Earnings warnings are generally bad omens that rarely have a one quarter impact. But with many of these stocks already pricing in really bad scenarios. So when companies come in and say that revenues are down 3% or 12%, in many cases these are being rewarded by bottom-fishing traders who are trying to get into the stocks when the shares have sold off in many cases 50% or 75% (or more). Some companies which issued earnings warnings are Lattice Semiconductor (NASDAQ: LSCC), United Technologies (NYSE: UTX), Steel Dynamics (NASDAQ: STLD), H.B. Fuller (NYSE: FUL) and Waters Corp. (NYSE: WAT)
Lattice Semiconductor (NASDAQ: LSCC) issued an earnings and revenuewarning last night saying its expects a sequential revenue drop of 12%to 16% rather than flat to -4%. With shares close to $1.00 this mightbe all in the stock, but it joins the semiconductor warnings game.Shares are up a tad, but less than 1% at $1.28; 52-weektrading range is $1.04 to $4.00. Stock trades at under tangible bookvalue as long as its cash balances hold up.
United Technologies (NYSE: UTX) predicted that revenue would declineby 3.3% in 2009 and it put earnings at plus or minus 5% and expects theeconomic deterioration to cause a drop in revenues next year. $4.90 isthe pivot point that is the basis of a +/-5%, and First Call hadestimates at $5.03 for 2009. Shares are actually up by a fraction of apercent after spending the first 25 minutes of trading and thepre-market in negative territory.
Steel Dynamics (NASDAQ: STLD) guided for earnings to come at a loss of-$0.35 to -$0.40 versus $0.15 First Call consensus estimates. What thecompany said was that it believes the drop in scrap metals has run itscourse and may start to improve. Wall Street is trusting this as sharesare up less than 1% at $10.85. Its 52-week trading range is $5.18 to$40.92.
H.B. Fuller (NYSE: FUL) warned and gave guidance of $0.24 EPS versus$0.39 First Call consensus estimates. The adhesives and chemicals company said revenues were put at roughly$350 million, versus $367.58 million as the First Call consensus.Shares are down 1.5% at $13.84.
Waters Corp. (NYSE: WAT) is one of the few which is trading way off onearnings warning. The analytical instrument manufacturer warned thatrevenue and earnings would be under expectations as new orders werenot completed. Waters sees revenue at $410 million to $420 million for thequarter, yet analysts were looking for almost $450 million and thelowest estimate was $441 million. This one has also taken four analystdowngrades this morning from Deutsche Bank, Leerink Swann, Baird, andCowen. Shares are down 16% at $35.14.
Based upon what we are seeing from the trends in earnings warnings, if a company is only going to fall short of estimates by 10% or 15% then they better get that data out while Wall Street is still in a decent mood before the holiday bills and pink slips coincide with each other in January and February. We did not include the financial firms nor any companies who are entirely tied to the auto industry in any of this analysis. The reasons should be evident as to why.
Jon C. Ogg
December 12, 2008