THE MARKET MIDDAY
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dELiA*s, Is like.. You Know, Trading Higher
Last night, dELiA*s Inc. (NASDAQ:DLIA), a direct marketer of teen apparel, announced that its Internet subsidiary, iTurf Inc., had filed a registration statement with the SEC -- laying the groundwork for an initial public offering. This morning, shares of the teen titan like, you know, went up $1 5/8 to $16 11/16, which was understandably a smaller percentage gain than the 26% that ocurred at the beginning of the year when dELIA*s initially announced its intention to sell a stake in its Internet unit to the public.
dELiA*s is definitely way ahead of the pack in terms of online teen marketing, thanks in part to its early development of gURL.com -- a website dedicated to teenage girls. The firm has expanded its Net presence to six sites since turning on its main site last May, and attendance is soaring (800,000 to 22 million page impressions at iTurf from February to December of last year). The teen market is huge, as our own Louis Corrigan noted in this year's Industry Focus, "The broad 'teen' market in the U.S. is being driven by the Baby Boomers' baby boom. According to the Census Bureau, the number of 10- to 19-year-olds reached a 15-year low of 35.2 million in 1992, but it's been expanding ever since. This segment of the population will reach 40 million by 2000 and will continue growing at twice the rate of the overall population through 2010. Also, what's often called 'Generation Y' includes folks in the 10- to 24-year-old age bracket. This group will increase in number from 56.2 million in 1998 to 63.1 million in 2010."
With disposable income estimates in the range between $120 and $278 billion, the group is also slapping down some cash. Indeed, online revenue is expected to account for about 4% of dELIA*s revenues ($6 million) for its current year ending this month. iTUrf reported net income of $52,000 for the first nine months of the fiscal year off of $1.9 million in sales -- which represented a 22-fold increase year over year (the firm is hoping to merely double sales in calendar 1999). Other Internet retailers, with customer lists that ultimately spend less per head, are being valued in the $500 -$3000 market cap/per customer range, suggesting a valuation between $50 to $100 million for the offering.
Beyond timing the offering for a receptive market, distributing shares now will allow the company to fund its Internet expansion with cash that won't have to be taken away from the pile dedicated to its core retail growth. It is unclear whether or not the Internet brand has expanded dELiA*s catalog operations, but it certainly lends a hip cachet to the retail concept.
Fast food giant McDonald's (NYSE: MCD) shaked its way $3 1/8 higher to $79 after reporting Q4 EPS of $0.64 (excluding costs for its Made For You operational program), topping last year's $0.58 and in line with the First Call mean estimate. The company also set a two-for-one stock split, which will be paid March 5.
Document processing company Xerox Corp. (NYSE: XRX) gained $11 1/4 to $116 5/8 after reporting Q4 EPS of $1.69, up from $1.46 a year ago and ahead of the First Call mean estimate of $1.67, thanks to a 33% increase in digital product revenues, improved margins, and benefits from its global restructuring program. The company also announced a two-for-one stock split today, payable on Feb. 23.
PC maker and computing products company Compaq Computer (NYSE: CPQ) marched $3 1/16 higher to $49 3/4 after announcing it intends to sell an undetermined stake in its AltaVista search engine in an initial public offering, possibly this year. AltaVista's site will feature e-commerce from recent Compaq acquisition Shopping.com (Nasdaq: IBUY) as well as Microsoft's (Nasdaq: MSFT) HotMail e-mail technology. For more on the move, see this morning's Breakfast With the Fool.
Help desk software maker Remedy Corp. (Nasdaq: RMDY) gained $5 9/16 to $22 5/16 after reporting Q4 EPS of $0.26 (excluding charges), a penny less than last year's results but $0.02 ahead of the Zacks mean estimate. Hambrecht & Quist and Goldman Sachs both raised their ratings on the company this morning.
International broadband communications provider United International Holdings (Nasdaq: UIHIA) rose $7 7/8 to $45 1/2, adding to yesterday's 10% advance, on news that Microsoft (Nasdaq: MSFT) will take part in a series of joint projects with the company's United Pan-Europe Communications (UPC) subsidiary to offer online, telephone, and interactive video services to European broadband customers. Additionally, some $300 million worth of shares of UPC's pending initial public offering have been set aside for Microsoft, if it wishes to buy them.
Fiber optic telecom components and laser-based chip inspection equipment maker Uniphase Corp. (Nasdaq: UNPH) moved up $12 7/8 to $82 5/8 after posting fiscal Q2 EPS of $0.27 (excluding charges) compared to $0.20 a year ago, beating the First Call mean estimate by a penny. Net sales rose 40% year-on-year in the period to $63.8 million.
Cardiac laser surgery technologies developer PLC Systems (AMEX: PLC) beamed up $15/16 to $6 7/16 after the Health Care Financing Administration recommended that transmyocardial revascularization (TMR) procedures, an alternative to heart bypass surgeries, should be covered under Medicare as long as they are performed with FDA-approved devices. So far, PLC's CO2 HeartLaser is the only device approved by the FDA for TMR procedures.
News integrator and provider NewzEdge Corp. (Nasdaq: NEWZ) jumped $2 11/16 to $13 5/16 after IBM (NYSE: IBM) said it will integrate the firm's Review Topics product into Big Blue's own internal online news service.
Pharmaceutical product technologies developer Vical Inc. (Nasdaq: VICL) gained $1 1/2 to $15 3/4 after saying Pfizer (NYSE: PFE) will use the firm's naked DNA gene delivery technologies for certain therapies for animals. As part of the deal, Pfizer will buy $6 million of Vical stock and fund $1.5 million in Vical research over the next three years.
Property and casualty insurer Horace Mann Educators Corp. (NYSE: HMN) picked up $1 to $26 7/8 on news that it will be added to the S&P MidCap 400 Index in place of First Brands (NYSE: FBR), which is merging with Clorox (NYSE: CLX). Rational Software (Nasdaq: RATL), which will replace Allegiance Corp. (NYSE: AEH) on the same index, added $1 7/16 to $31 1/8.
Inktomi Corp. (Nasdaq: INKT), a developer of scalable software for the Internet, fell $17 1/4 to $131 on news that Microsoft (Nasdaq: MSFT) will drop Inktomi's browser as the primary search engine on the Microsoft Network. The software giant is cutting Inktomi loose in favor of AltaVista, the popular search site to be spun off by Compaq Computer (NYSE: CPQ).
Funeral and cemetery company Service Corp. International (NYSE: SRV) shed $14 7/8 to $19 9/16 as the company said it expects Q4 EPS of between $0.22 and $0.24, badly missing First Call's $0.42 estimate. Less death in the company's main markets -- mortality being a major driver of the funeral business -- was a main reason for the projected shortfall.
Predictive software firm HNC Software (Nasdaq: HNCS) lost $2 3/4 to $27 1/2 as it said it is dropping plans to merge with privately held Open Solutions, which develops software for banks and credit unions, in favor of a strategic alliance with the company. HNC cited "uncertainty in the small to medium-size banking business environment" as a reason for the decision. The company also reported Q4 EPS of $0.27, up from $0.18 last year and a penny ahead of Wall Street's consensus earnings estimate.
Number one Pepsi bottler Whitman Corp. (NYSE: WH) drained $3 3/8 to $20 1/8 after reporting Q4 EPS of $0.12, well above last year's $0.11 per share loss but flat with market estimates. The company announced a deal with PepsiCo (NYSE: PEP) that involves swapping domestic and international territories; PepsiCo will take a 35% stake in Whitman subject to the approval of the company's shareholders. Whitman says the deal will boost its annual sales by nearly 40% annually on a pro-forma basis.
PepsiCo, meanwhile, fizzled $5/16 to $39 15/16 this morning as the company said it expects to report Q4 EPS of about $0.24 when it hands in results next week. The company also said it will realize a $0.19 per share tax benefit in Q4 as a result of a settlement with the IRS and announced plans to close four of Frito-Lay's North American plans, a project with a $120 million price tag.
Healthcare services giant McKesson HBOC (NYSE: MCK) lost $8 1/8 to $73 7/8 after it said fiscal Q3 EPS was $0.56, ahead of last year's $0.43 figure and flat with market projections. The company said it should be able to meet its fiscal 2000 EPS goal of $3.00 per share, a penny below the Street's current earnings estimate.
Hospital and healthcare systems operator Quorum Health Group (Nasdaq: QHGI) moved back $2 1/4 to $9 9/32 after saying it expects full-year fiscal 1999 EPS of between $0.80 and $0.90, missing First Call's $1.10 consensus projection. The company reported fiscal Q2 EPS of $0.05 (before items), down from $0.32 a year ago and well off the market's $0.20 mean estimate.
Power conversion product manufacturer Artesyn Technologies (Nasdaq: ATSN) was shocked for a $3 15/16 loss to $14 1/2 after it said it expects Q1 EPS of between $0.15 and $0.18, below First Call's $0.23 projection, but is still comfortable with the Street's full-year range of between $1.05 and $1.15 (the mean is $1.12). Q4 EPS was $0.24, up from $0.10 last year and a penny above analyst projections.
Chip performance accelerator technology developer NeoMagic Corp. (Nasdaq: NMGC) crumbled $5/8 to $16 as Trident Microsystems (Nasdaq: TRID) countersued the company in response to a November patent infringement lawsuit. "We believe that NeoMagic filed its complaint against Trident with the specific intent to destroy competition" said Trident CEO Frank Lin.
Fiber-optic network operator Qwest Communications International (Nasdaq: QWST) fell $1 11/16 to $57 as Lehman Brothers, citing increased competition, high product and location expenses, and high valuation multiples, cut its rating on the stock to "outperform" from "buy."
Wireless telecommunications firm Omnipoint Corp. (Nasdaq: OMPT) slumped $7/8 to $14 7/8 after Wheat First Union downgraded the stock to "hold" from "outperform."
Turfgrass and forage seed developer AgriBioTech (Nasdaq: ABTX) was reaped for a loss of $1 1/32 to $7 29/32 after losing $3 1/8 yesterday on Friday's news that it has ended its three-month search for a strategic partner and will remain independent.
Black & Decker (NYSE: BDK) down $1 3/4 to $56 1/8; Q4 EPS: $1.10 (excluding one-time items) vs. $1.00 last year; estimate: $1.10
Coca-Cola (NYSE: KO) down $2 1/4 to $60 11/16; Q4 EPS: $0.24 vs. $0.33 last year; estimate: $0.24
Consolidated Freightways (Nasdaq: CFWY) down $13/16 to $17 3/8; Q4 EPS: $0.53 (before charges) vs. $0.31 last year; estimate: $0.48
CyberCash Inc. (Nasdaq: CYCH) down $2 to $16 5/16; Q4 EPS: loss of $0.46 vs. loss of $0.49 last year; estimate: loss of $0.48
Halliburton Co. (NYSE: HAL) down $3/4 to $29 3/4; Q4 EPS: $0.20 (before charges) vs. $0.58 last year; estimate: $0.20
MemberWorks Inc. (Nasdaq: MBRS) down $29/32 to $32 1/2; fiscal Q2 EPS: $0.10 vs. $0.03 last year; estimate: $0.10
S3 Inc. (Nasdaq: SIII) down $17/32 to $6 27/32; Q4 EPS: loss of $0.56 vs. profit of $0.03 last year; estimate: loss of $0.32
Sybron International (NYSE: SYB) down $3/16 to $26 1/16; fiscal Q1 EPS: $0.24 vs. $0.18 last year; estimate: $0.24
Terra Nitrogen Co. (NYSE: TNH) down $3/4 to $10 1/8; Q4 EPS: $0.01 vs. $0.71 last year; no estimate
Union Pacific Resources Group (NYSE: UPR) down $1/2 to $8 3/4; Q4 EPS: loss of $3.48 (from continuing operations) vs. profit of $0.31 last year; estimate: loss of $0.33
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