Author Archives: Scalper1

Apple Suppliers NXP, Qorvo Fall On iPhone 6S Weakness

Apple ‘s ( AAPL ) iPhone 6S tornado hit shares of chipmakers  NXP Semiconductors ( NXPI ) and Qorvo ( QRVO ), a Goldman Sachs analyst wrote Wednesday ahead of the duo’s quarterly earnings reports. Both are expected to report 16% dips in December-quarter sales and earnings that fell by double digits during the holiday season. “Smartphone-exposed stocks have been under pressure recently after a slew of negative pre-announcements among suppliers with heavy Apple exposure,” Toshiya Hari of Goldman Sachs wrote in a research report. But Hari sees the potential for a “snap-back” as “investors digest Apple’s weak Q1 and begin to look at what we believe will be a relatively strong 2016 overall.” NXP Semiconductors fell 2.9% on the stock market today  ahead of its late Wednesday Q4 earnings report. Qorvo stock closed down 0.2% and is scheduled to report fiscal Q3 earnings late Thursday. Apple for its part, rose 2% on Wednesday. For its December quarter, NXP is expected to report $1.29 billion in sales and $1.07 earnings per share ex items, down 16% and 21%, respectively, vs. the year-earlier quarter. The consensus view of 25 analysts polled by Thomson Reuters was relatively in line with NXP’s three-months-ago guidance for a sales decline of “low to mid-teens,” sequentially. For the year, analysts model $5.78 billion in sales and $5.43 EPS minus items, up 2% and 14%, respectively, vs. 2014. Hari rates NXP stock a neutral as it continues realizing synergies from its recently completed acquisition of Freescale Semiconductor. The merger reduced NXP’s Apple exposure by essentially half, Hari noted. He expects NXP to mount up on its automotive content, expected to grow by 9% CAGR over the next three years. Advanced driver assistance systems, infotainment and autonomous vehicles will drive that growth. Late Thursday, Qorvo is expected to report $620.3 million in sales and 94 cents EPS ex items for its fiscal Q3. On a year-over-year basis, sales would dip 16% and EPS would be down 37%. Qorvo, Cirrus Logic ( CRUS ) and Dialog Semiconductor drove smartphone pressure with their negative pre-announcements late last year. Qorvo reduced its fiscal Q3 sales guide to $620 million from earlier views for $720 million to $730 million. The company didn’t reduce its EPS ex items guide for $1.25 to $1.30. Hari downgraded Qorvo stock to neutral from a buy rating on its “disadvantage to Skyworks Solutions ( SWKS ) … given (Qorvo’s) ongoing integration and Skyworks’ ability to leverage its portfolio of adjacent analog products to provide more complete solutions to handset (smartphone-makers).” Qorvo was created in January 2015 with the merger of RFMD and TriQuint, and competes against radio-frequency (RF) chip suppliers Skyworks and Avago Technologies ( AVGO ). RF content in smartphones is expected to grow 9% and 14% in 2016 and 2017, Hari estimated. That’s against an 0.4% decline in smartphone unit growth in 2016 vs. 1.4% growth in 2015, he wrote. Although Qorvo’s portfolio is more complete post-merger, Hari questioned the timeline on synergies. The company guided to $150 million in synergies in 2017 with $75 million realized in 2015.

Chainsaws Are Faster, But Market Prefers Steady Termite Plays

Bad economies generally don’t affect termites or their enemies. Infestation isn’t the sort of problem that homeowners put off to save money. So it shouldn’t come as a surprise that the two stocks associated with termite and pest control carry strong IBD Earnings Stability Ratings. ServiceMaster ( SERV ) has a Stability Rating of 19 on a gauge that runs from zero (most calm) to 99 (wild). The midcap stock went public in June 2014. The stock broke out of its first base in November 2014 and advanced 46% before starting to consolidate in March 2015. Since then, the stock has sketched several bases without gaining much after clearing the patterns. As a result, the base count remains first stage. As a stock advances it pauses to consolidate, and breakouts from the first two bases generally do better than those from later consolidations. ServiceMaster lost money in 2011-12, but it turned a profit of 62 cents a share in 2014. The Street expects earnings growth to step up 33% when the company reports unaudited 2015 results Feb. 25 before the open. Revenue is expected to rise 5.8%. Growth investors might be tempted to snub steady growers, but ServiceMaster has attracted quality fund support. Fidelity Contrafund ( FCNTX ) and Skagen Global Fund started buying shares in Q4. Fidelity Magellan ( FMAGX ) added to an existing position. The building maintenance and services industry group was No. 22 among 197 industry groups, as of Wednesday’s IBD. Six weeks ago, the group was No. 81. A strong industry group is important to a stock’s success, especially in a shaky stock market. Rollins ( ROL ) is also known for taking on termites and other pests, though it might be better known under its Orkin brand. The stock carries an Earnings Stability Rating of 1, which is about as calm as earnings get. In the past five years, earnings grew a respective 12%, 11%, 10%, 12% and — in 2015 — 11%. Revenue growth is generally in the 5% to 6% range. The Street expects earnings to grow 10% in 2016. Rollins is working on a first-stage base, thanks to an undercutting of its previous recent low. When the low of a pattern undercuts the low of the previous pattern, the base count is erased and restarted. In this case, the prior base also was first-stage. The reset reflects the driving out of weak holders. When the weak holders abandon a stock, the remaining strong holders make a breakout more likely to work. Funds added to their overall stake in Rollins in each of the final three quarters of 2015. Three funds rated A+ added to existing positions in Q4. In a stronger stock market, slow growers such as ServiceMaster and Rollins probably wouldn’t be of much interest to IBD-style investors. However, right now the market appears to rewarding caution. Image provided by Shutterstock .

Manhattan Associates Slips Despite Q4 Earnings, 2016 Guidance Beat

Maker of supply-chain management software Manhattan Associates ( MANH ) on late Tuesday posted Q4 earnings that beat expectations. Fourth-quarter earnings rose 32% to 39 cents a share minus items, beating Wall Street analysts by 4 cents, on revenue up 8% to $141.4 million, or $100,000 better than Wall Street. It also guided 2016 beyond Wall Street expectations. Still, Manhattan Associates stock seesawed Wednesday and was flat in late-afternoon trading in the stock market today , near 55. Shares touched a record high 77.75 on Dec. 7. Analysts, though, were mostly upbeat. “Manhattan closed 2015 strong,” said William Blair analyst Matthew Pfau in a research note Wednesday. The company’s enterprise platform lets a warehouse manager 100 miles away see which Harry’s Apothecary goods are flying off the shelves and lets Harry know what’s stacking up at the warehouse, helping him prepare for the next sale. The visualization can extend from the checkout counter to the manufacturer’s parts supplier. With a market value of $3.77 billion, Manhattan is the eighth largest member of IBD’s Computer Software-Enterprise industry group. It earns an IBD Composite Rating of 87, meaning its stock is outperforming 87% of all S&P 500 companies, and ranks higher than most larger rivals, including SAP ( SAP ), Salesforce.com ( CRM ), ADP ( ADP ), Workday ( WDAY ), ServiceNow ( NOW ) and NetSuite ( N ). Only Ultimate Software ( ULTI, ) with a 98 CR, is bigger and performing better. The stock of the largest, SAP, with a market cap of $94 billion, spent most of the morning down before rising up a fraction Wednesday afternoon. Ultimate Software stock was up 6%, after that company also beat earnings expectations late Tuesday. “Although the retail environment remains challenging, Manhattan has not seen a material change in IT purchasing trends from retailers and the pipeline is still strong,” Pfau said. “However, we believe that management’s guidance takes into account a cautious retail IT spending environment for 2016.” While consumer spending makes retailers cautious, Manhattan’s supply-chain tools are intended to make the shopkeepers more cost-efficient. “Demand for our omni-channel, store and distribution management solutions continues to be strong and we’re working hard to extend our market leadership position,” Manhattan Associates CEO Eddie Capel said in the company’s earnings release.  “Despite persistent global macro sluggishness, we are optimistic about our growth opportunities in 2016. We will continue to be a serial investor in innovation. . . .” For the year, Manhattan expects adjusted EPS to rise 11%-13% at $1.69-$1.72 per share, on revenue up 9%-10.5% to $609 million to $615 million, or $612 million at the midpoint. Analysts polled by Thomson Reuters have modeled $1.66 and $611.6 million.