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Closing Market NumbersDJIA 10232.16 -184.90 (-1.77%) S&P 500 1285.55 -27.49 (-2.09%) Nasdaq 2801.27 -71.16 (-2.48%) Russell 2000 419.32 -5.36 (-1.26%) 30-Year Bond 98 -21/32 6.27 Yield
Today's Market Movers:
UPSPharmaceuticals developer Biopure Corp. (Nasdaq: BPUR) gained $3 13/16 to $12 3/8 after reporting positive results from an animal study of its Hemopure oxygen therapeutic. The findings were presented today at the annual meeting of the American Society of Anesthesiologists.
Data networking products developer ECI Telecom (Nasdaq: ECIL) added $2 1/4 to $28 1/8 after saying it expects to realize $22 million to $30 million in capital gains related to yesterday's proposed sale of privately held Telegate Ltd. to cable broadband systems supplier Terayon Communication Systems (Nasdaq: TERN). ECI owns a 35% stake in Telegate.
Television broadcaster, plastic film manufacturer, and healthcare product distribution company Chris-Craft (NYSE: CCN) moved up $7 1/2 to $66 after The Wall Street Journal reported that the company is considering selling some or all of its 10 television stations to companies including CBS (NYSE: CBS) and News Corp. (NYSE: NWS).
Online technology-related content provider ZDNet (NYSE: ZDZ) tacked on $2 1/2 to $22 1/2 after Goldman Sachs analyst Michael Parekh raised his rating on the firm to "trading buy" from "market outperform."
DOWNSChip giant Intel Corp. (Nasdaq: INTC) shed $4 9/16 to $72 1/8 after posting Q3 EPS of $0.55 last night, which was $0.02 short of analysts' expectations. For a thorough look at the earnings report, see yesterday's Drip Port report.
Enterprise resource planning (ERP) software developer SAP (NYSE: SAP) was slapped with a $3 15/16 loss to $35 after warning that its 1999 revenue growth will be between 20% and 25%, which is lower than previous expectations.
Internet strategy consultant and e-commerce firm IXL Enterprises (Nasdaq: IIXL) fell $3 3/16 to $35 7/16 after filing with the SEC to sell 7 million shares in a secondary offering, including 5 million shares held by existing shareholders.
Online customer communications software developer Kana Communications (Nasdaq: KANA) was canned for a $4 1/8 loss to $69 5/8 after Bloomberg News reported that Genesys Telecommunications (Nasdaq: GCTI) is suing the company for patent infringement related to an e-mail organization product.
Network storage provider StorageTek (NYSE: STK) dropped $4 11/16 to $14 3/4 after saying lower-than-expected North American revenues will lead to Q3 EPS below $0.10 (excluding charges), missing the estimate range of $0.30 to $0.33 given by analysts surveyed by First Call.
Today's Top Stories:Abercrombie Speaks Out
Dave Marino-Nachison (TMF Braden)
In-crowd casual clothier Abercrombie & Fitch (NYSE: ANF), unlike many apparel retailers, doesn't issue regular same-store sales or earnings guidance, and the company's long-term focus alternately pleases and frustrates investors.
"The company's view," said company Investor Relations and Communications Director Lonnie Fogel in a StockTalk interview with the Fool this summer, "is I think investors are very shortsighted. We're trying to get people to look beyond the current week, the current month, even beyond the current quarter."
That changed today when the company sent out a press release saying third quarter-to-date same-store sales were up 12% after a "very strong" August and September back-to-school season. The back-to-school results, however, were offset in part by "less favorable" results from Abercrombie's regular October sales.
Abercrombie also said it remains comfortable with First Call's $0.31 consensus estimate for the quarter, which would represent 29% year-over-year growth from last year's $0.24. Look for results Nov. 9.
Why the sudden change of heart from Abercrombie?
It's a little baffling, given that the news wasn't particularly earthshaking and that the company's statement that back-to-school sales were strong speaks well to Abercrombie's continued excellence in merchandising and marketing. Keep in mind that where apparel companies are concerned, it's really August and September that matter most anyhow.
Nevertheless, somewhere along the line Abercrombie's information management went bad, forcing the company's hand.
Starting sometime late last week -- presumably Thursday night or Friday -- the shares started falling like a fraternity pledge after too much paddling. Following today's move, during which nearly 20% of the company's market value was gone by lunchtime, Abercrombie stock was well off its trading range of last week, during which it hung around the upper $30s.
Company officials heard enough and decided to stem the flow. Now, their job is to find out what happened and investors need to consider the likelihood that someone in the company -- not necessarily in upper management, it should be said -- leaked information to someone in the "investment community." While that may be par for the course in today's world, when a company works as hard as Abercrombie to manage information flow and something goes awry investors can really pay for it. In that context, Abercrombie's out-of-character move to pre-announce should probably be applauded.
Of course, there's still the little matter of the company's quarter. Some will say today's move is basically an indicator that investors were hoping for Q3 results to outdo Street estimates, as if a company's growth is best measured by the computations of a few MBAs as opposed to its own performance and goals. Keep in mind these analysts don't -- or at least shouldn't -- get monthly sales updates either.
Besides, as discussed by the Fool's Warren Gump in a recent Fool Plate Special, the company is an impressive performer and it looks to remain one for some time. The Q3 news doesn't appear particularly disappointing. Besides, the once white-hot shares had already been cooling of late, which makes the stock's fall over the last few days look especially outsized.
Here's a clue: count the number of brokerages that lowered their long-term ratings on Abercrombie over the last few days. The answer? None. In fact, only one -- Brown Brothers Harriman & Co. -- did any downgrading at all with a short-term "strong buy" cut to "buy." To the contrary, many are urging their clients to start shopping Abercrombie imm�diatement.
That's more like it. Investors should probably consider Abercrombie stock a serious sale opportunity while supplies last.
Richard McCaffery (TMF Gibson)
Strangely unaffected by the year 2000 computer crisis or Internet volatility, major home appliance maker Whirlpool (NYSE: WHR) reported earnings (from continuing operations) of $1.40 per diluted share, up 36% from last year and way ahead of the First Call/Thomson mean estimate of $1.34.
Strong sales growth in North America and Europe helped the maker of KitchenAid, Roper, and other name brand appliances hit the record mark. Net income totaled $107 million, up from $78 million a year ago.
The growth is being spurred by new products and a robust economy that has Americans buying lots of new appliances for lots of new homes. (I just bought a snazzy Whirlpool washer and dryer myself.) Total sales for the quarter hit $2.7 billion, up 7% from last year.
The company's 17% quarterly sales gain in North America is especially impressive considering rival Maytag's (NYSE: MYG) recent struggles. Early last month Maytag warned investors to expect flat earnings for the quarter because of slow sales in its low-end and midrange product lines. For more on this excellent company's current problems, check out Brian Graney's recent article.
Analysts expect Whirlpool to earn $5.16 for the year, and, based on the strength of its recent quarter and previous comments from management, hitting that number should be a piece of cake. This would represent 21% year-over-year EPS growth for Whirlpool, which sports a forward price-to-earnings ratio of 12.3. In other words, the company is trading at a little more than half its expected growth rate. (Maytag is also trading at a discount to its expected growth rate, by the way, thanks to the recent clubbing.)
All this P/E mumbo jumbo aside, investors should take a closer look at the efficiencies Whirlpool's been squeezing out of its laundry, which help tell the story of robust earnings growth.
In the third quarter, gross margins grew nearly 1% and operating margins grew more than 1.5%. Whirlpool has held inventory and receivables levels flat, trimmed long-term and short-term debt, and is currently buying back $250 million in shares with extra cash. The company's return on equity stands at a respectable 17% this quarter, in line with what it achieved last year, and well above the 1995 level of 11.6%.
Going forward, Whirlpool's push to expand globally -- its major strategy this decade -- has it well-positioned for future growth. Whirlpool is the number one appliance maker in Latin America (as well as North America), number three in Europe, and is ready to capture market share in Asia. The company has manufacturing operations in 11 countries and sells products in over 170 countries. Last year the company took care to improve profitability overseas and boosted operating profit 73% in Asia and 125% in Europe.
Investors should range over the company's latest financial statements for a closer look.
More of Today's Best:FOOL PLATE SPECIAL An Investment Opinion
SLM's Q3 Earnings Fail to Excite
By Brian Graney (TMF Panic)
-- It has been more than two years since SLM Holding Corp. (NYSE: SLM), the parent of government-sponsored enterprise Sallie Mae, was privatized with much fanfare. Today, SLM posted its third quarter financial results. For the period, earnings on a "cash basis" (which excludes gains on sales from securitizations) rose to $0.77 per share from $0.68 per share a year ago, which was in line with the First Call mean estimate. All in all, it was a pretty good quarter of internally generated growth for SLM. Still, investors let out a collective yawn and the stock fell slightly this morning.
FULL STORY >>
BREAKFAST WITH THE FOOL
Results of Restructuring Taking Hold at Motorola
Richard McCaffery (TMF Gibson)
-- Communications and semiconductor company Motorola (NYSE: MOT) reported earnings (excluding special items) of $0.53 per share on net income of $332 million last night due to strong sales of digital wireless phones and a year-long restructuring effort. Included in the special items was a $994 million charge for Iridium (Nasdaq: IRIQE), the company's $5 billion satellite telephone venture that's currently working to restructure its debt under bankruptcy protection. That nastiness aside, Motorola's Q3 results were good enough to meet analyst estimates and a far cry from the manufacturer's sad third quarter a year ago.
FULL STORY >>
FOOL ON THE HILL An Investment Opinion
Why Regulators Never Learn
Bill Mann (TMF Otter)
-- A very interesting thing happened this week, something that was covered by Marketplace (a truly fantastic, mostly Foolish radio program, by the way), but not, to my knowledge, anywhere else. Alan Greenspan, the chairman of the Federal Reserve, was giving a speech before the annual meeting of the American Bankers Association in Phoenix, and he was discussing the need for specific regulation to respond to the nature of the banking mega-mergers. These mergers have passed muster with the regulatory authorities recently, but now Greenspan has a more global concern.
FULL STORY >>
Bob Evans Gets Chewed Up
Dave Marino-Nachison (TMF Braden)
-- They say if you like sausage you shouldn't see it made -- and they're right. The dark side of pork reared its ugly head in Columbus, Ohio today, as family restaurant and sausage maker Bob Evans Farms (Nasdaq: BOBE) last night announced preliminary financial results for fiscal Q2 (ending Oct. 29). The company said it expects EPS of between $0.36 and $0.39, missing First Call's five-analyst consensus estimate of $0.42. The company turned in EPS of $0.37 in last year's Q2. Bob Evans blamed a combination of disappointing restaurant sales growth and increased expenses at its restaurant and food operations.
FULL STORY >>