Ups and Downs Plus Top News (QuickNews) October 15, 1999

Motley Fool QuickNews

Friday 10/15/99

Closing Market Numbers

DJIA           10019.71   -266.90    (-2.59%) 
S&P 500         1247.41    -36.10    (-2.81%)
Nasdaq          2731.83    -75.10    (-2.68%)
Russell 2000     414.70     -4.61    (-1.10%)
30-Year Bond    98 7/32    -28/32   6.26 Yield

Today's Market Movers:

For an extended list of today's earnings movers, click here.


Cysive (Nasdaq: CYSV), which develops software for large-scale e-business operations, jumped $20 3/4 to $37 3/4 in the company's first day of trading. The company and a stockholder yesterday sold 3.35 million shares of stock to the public at $17 per share. Cysive plans to use proceeds from the offering for "general corporate purposes, including working capital, expansion of operations, and sales and marketing activities."

Office supplies retailer Office Depot (NYSE: ODP) won $1 1/2 to $10 5/8 today. The company turned in Q3 EPS of $0.19 (before charges), a penny better than First Call's consensus estimate, though $0.02 off last year's mark. John Macatee resigned as president, COO, and director, effective today, to pursue other opportunities.

Optical networking products Digital Lightwave (Nasdaq: DIGL) flashed up $2 9/16 to $10 9/16 today. The company said Q3 EPS was $0.09; last year's quarter was break-even. The company also said it will restructure its board of directors and is considering financing alternatives, including the conversion of a pending registration into an equity offering.

Storage management software developer Veritas Software Corp. (Nasdaq: VRTS) added $9 5/8 to $91 3/32 after the company said Q3 EPS was $0.21, up from $0.09 last year and handily beating Wall Street's consensus estimate of $0.17. The company also announced plans to split its stock 3-for-2 on Nov. 19.

Biopharmaceutical company Liposome (Nasdaq: LIPO) popped up $5/8 to $7 5/8 today. The company withdrew the application for its new breast cancer drug Evacet from the FDA. The Oncologic Drugs Advisory Committee (ODAC) declined to recommend the drug at a September meeting. Liposome plans to address the issues raised by the ODAC and submit a new application by year's end.

Semiconductor maker International Rectifier (NYSE: IRF) moved up $1 1/2 to $17 3/8 in today's trading. "We expect revenue growth to accelerate in the December quarter and through the fiscal year," said CEO Alexander Lidow. "A richer business mix, lower cost structure, and continued price stability will expand gross margins, and a lower overhead expense ratio will contribute positive earnings leverage." Fiscal Q1 EPS was $0.10, up from break-even last year and a penny better than First Call's four-analyst consensus estimate.

Photodynamic therapy products developer QLT PhotoTherapeutics Inc. (Nasdaq: QLTI) added $1 to $38 1/2 following the release of positive data concerning Phase III trials of Visudyne, a treatment for a common form of blindness in people over 50. Visudyne is being codeveloped by QLT and the CIBA Vision unit of Novartis AG.


Conglomerate Tyco International (NYSE: TYC) slid another $10 to $87 after dropping 6% yesterday on continued concerns of alleged accounting irregularities at the acquisition-happy company. In a conference call this morning, CEO Dennis Kozlowski unsuccessfully tried to put an end to the matter by calling the reported suspicions "false, unfounded, and malicious."

Traders took a bite out of Tastykake baked snacks maker Tasty Baking Co. (NYSE: TBC) today, sending the company's stock down $1 3/16 to $10 9/16 following a warning late yesterday that Q3 EPS will come in between $0.07 and $0.09, missing the Zacks mean estimate of $0.16.

Broadband Internet access systems designer Redback Networks Inc. (Nasdaq: RBAK) fell $5 11/16 to $129 3/8 after some 12 million shares held by insiders were reportedly freed from the lock-up related to the company's initial public offering in May.

Railroad and flow control products manufacturer ABC-NACO (Nasdaq: ABCR) was run over for a $3/4 loss to $11 after saying industrywide issues in the railway sector will lead to lower-than-expected sales and earnings throughout the remainder of the year.

Today's Top Stories:

Caterpillar Plows Into Another Tough Quarter

By Richard McCaffery (TMF Gibson) Caterpillar (NYSE: CAT), the world's largest manufacturer of construction and mining equipment, reported Q3 income of $219 million, or $0.61 per share, far from last year's strong mark of $0.92 per share.

Sales and revenue fell 9% to $4.72 billion, down $458 million from last year due to lower industrywide sales and an unfavorable change in product sales mix. These changes were partially offset by lower sales, general, and administrative costs, as well as lower research and development expenses. Caterpillar's financial division reported strong growth, with revenue from financial services jumping 10%.

It's been a tough year for Caterpillar as fears of higher interest rates, the strong dollar, and weak global construction and mining markets have taken their toll on the Peoria, Illinois company. After a pretty strong first quarter, Caterpillar warned investors that 1999 growth would be less than previously thought. This was confirmed today when management forecasted a 5% decline in sales and revenue for the year. Company officials expect improvement in the industry next year as the worldwide economy strengthens, especially in Asia and South America.

Caterpillar stock hardly moved on the news since investors had already factored in a tough second half of the year. Caterpillar is down about 16% from its 52-week high of $66 7/16, reached in May after the good first quarter results. For the year, however, Caterpillar stock is up 17%.

This follows a five-year period during which Caterpillar expanded globally, diversified its business into less cyclical operations such as financing and logistics, increased sales 46% to $20.9 billion, and upped profits 58% to $1.5 billion.

But that growth has come at a price. Average return on equity (ROE) -- a measure of how well equity is being employed -- has fallen from 36.3% in 1996 to 30.9% last year. By the end of Q3, ROE had plunged to 19%. At the same time, long-term debt has grown from $5.1 billion in 1996 to $9.4 billion last year, and the company's growing asset base generated less in sales at the end of 1998 than in 1996.

Caterpillar's ROE remains high relative to the corporate average, and the 19% trailing ROE is probably an anomaly. Still, the fact it's moving in the wrong direction for the last 21 months raises questions about the cost of growth.

Caterpillar is second to none in terms of brand name and ability to compete globally, but investors are smart to set the bar very high, especially when looking at capital-intensive industries.

FOOL ON THE HILL An Investment Opinion
When the Market Bites Back
By Bill Mann (TMF Otter)

-- Every morning I scan the newswires to see what strikes me as deserving Foolish comment. Today was easier than most, as I watched each of the major indices drop nearly 2% in the first 15 minutes of trading. While The Motley Fool is dedicated to educating the individual investor about the inherent strength of identifying the best companies and sticking with them, clearly such precipitous drops can tie investors' tummies into knots. So, rather than ignore the source of anxiety, let's examine it, shall we?

More of Today's Best:

LVMH Considering Calvin Klein
By Dave Marino-Nachison (TMF Braden)
-- Like a giddy shopper flinging francs on Paris' 8th arrondissement, luxury goods giant LVMH Moet Hennessy Louis Vuitton (Nasdaq: LVMHY) buys, buys, and buys with the seeming intention of adding all of the world's top brands to its stable. The beat is likely to go on, given a company spokesman's confirmation of Chairman Bernard Arnault's interest in an alliance or merger with New York clothes, accessories, and fragrances maker Calvin Klein, which had $5.4 billion in global retail sales last year.


FOOL PLATE SPECIAL An Investment Opinion
Greenspin Alert: Stocks Are Risky Business
By Brian Graney (TMF Panic)
-- With just over two weeks to go until Halloween, the U.S. stock market is up to its old October tricks again. Investors may have casually noticed that the major market averages have been sliding all week, which seems to happen every time the tenth month of the calendar rolls around and pumpkins start appearing on doorsteps.skyrocket.

Sun Shines at Sun Microsystems
By Richard McCaffery (TMF Gibson)
-- Growth across all lines of business, especially servers for the Internet and Internet service providers (ISPs), powered Sun Microsystems (Nasdaq: SUNW) to fiscal first quarter net income (excluding acquisition-related charges) of $274.8 million, up 39% from a year ago.