (NYSE: [ T ]) is slated to release its second-quarter 2010 results on July 22, 2010, before market opens. The current Zacks Consensus Estimate for the second quarter is 57 cents, representing a 5.43% annualized growth.
AT&T had an average of 6% positive earnings surprise in 3 of the last 4 quarters. Hence, we will not be surprised if the carrier beats expectations in the second quarter on the back of a strong wireless growth momentum.
On its first quarter conference call, AT&T stated that it envisages stable revenue and stable-to-improved earnings and operating margins for full-year 2010. The forecast takes into account the dilutive impact of roughly 5 cents to 6 cents associated with the carriera™s impending acquisition of specific wireless assets from VerizonCommunications Inc. (NYSE: [ VZ ]). However, AT&T does not expect pension retiree benefit costs to drag the bottom line in fiscal 2010.
Moreover, AT&T is growing its focus on returning maximum value to its shareholders through attractive dividend payout and share repurchase initiatives.
Agreement of Analysts
Estimates for the second quarter are trending downwards since the first-quarter results, showing a clear directional agreement. Out of a total of 29 analysts currently covering the stock, 8 reduced their estimates over the last 30 days and 4 made upward revisions. However, over the last one week, one analyst raised the estimate upward while one moved in the opposite direction.
Estimates for fiscal 2010 have also been negative, with 9 out of the total 32 analysts reducing their forecasts in the last 30 days and only 1 analyst making a positive revision. Over the last one week, 1 analyst revised the estimate downward with no upward revision. The current Zacks Consensus Estimate for fiscal 2010 is $2.26, reflecting a substantial growth of 7.05% year over year.
The negative revision is largely due to declining wireline revenues in the second quarter. AT&T is challenged by aggressive pricing plans of direct competitors such as Verizon as well as Sprint Nextel (NYSE: [ S ]), which is aggressively rolling out a $50 per month unlimited voice and data plan. Despite the strong growth momentum in delivering iPhones, we believe high marketing costs associated with the product (especially due to the heavy subsidy associated with iPhone 3G/3GS) is affecting earnings.
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