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Verizon Earnings Call: Yahoo, Frontier Deal, Strike, Wireless War

Verizon Communications ( VZ ), on the hunt for Internet pioneer  Yahoo ( YHOO ), is expected to update 2016 guidance when it reports Q1 earnings on Thursday, in the wake of selling wireline assets in three states to Frontier Communications ( FTR ). Verizon and AT&T ( T ) were among the best performing large-cap stocks in the S&P 500 in the March quarter. AT&T reports Q1 results on April 26. Verizon sold wireline assets in California, Florida and Texas to Frontier for $10.5 billion. The deal closed in early April. Aside from Verizon’s stated interest in acquiring Yahoo , analysts may ask for management views on how a strike by 39,000 wireline workers will impact Verizon’s FiOS business. “We expect Verizon to update 2016 guidance post the recent close of the Frontier deal, including clarity around EBITDA (earnings before interest expenses, taxes, depreciation and amortization) guidance and subsequent cost cuts, which we believe management has thus far conservatively guided,” said Colby Synesael, an analyst at Cowen & Co., in a report. “While it’s likely someone will bring up Yahoo during Q&A, it’s unlikely management provides much of a response.” Analysts polled by Thomson Reuters expect Verizon’s Q1 profit to rise 4% to $1.06 per share, with revenue growing 2%; these predictions include Verizon’s June 2015 acquisition of AOL. Wireless competition remained intense in Q1 amid a flurry of video-related promotions, analysts say. UBS analyst John Hodulik forecasts that Verizon will lose postpaid phone subscribers in Q1, as it did in the March quarters in 2014 and 2015.

Here’s Why IBM Is Falling Despite A Solid Q1 Earnings Beat

IBM ( IBM ) was trading down Tuesday, following a first-quarter earnings report late Monday that beat estimates but still left room for concern. IBM has been undergoing a major transition, shedding older technologies while making a concerted push into growth areas such as cloud computing, Big Data analytics, security and mobile computing — areas it calls strategic imperatives. The transition helps explain why revenue growth has declined each quarter for the past four years. In its Q1 earnings results, IBM reported revenue of $18.7 billion, down 4.6% from the year-earlier quarter but edging the Wall Street consensus estimate of $18.3 billion. Revenue from strategic imperatives rose 14%. Total cloud revenue rose 34%. Earnings per share ex items of $2.35 easily beat views of $2.09, as polled by Thomson Reuters, but were down 19% and marked the fourth quarter in a row of EPS declines. IBM stock was down more than 6%, near 143, in afternoon trading in the stock market today , presumably on the view that Q2 expectations are below estimates. IBM does not provide formal quarterly guidance, but its implied EPS guidance of $2.85 for Q2 is below the consensus estimate of 3.01. Despite the Q1 beat, IBM did not increase but instead maintained its full-year earnings outlook. IBD’s Take: How healthy is IBM’s stock and how does it stack up vs. rivals? Find out at IBD Stock Checkup RBC Capital Markets analyst Amit Daryanani maintained a sector perform rating on IBM stock, and a price target of 155. “We believe the competitive challenges are emerging from companies seeking to build a business model similar to IBM’s, notably Hewlett-Packard Enterprise ( HPE ), Cisco ( CSCO ), Oracle ( ORCL ), EMC ( EMC ), and Dell,” he wrote. Of these competitors, he said, Hewlett-Packard is the closest. Another is Cisco. ‘Attempting To Recreate The IBM Model’ “Beyond Hewlett-Packard and Cisco, there are also others attempting to recreate the IBM model,” he wrote. A harsher report on IBM came from Credit Suisse analyst Kulbinder Garcha, who reiterated an underperform rating and a price target of 110 on IBM stock. “We believe the quality of earnings was again low and the manner in which IBM has chosen to manage its business seems unsustainable,” Garcha wrote. “We believe the secular and structural challenges facing IBM remain, and specifically see limited improvement in Services and Software margins.” UBS analyst Steven Milunovich maintained a neutral rating on IBM but raised his price target to 150 from 132. “The quarter was mixed with revenue and EPS beating due to currency improvement, acquisitions, and the Japan tax rebate,” he wrote. “We give IBM credit for changing the narrative,” with an emphasis on becoming a leader in the new category of Cognitive Computing, which includes its Watson computer business, he wrote. Drexel Hamilton raised its revenue forecast, maintained its EPS projection and raised the price target to 166 from 160.

Einhorn Trims SunEdison Stake On Bankruptcy Rumors; Yieldco Sued

Activist investor David Einhorn cut his SunEdison ( SUNE ) stake by more than half, dropping below a critical 5% threshold, according to a late Monday filing that followed fresh reports of a looming SunEd bankruptcy. On Friday, Einhorn trimmed his SunEdison shares to 2.8% from 6.8% in January, meaning he is no longer a beneficial owner required to file a U.S. Securities and Exchange Commission filing when he sells or acquires shares. Einhorn-owned hedge fund Greenlight Capital also cut its SunEdison exposure to 1.6% from 4% in January. Three months ago, SunEd gave in to Greenlight demands, allowing former Greenlight executive Claire Gogel to have a role as independent director on the board. Together, Einhorn and Greenlight own just shy of 18 million shares of SunEdison stock. In early trading on the stock market today , SunEdison stock dropped nearly 5% and was trading below 33 cents. Shares of yieldcos TerraForm Power ( TERP ) and TerraForm Global ( GLBL ), on the other hand, rose 2.1% and 0.4%, respectively. SunEdison stock is down 99% since last July, when it hit a seven-year high before announcing its plan to acquire residential installer Vivint Solar ( VSLR ). In December, amid increasing reports of SunEd’s financial troubles, Vivint scrapped the sale. TerraForm Power stock climbed Tuesday despite a new  class action lawsuit  filed by New York law firm Bronstein, Gewirtz & Grossman, with the plaintiffs consisting of shareholders who bought stock between May 7, 2015, and March 15. According to the complaint, “the defendants made materially false and misleading statements regarding the TerraForm’s business, operational and compliance policies.” On March 16, TerraForm Power missed a second deadline to file its annual 10-K. SunEdison and TerraForm Global also missed their 10-K deadlines. Both TerraForms now face the potential of being delisted from the Nasdaq.