Earnings – STX, URI and ISRG

We are not out of the woods yet, but today’s price action is a step in the right direction.  The Dow posted its best day since March 13th gaining 194 points +1.50% and in the process moved back above its 50 day moving average.  The S&P 500 and NASDAQ also moved above their 50 day lines gaining +1.55% and +1.82% respectively. NASDAQ made its biggest gains since Dec 20th, 2011. Advancing stocks led declining stocks by 3.25 to 1 on both the NYSE and NASDAQ. But the turnover was slightly lower in both the exchange.

This rally was courtesy – demand of Spanish bonds and good earnings. The investors showed good appetite for Spanish bonds, even though the yields on 10 year notes spiked. It’s early in the earnings reporting season, but as of Tuesday morning 74% of the 39 companies that have reported exceeded analysts’ expectations. But the fickleness of news and volatility of the market definitely reminds me of last year. So being defensive is not bad at all. That said, I am taking out the small index short but will leave the BLV and TLT in place.

Lastly, a buy order of AAPL set long time ago at $581 got triggered today. Let’s see where it takes us.

EARNINGS –

Seagate technologies, STX, the one that I have advocated for last month or so came out with flying colors.

The hard drive maker brought in revenue of $4.4 billion, up from $2.7 billion in the prior year’s quarter, and above the average analysts’ forecast of $4.38 billion. Excluding items, Seagate earned $2.64 a share on net income of $1.2 billion, up from 25 cents a share and $113 million in the prior year’s quarter. Analysts surveyed by Thomson Reuters were looking for earnings of $2.11 a share.

Seagate also achieved a gross margin of 37% during the third quarter, comfortably above its forecast of 33%. These margins are strongest in company’s history. Seagate reaffirmed its $5 billion revenue target for its fiscal fourth quarter on Tuesday, as well as its $20 billion goal for calendar year 2012. The hard drive specialist also raised its fourth-quarter gross margin forecast from 33% to 34.5%.

This stock has formed a two month-long base and will breakout with a gap tomorrow. If you are interested then set a buy for $28.7 and double it up if it goes below $28. If we are in a bull we will go up till $30 in next few days or so. Following is an older chart of STX but the picture still remains the same expect for another blockbuster earnings.

United Rentals, URI,  is the one that I bought around $42 when it broke out a month ago but got out when it went below $40 and 50 DMA. The company mainly rents construction and industrial equipment in North America, including backhoes, forklifts and heaters. It also sells some new and used gear. The company has moved away from the construction rentals with the purchase of RSC holdings that gave URI quite a bit of industrial exposure.

United Rentals earned 36 cents a share in first quarter, reversing a 32-cent loss in the same quarter last year, and trouncing the Street’s estimate of 5 cents. Sales climbed 25% to $656 million, easily topping projections of $610 mil. For the prior three-quarters, sales grew 13%, 18% and 25%. The company’s rental revenue increased 21% in the quarter, reflecting year-over-year increases of 6.3% in rental rates and 18.4% in the volume of equipment on rent. 

“Once again, we drove profitable growth faster than the construction recovery,” CEO Michael Kneeland said. “Both core areas of our business — general rentals and specialty operations — realized higher rates year-over-year on a fleet that was about $600 million larger on average.”

Tomorrow URI will open above consolidation. Once again if this is a bull market it will start drifting towards $50. Remember PEAD.

Intuitive Surgical, ISRG, is a medical robot maker and has been one of the strongest leader of this bull.

The medical robotics maker’s earnings rose 35% to $3.50 a share. Revenue climbed 28% to $495 million. Analysts polled by Thomson Reuters expected Intuitive Surgical to earn $3.14 a share on sales of $464.7 million. Intuitive Surgical also forecast 2012 sales will rise about 20% from 2011’s $1.76 billion. It had expected 17% to 19% growth. A key to growth has been winning acceptance for robotic-assisted surgery in more procedures. The company said da Vinci-assisted procedures grew 29% in Q1 from a year earlier.

Gross margin edged up to 71.9% from 71.8%. Revenue from instruments and accessories climbed 32%, while services revenue jumped 27%. Systems revenue grew 24%, as da Vinci systems sold rose to 140 units from 120 units a year earlier. 

With a new product in late 2011, Intuitive Surgical aims to expand robotics-assisted surgery to gallbladder operations and cardiac procedures, such as heart valve repairs.

I am a big fan of this company and owned it’s share for short period prior to last quarter’s revenue. I will add some if the price drops to $555.

IBM and INTC

There were other earnings such as IBM’s better than expected earnings but a slight miss on revenue side. Chipmaker Intel  posted better-than-expected first-quarter results, easing concerns that sluggish PC sales might weigh on its performance. The Santa Clara, Calif.-based company also forecast revenue for the current quarter above analyst expectations. But the company said its gross profit margin would fall this quarter. Intel earned 53 cents a share in the first quarter, down 5% from the year-earlier quarter but 3 cents better than analysts were expecting. Sales rose 0.5% to $12.91 billion, vs. views of $12.84 billion.

Tomorrow’s earnings –

Date After Close Before Open
18-Apr KMP
VMW
MLNX
FFIV
SCSS
PLCM
CLB PII
QCOM
CBST HAL
YUM
EBAY
TSCO

More on the day Ahead

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2 comments on “Earnings – STX, URI and ISRG

  1. Yes, ISRG should be bought on any pullback. I’ve been doing so for years starting before it even cracked $100. This company has a long way to go before their growth ends.
    Good post. Stick with growth! “Value” stocks sometimes don’t turn out to be quite so valuable.

    • sumeetvatsa says:

      Yes Dave you are right. I totally agree with you. With boat load of cash and excellent in house R&D, I expect it to grow at 15-20% rate for next 5 to 10 years.

      Great call.

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