Next week will be a busy one on the Economic calendar as several central banks will hold their April policy meetings and the US is expected to release the much anticipated non-farm payrolls data. In the US, most are expecting to see that the jobless rate fell as employers likely added more than 175,000 workers in March.
In Asia the focus will be on Japan where the nation will carry out its planned sales tax increase which will take sales taxes from 5 percent to 8 percent. The tax hike has been designed to help reduce the nation’s debt, however many worry that a tax increase of this magnitude could have negative effects on the Japanese economy.
Investors will also have their eyes on General Motors as Chief Executive Officer Mary Barra is scheduled to testify before US policymakers on Tuesday. Barra will be tasked with explaining why it took the company so long to recall its 1.6 million defective vehicles which have been linked to 12 deaths.
Key Earnings Reports
Next week investors will be waiting for several key earnings reports including Synnex Corporation SNX, Micron Technology, Inc MU, and UTi Worldwide Inc. UTIW.
Synnex Corporation
Synnex is expected to report first quarter EPS of $0.94 on revenue of $2.75 billion, compared to last year’s EPS of $0.88 on revenue of $2.46 billion.
The analysts at S&P Capital IQ gave Synnex a hold rating with a $65.00 price target on
March 22nd. S&P took into account the company’s plans to acquire the customer care department at IBM.
“Our hold recommendation is based on valuation. We have a positive view of the pending deal to acquire IBM's customer care business, which would be combined with SNX's Concentrix subsidiary. The acquisition would cost $430 million in cash and $75 million in SNX stock, but would bring IBM's $1.2 billion business, with 170 clients, into the fold. Also, SNX would become a strategic partner with IBM. The close is expected, subject to customary approvals, in the first quarter of calendar 2014. More generally, we remain cautious about the economic backdrop, particularly given persistently high, albeit improving, unemployment in the U.S. Still, we are seeing some strength in select areas of the distribution business.”
Micron Technology, Inc.
Micron Technology is expected to report second quarter EPS of $0.74 on revenue of $3.97 billion, compared to last year’s loss of $0.28 on revenue of $2.08 billion.
Merrill Lynch gave Micron an underperform rating with a $19.50 price objective on March 19th, citing the company’s potential for long term growth as it gains momentum.
“Management has addressed how Micron can be less vulnerable to recent weakness in spot given its high exposure to OEM sales and cost competitiveness. In fact, NAND price collapse (c.50% down YoY or high teens QoQ in the spot) should not be a management concern; still profitable DRAM (60%+ of total capacity), better than seasonal according to management, can remain a catalyst for the firm's overall earnings growth engine. Long-term growth momentum has also been well presented given promising demand areas: SSD, server/networking, China OEMs, etc”
On February 10th, JMP Securities gave Micron a market outperform rating with a $33.00 target price, noting the benefits of the company’s efforts to maintain supply growth.
“We reiterate our Market Outperform rating and raise our estimates and price target on Micron Technology from $31 to $33 due to persistent strength in DRAM pricing and favorable indications out of its 2014 Winter Analyst event. Even with the fire-damaged Hynix fab back on line, DRAM pricing continues to trend well above seasonal norms and we believe it is on track to achieve mid-single digits or better ASP improvement on the quarter vs. the expectation for flat that Micron set at earnings back in January. We estimate this DRAM strength is only partially offset by ongoing weakness in NAND, as Micron is moving the mix toward higher value SSD and mobile applications that are less subject to the mid-teens or worse pricing decline trending for NAND due to increasing TLC (Triple Level Cell) effects. Bigger picture, what jumped out at us this analyst day is that Micron is keeping strict ranks with other memory players in maintaining a commitment to disciplined supply growth that will not undermine the favorable status quo in pricing dynamics for the industry. With all other key memory industry players apparently on the same page, we raise our adjusted CY14 EPS estimate from $3.10 to $3.25 (Street $2.50) and our price target from $31 to $33 based on an unchanged ~10x PE/CY14 multiple that represents ~50% discount to our coverage mean in the high teens.”
On February 10th, Morgan Stanley gave Micron an equal-weight rating. The firm had an optimistic outlook, but said stability was still a big concern as equipment orders increase.
“We still feel like this is a strong cyclical environment, but are concerned about potential
supply growth. Key will be ongoing equipment orders from memory, and Micron’s reaction to modest NAND weakness. On the positive side, the company remains committed to declines in DRAM wafer starts, expressed willingness to let inventory build up during periods of supply demand shift (predicated on long term stable pricing), said they will consider to reducing fab utilization during periods of modest weakness, and indicated they will continue to improve net debt.”
S&P Capital IQ gave Micron a hold rating with a $28.00 price target on March 22nd. The analysts at S&P said they were optimistic about the company’s future with its upcoming acquisition, however worried about growth prospects within the DRAM market.
“We forecast that revenues will rise 80% in FY 14 (Aug.), as MU benefits from the inclusion of the Elpida acquisition, and 4.6% in FY 15, following a 10% increase in FY 13.We remain cautious about growth prospects within the Dynamic Random Access Memory (DRAM) space given end-demand softness and increasing competitive threats to personal computers. Despite this, we think growth in mobile DRAM and a more rational supply environment will support average selling prices (ASPs).We like MU's increasing focus on the higher-growth-potential flash memory business, which should be supported by end-market growth for mobile devices such as tablets and smartphones. New product cycles such as Ultrabooks and Solid State Drives should also benefit MU over time, in our view.”
UTi Worldwide Inc.
UTI Worldwide is expected to report a fourth quarter loss of $0.06 per share on revenue of $1.08 billion, compared to last year’s EPS of $0.13 on revenue of $1.10 billion.
The analysts at Stifel gave UTi a buy rating and lowered their price target to $14.00 on March 11th. The team at Stifel said that although they were lowering their estimates, the still saw a positive future for the company’s share and chose to maintain a buy rating.
“UTi Worldwide recently tested investor patience with its negative preannouncement and disclosure of a "going concern" opinion by its auditors, which is highly unusual for a non-asset-based company that traditionally made money and was net-debt-free just a couple years ago. In the midst of its massive IT transformation initiative, numbers again are trending worse than we expected, as the company's EBITDA continues to slide. However, unlike its other competitors plagued by the lackluster forwarding market, UTi has a cost-cut story that should unfold later this year, assuming its timeline for completion of its 1View system rollout by August 31 is accurate. We are reducing our estimates significantly but believe the stock has sufficient upside potential from current levels to maintain our Buy rating.”
S&P Capital IQ gave UTi a hold rating with a $17.00 price target on March 22nd, saying that the company’s stock prices are fairly valued due to a recent share price decrease.
“Given a recent price drop, we find the shares fairly valued at recent levels. While UTIW is likely to be hurt by falling air freight volumes, we expect some improvement in demand as we move through calendar 2014.We also believe results will be hurt by rising purchased transportation costs for air and ocean freight volumes, but see additional capacity coming on line over time, which should help with this issue. UTIW should also get better traction from recent restructuring actions in FY 15. UTIW has had an erratic operating performance, with several recent EPS misses versus consensus expectations, but we see improved financial performance in FY 15.”
Morgan Stanley gave UTi an equal weight rating with a $23.00 price target on March 27th, noting that the transportation sector is likely to rebound following the severe winter.
” After weeks of severe weather headwinds, Class I rail traffic grew ~5% & 6% YoY in weeks 11 & 12, respectively, and was stronger vs. normal seasonality. Though two weeks do not make a trend, if sustained, rebounding rail traffic could drive pos. mgmt. commentary on 2Q earnings calls.”
Economic Releases
Central banks’ April policy meetings will be in focus this week with several central banks including the Reserve Bank of Australia and the European Central Bank set to meet. The ECB will be the main event as investors scour next week's inflation data for clues about the bank's next move. This week has brought about quite a bit of speculation that the ECB will ease further in April either through a negative deposit rate or some kind of asset purchase program.
Daily Schedule
Monday
- Earnings Releases Expected: UTi Worldwide UTIW
- Economic Releases Expected: Chinese manufacturing PMI, Canadian GDP, French GDP, German retail sales, Japanese housing starts
Tuesday
- Earnings Expected: Apollo Group, Inc. APOL
- Economic Releases Expected: US manufacturing PMI, US redbook, eurozone unemployment rate, British manufacturing PMI, eurozone manufacturing PMI, RBA interest rate decision
Wednesday
- Earnings Expected: Unifirst Corporation UNF, Monsanto Company MON, Acuity Brands Inc AYI
- Economic Releases Expected: Chinese services PMI, Australian trade balance, US crude inventory data, eurozone PPI
Thursday
- Earnings Expected From: Global Payents Inc. GPN, Micron Technology, Inc. MU, Synnex Corporation SNX
- Economic Releases Expected: US services PMI, Canadian imports and exports, US trade balance, eurozone services PMI, ECB interest rate decision, British services PMI
Friday
- Earnings Expected From: CarMax KMX
- Economic Releases Expected: US nonfarm payrolls, German factory orders
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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