We've weighed in on the absurdity of the global razorblade arms race. But what's the connection between razors and batteries? Today, Rayovac
What's the connection? We're pretty sure it's got something to do with distribution channels and shelf space. But if we see the Diehard guys snooping around our medicine cabinets, we'll let you know.
In today's Motley Fool Take:
- Intel Rocks the Chips
- Quote of Note
- Giving Gap Its Due
- Shameless Plug: Shiny, Happy People
- Et Tu TiVo?
- Discussion Board of the Day: TiVo
- Quick Takes: Schering-Plough, Freddie Mac, DaimlerChrysler, Local news
- And Finally...
Intel Rocks the Chips
Semiconductor giant Intel
Intel now expects third-quarter sales to range from $7.3 billion to $7.8 billion, compared to earlier forecasts of only $6.9 billion to $7.5 billion, and up strongly from last year's $6.5 billion. Management also increased gross margin guidance by two points, to 56%, plus or minus a few points. The high end of that range represents a level not seen in three years.
The news buoyed others in the chip market, including equipment leader Applied Materials
Despite recent gains, many semiconductor stocks are still near multi-year lows, a result of a cyclical industry having just suffered its worst three-year downturn in two decades. Investors applauded Intel's news as sign of a possible turnaround for Intel, the chip sector, and, perhaps, the larger tech economy. If Intel's upbeat forecast does herald a recovery, investors may want to reconsider any bets they've placed against the chip industry. Cyclical upswings can be dramatic and often last at least a few years.
Looking ahead, Intel was previously expected to earn $7.8 billion in fourth-quarter sales, a number that will almost surely need to be bumped up. For the year, its $0.69 in consensus earnings-per-share estimates may rise to at least $0.74 per share. The $28 stock is at 40 times the existing estimate and 25 times trailing free cash flow, in line with the S&P 500's free cash flow multiple. Although pricey-looking, if better times are ahead, the stock could keep rising on arguments that its valuation will become justified as earnings expand.
Quote of Note
"I hope life isn't a big joke, because I don't get it. " -- Jack Handey
Giving Gap Its Due
By LouAnn Lofton (TMF Bling)
Sure, I figured sales and earnings would be up. Having fallen so far by this time last year, that would be easy. Same-store sales would also eclipse the dismal results of recent years, but how would things measure up elsewhere? And would any of this really signal progress?
What I saw surprised me. The quarter really was strong, and Gap does seem to be making its way back to good health.
Now, I have to admit I'm not a full-fledged believer yet. The third quarter will tell the tale. After all, it was in the third quarter last year that Gap began inching its way out of the hole, and comparisons get tougher as we move into the crucial back-to-school season and beyond. Only then can Gap justify a move from $8.35 to around $19 per share in less than a year.
Since I can't predict the future, and since third-quarter results are still a ways off, let's look at what we can see. I mean, there's no reason not to celebrate the company's solid Q2 results.
Total revenues for the quarter increased 13% to $3.7 billion on a 10% jump in same-store sales (though admittedly, that's coming off last year's 7% drop and the second-quarter 2001's decline of 9%).
Net income, meanwhile, more than tripled to $209 million from $57 million. In fact, Gap earned more in this one quarter than it did in the first two quarters combined in each of the past two years. Earnings per diluted share came in at $0.22 versus $0.06.
The cash flow statement also looks good. Capital expenditures declined 40%, and the business generated $235 million in free cash flow through the first six months of the year.
Gap's fashion mix continues to resonate with customers, and because it's discounting less, gross margins improved to 36% from 33%. Inventories increased a respectable 9%, while total debt stayed roughly the same. Moving into the third quarter, Gap looks to be in good shape, operationally lean and strong, and headed (finally) in the right direction.
Can Gap pull off another outstanding quarter of growth? I certainly hope so. Until I know for sure, you can bet I'll be watching the monthly same-store sales reports and monitoring the new fall fashions filling its stores.
As mentioned above, LouAnn Lofton owns shares of Gap.
Shameless Plug: Shiny, Happy People
Or dour, depressed people.... Hey, that's what it takes to make the world go 'round, no? Rest assured, The Motley Fool's Community is a microcosm of the world, except there seems to be a higher percentage of smarter folk. We're continually amazed at all we learn on our discussion boards -- almost every subject from stock investing to taxes to how to find a job to how to quit smoking is covered, every day, in every way. Check it out and take advantage of our free trial offer.
Et Tu TiVo?
Whether you follow the company or not, you have to admit that TiVo's
That's why the real gravy for TiVo is its budding subscriber service. TiVo truly struts its killer-app stuff with its ability to download localized programming and then record shows you like -- and even shows it thinks you might like based on the shows you like.
So investors might forgive TiVo for posting a wider second-quarter loss last night, given that the company landed another 90,000 subscribers and plans to top the million-user mark over the holidays. That's the scalable sweet spot right there, folks. Forget the hardware, beyond the fact that it facilitates the service revenue. Just $8.1 million of the company's $26.7 million in revenue this past quarter came from hardware sales.
TiVo has learned to let others do the dirty work of getting enabled devices into homes. In addition to the Hughes
Last week, our own Lou Lofton pitted TiVo against Netflix
And for all their differences, both climb the same wall of worry toward (and, in the case of Netflix, beyond) the million-subscriber mark. Netflix is now profitable, and while TiVo expects to post another loss here in the third quarter, high-margin subscriber growth has a way of kick-starting the bottom line.
TiVo wouldn't mind following Netflix into market-darling land. When it does, it might just be tempted to hit pause and savor the moment.
Discussion Board of the Day: TiVo
Have a TiVo testimonial to share? Is it really a television-viewing revolution or are digital video recorders overrated? Will TiVo rise and kiss the single digits goodbye -- forever? All this and more -- in the TiVo discussion board. Only on Fool.com.
Shares of Schering-Plough
The Office of Federal Housing Enterprise Oversight, the agency that regulates Freddie Mac
In local news, auto mechanic Jonathan Charles said, "Some people just don't know when to keep their mouth shut."
Today on Fool.com: Bill Mann begs the stock options question.... Great ideas, like investments, don't always sound so great at first. Unless you're into fried Twinkies.... Whitney Tilson has investing lessons from Michael Lewis' Moneyball.... In our Tax Center, should you borrow money to buy dividend-paying stocks?
Bob Bobala, Robert Brokamp, Paul Elliott, Mathew Emmert, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Reggie Santiago, Kate Southerland, Dayana Yochim