Thursday, April 16, 1998
by Paul Larson (TMFParlay@aol.com)
CHICAGO, IL (April 16, 1998) -- The Fool Port bucked the market trend today by rising 0.25% even though the S&P and Nasdaq melted for losses of 1.00% and 0.27% respectively. There's quite a bit of news to digest today so let's get right to it.
The portfolio was helped in part by its lone short position of Trump (NYSE: DJT). After quite an amazing day yesterday, Da Donald's company gave back a significant portion of its rumor-induced rise, falling $5/8 to $8 5/8. Those who have been following the company for a while know that there have been numerous buyout rumors surrounding Trump for some time. Occasionally one of these rumors causes the rubber to grip the road and spikes the stock up. We've been through this before as can be seen from this previous recap. Is there any more validity to the rumors this time than the last time we heard "wolf" cried? Time will tell.
America Online (NYSE: AOL) made an impressive announcement today. Now calling itself "the world's leader in branded interactive services and content," AOL announced that worldwide membership of the service has surpassed the 12 million-member mark. Amazing. Those of us who have been championing a membership -based valuation model on America Online were certainly smiling at today's announcement. The company's press release had numerous other goodies in it concerning AOL's performance as a service, and I recommend clicking here and checking it out. The market did not seem to notice and bid the stock up a scant $3/16 to $75 1/4.
Before getting to the earnings news of the day, I thought it interesting that 12 of the 14 stocks in the portfolio traded at least a million shares today. Same thing happened yesterday. Liquidity is certainly not a problem with the stocks that the Fool Port holds.
Earnings! Earnings! Get your earnings here!
The first of the Fool Portfolio companies to announce earnings today was KLA-Tencor (Nasdaq: KLAC). This morning the company announced earnings per share of $0.33 diluted versus a mean estimate at reporting time of $0.36. However, back out a one-time charge and the earnings reported would have been $0.35, closer to the estimate. It is important to note that even though the earnings were only slightly lower than Wall Street expected yesterday, they are significantly below what was expected a month ago when the analysts were estimating earnings of roughly $0.50 per share.
KLA-Tencor, which sells a significant amount of product into Asia, reported that the Asian problem was partly to blame for the significant quarter-over-quarter revenue decline from $326.4 million last quarter to $274.2 million this quarter. The company said in its press release that a number of orders in the region have either been delayed or outright cancelled. If any company in the portfolio is going to be hit by the Asian situation, KLA-Tencor is it.
Even with this earnings softness, the company's balance sheet remains strong with nearly $715 million in cash (little over $8 a share) and no debt. I also am impressed that the company was able to maintain profitability in the face of significant top line shrinkage. The market seemed somewhat apathetic about the earnings news and dropped the stock a mere to $5/16 to $39 5/16.
Not only did KLA-Tencor report today, but so did the Fool Port newcomer 3Dfx Interactive (Nasdaq: TDFX). I personally was expecting 3Dfx to probably beat the estimates of $0.24 per share in the quarter, but even I was a little shocked when the numbers were released after the market closed. The company absolutely smoked this last quarter and reported diluted earnings per share of $0.50, more than double the estimate! This earnings report gets an A+ in my book, and we'll have the conference call summary available tomorrow.
Not all was bright on the earnings front for the Fool Port. The earnings, err, loss that was most highly anticipated today came from Iomega (NYSE: IOM). After the close, the company announced a per share loss of $0.07 diluted. Most analysts were looking for a loss of only $0.03 to $0.06 per share, so the results were slightly worse than expected. The company blamed weak international sales and increased marketing expenditures as the reasons for the loss. No surprises there.
What is surprising and will probably hurt the stock are the comments that the company made about the earnings outlook going forward. It said that in the next two quarters it expects a slight loss to breakeven results at best. On the bright side, Iomega said that it expects to return to profitability in the fourth quarter of 1998. This guidance breaks from Iomega's historical tight-lipped policy when giving its projections for the future. I personally think that Iomega is in deep trouble, and this earnings report just reinforces my opinion. Nevertheless, I think that others in the Fool Port ranks think much more highly of the company than I. Today the stock lost a quarter to $7 1/4, but tomorrow promises to be an interesting day of trading in Iomega.
Those interested in listening to Iomega's earnings conference call replay can call the following number from now until April 20:
Iomega 1Q98 Earnings Results Conference Call -- 1-800-446-4927
Jeff Fischer is busy listening to the conference calls from both Iomega and 3Dfx as this is being scribed and he promises to post all of the juicy information from the calls by tomorrow morning in a couple of conference call summary reports. Of course, we'll digest these earnings further in this column when we have more time to do so in the future.
Oh, and by the way, the portfolio hit an all-time high today during the afternoon, but could not hold the gains. Shucks. We'll have to break out the kazoos and party hats some other time.
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Day Month Year History FOOL +0.25% 7.99% 21.22% 306.82% S&P: -1.00% 0.58% 14.19% 141.75% NASDAQ: -0.27% 1.23% 18.33% 158.02% Rec'd # Security In At Now Change 8/5/94 710 AmOnline 3.64 75.25 1969.33% 5/17/95 1960 Iomega Cor 1.28 7.13 456.46% 10/1/96 84 LucentTech 23.81 68.25 186.67% 9/9/97 290 Amazon.com 38.22 98.50 157.71% 8/12/96 130 AT&T 39.58 66.25 67.39% 2/20/98 215 DuPont 59.83 75.50 26.18% 1/8/98 115 S&P Depos. 95.91 110.81 15.54% 2/20/98 270 Int'l Pape 47.69 53.88 12.97% 1/8/98 425 3Dfx 25.67 28.69 11.77% 2/20/98 200 Exxon 64.09 70.31 9.71% 4/30/97 -1170*Trump* 8.47 8.63 -1.84% 6/26/97 325 Innovex 27.71 26.88 -3.01% 8/24/95 130 KLA-Tencor 44.71 39.31 -12.08% 8/13/96 250 3Com Corp. 46.86 33.38 -28.78% Rec'd # Security In At Value Change 8/5/94 710 AmOnline 2581.87 53427.50 $50845.63 9/9/97 290 Amazon.com 11084.24 28565.00 $17480.76 5/17/95 1960 Iomega Cor 2509.60 13965.00 $11455.40 10/1/96 84 LucentTech 1999.88 5733.00 $3733.12 8/12/96 130 AT&T 5145.11 8612.50 $3467.39 2/20/98 215 DuPont 12864.25 16232.50 $3368.25 1/8/98 115 S&P Depos. 11029.25 12743.44 $1714.19 2/20/98 270 Int'l Pape 12876.75 14546.25 $1669.50 1/8/98 425 3Dfx 10908.63 12192.19 $1283.56 2/20/98 200 Exxon 12818.00 14062.50 $1244.50 4/30/97 -1170*Trump* -9908.50 -10091.25 -$182.75 6/26/97 325 Innovex 9005.62 8734.38 -$271.25 8/24/95 130 KLA-Tencor 5812.49 5110.63 -$701.87 8/13/96 250 3Com Corp. 11715.99 8343.75 -$3372.24 CASH $11233.54 TOTAL $203410.92