Stock Market Predictions

Cray jumps on results beat, outlook raise

Stock Market Predictions

The company also raised its full-year sales outlook for the second time since November.

"We had a strong first quarter led by a large acceptance at Oak Ridge National Laboratory," CEO Peter Ungaro said in a statement on Thursday.

The company expects strong growth from its commercial customers in 2012, from manufacturing, life sciences and energy industries, it said on a conference call with analysts.

Cray raised its full-year revenue outlook range by $30 million between $430 million and $450 million.

Cray said on Wednesday it would sell its interconnect hardware development program and related intellectual property to Intel Corp (INTC.O) for $140 million in cash.

Shares of the company rose to $10.67, adding nearly $66 million to its market capitalization, and making it one of the biggest percentage gainers on the Nasdaq.

(Reporting by Sayantani Ghosh in Bangalore; Editing by Gopakumar Warrier)

Expedia tops profit estimates, shares up

Stock Market Predictions

"Overall it looks pretty strong," Morningstar analyst Dan Su said, noting a rise in domestic and international bookings.

"You probably would expect some headwinds in the Western economies would be pressuring growth" but there was no sign of that in the Expedia report, she said.

The company had a net loss of $3.3 million, or 2 cents a share, in the first quarter, compared with earnings of $52 million, or 37 cents a share, a year earlier.

Earnings per share adjusted for account depreciation, interest expense and other items rose to 26 cents from 16 cents a year earlier. That was better than the 15 cents a share expected by analysts, on average, according to Thomson Global Markets I/B/E/S.

Quarterly revenue rose 12 percent to $816.5 million, better than the $790.9 million expected by analysts.

Shares of Expedia rose 17 percent to $38.17 after closing at $32.63 on Nasdaq.

(Reporting by Karen Jacobs; Editing by Phil Berlowitz, Steve Orlofsky and Richard Chang)

Amazon wins some skeptics over, shares surge

Stock Market Predictions

Shares of Amazon leapt 16 percent on Friday, after it reported first-quarter earnings and margins late on Thursday that were well above investors' most bullish expectations. The gains tacked on some $10 billion in market value and marked its biggest single-day gain since October of 2009.

Chief Executive Jeff Bezos has tried to convince investors to stick with the company for the long term as it flirted with losses in recent quarters. He is trying to transform Amazon from an online version of a big-box retailer like Wal-Mart into a provider of technology services.

Some investors argue that its valuation of over 70 times forward earnings - dwarfing companies like Apple Inc and Google Inc that produce record profits - is justified because Amazon is on track for enormous margin expansion as it expands into more-profitable services from hosting websites to providing an online marketplace connecting buyers and sellers.

"These services will become an increasingly important part of Amazon's overall business and will be a driving force of profitability going forward," Bernstein Research analyst Carlos Kirjner wrote.

Amazon is trying to be "not a bookseller or a retailer, but a company that uses technology and (now) its scale to transform whole value chains" from retail to publishing and video distribution, Kirjner said.

Heavy spending has pressured profit margins in recent quarters, hitting the company's shares. But in the first quarter, gross margins rose by about 120 basis points to roughly 24 percent, Macquarie analyst Ben Schachter estimated.

Amazon shares rose to $227.95 in afternoon trade on the Nasdaq.

CONCEPT STOCK

Bulls argue that Amazon will grow into its rich valuation as earnings increase several-fold over three to five years. The company's ability to influence e-commerce - its "fulfillments" business is expanding rapidly and fuelling buying and selling among individuals for instance - and its burgeoning cloud-hosting business is already leading consumer Internet trends, they say.

But others remain wary about the high level of uncertainty in a fast-evolving industry. Bill Smead of Smead Capital Management owns shares of rival eBay Inc and is avoiding Amazon because the valuation is too risky for a long-term investment.

"We greatly respect what they're doing at Amazon but have virtually no interest in seeking out those risks," Smead said. "Amazon is a concept stock. The company will change our lives, therefore investors feel like pioneers buying the stock now."

Once Amazon's earnings become clearer in three to five years, investors will be able to compare it to valuations of similar companies and excitement around the shares will likely dwindle, Smead said.

"Four years ago, Apple traded at a much higher multiple," he added. "But it is earning a lot more now and that's measurable. They have the curse of being able to be valued."

David Berman of hedge fund firm Durban Capital agrees that Amazon is a "concept" stock, but owns the shares.

He is focusing on Amazon's future domination of an e-commerce market that is growing fast and taking share from traditional retailers.

"I don't have an edge in looking at the valuation of Amazon shares. What is more relevant is whether I think they will dominate more than the market currently thinks," he said. "I think they will, because rivals like Best Buy will struggle."

Apple shares are valued lower than Amazon because Apple is exposed to new rival products that could threaten its now-dominant iPads and iPhones.

"Amazon is a completely different company," Berman said. "No one can catch Amazon. There are too many barriers to entry. Amazon is going to be around forever."

Even if Apple's devices keep selling well, Amazon will benefit from that as more people use iPads and iPhones to shop online, he added.

Amazon makes its own hardware now too, but its Kindle business is not about the devices making money, Berman argued.

"It's about getting the devices out there as conduits to facilitate shopping at Amazon," Berman said. "Whether it's a Kindle or an iPad or iPhone, Amazon is happy either way."

A FLURRY

Amazon's surprise increase in first-quarter gross margins prompted a flurry of price target increases by analysts.

Faster growth at its online marketplace business and cloud unit Amazon Web Services, along with sales of digital goods, drove the improvement in margins, analysts said.

Amazon's 34 percent revenue increase to $13.18 billion also impressed Wall Street which had expected revenue of $12.9 billion, according to Thomson Global Markets I/B/E/S.

"The biggest surprise in the quarter was Amazon's gross margin increase of 120 basis points year-over-year, the largest uptick in 10 years," RBC Capital Markets analyst Ross Sandler said.

During the first quarter, nine of the 10 top-selling products on Amazon.com were digital products, including Kindle e-books, movies, music and apps.

"Bulls have been waiting a long time for this gross margin upside and it finally came in the first quarter," Macquarie's Schachter said.

The company's shares had been hit by margin pressure over the past few quarters.

Schachter expects gross margins to continue to ramp up in the long term as the company benefits from the increasing use of the Internet.

Analysts at Macquarie, RBC, Citigroup and at least nine other brokerages raised their price target on the stock. Nomura upgraded it to "buy" from "neutral.

According to Thomson Global Markets StarMine, 12 analysts rate the stock "strong buy," 11 a "buy," 15 a "hold" and one a "sell." Only one rates the stock "strong sell."

(Editing by Phil Berlowitz and Tim Dobbyn)

Goodyear sees decline in 2012 tire volumes

Stock Market Predictions

Weakening global demand and rising raw material costs have hurt Goodyear in recent times. The company has increased prices and focused on higher-margin tires to offset lower volumes.

On a conference call, Goodyear Chief Executive Richard Kramer said the company will continue to target highly lucrative market segments and not be lured towards volume opportunities.

"We have and will continue to say no to business that is not consistent with our strategy, as we're not running our business for volume alone," Kramer said.

Goodyear said first-quarter tire volumes declined at a higher-than-expected rate of 8 percent to 43 million units. Revenue per tire jumped up 16 percent on higher prices.

The top U.S. tire maker expects full-year tire unit volume to fall 2 percent, compared with its earlier expected sales volumes to be flat for the year.

Raw material costs for the second quarter are expected to increase about 12 percent.

The tire maker posted a first-quarter net loss of $11 million, or 5 cents per share, compared with a net income of $103 million, or 42 cents per share.

Excluding several charges, profit of 34 cents per share beat analysts' estimates of 7 cents per share, according to Thomson Global Markets I/B/E/S.

Sales rose 2 percent to $5.53 billion, below analysts' expectations of $5.83 billion.

Sales in North America, Goodyear's biggest market, rose 8 percent despite an 8 percent drop in volumes, helped by a better product mix.

Goodyear's shares, which have fallen 15 percent since the company reported fourth-quarter results in February, were down $1.10 at $10.83 in late morning trade on the New York Stock Exchange. They touched a low of $10.72 earlier.

(Reporting by A. Ananthalakshmi in Bangalore; Editing by Saumyadeb Chakrabarty, Gopakumar Warrier)

Aetna signals health claims may rise, shares drop

Stock Market Predictions

Health insurers largely posted higher-than-expected earnings in 2011 because of Americans' low use of medical services in the weak economy, leading their shares to far outperform the broader stock market.

But Aetna executives said on Thursday that they were seeing a stabilization in medical claims costs after deceleration that helped profits for the past year.

"Are we seeing a turn in healthcare cost utilization?" said Tim Nelson, a senior healthcare analyst with Nuveen Asset Management. "That's what Aetna investors are worried about, that's what managed care investors are worried about."

Shares of rival health insurers were down modestly after Aetna's report. WellPoint Inc (WLP.N) and Cigna Corp (CI.N) fell more than 1.2 percent, while UnitedHealth Group Inc (UNH.N) slipped nearly 1 percent.

Aetna, whose shares had outperformed rivals this year, is the first major health insurer to miss earnings estimates for the first quarter, after UnitedHealth and WellPoint posted higher-than-expected profits.

While UnitedHealth and WellPoint also raised their respective earnings forecasts for 2012, Aetna merely backed its outlook.

"They missed and they reiterated guidance, and what the Street was expecting was a beat and a guidance raise," Nelson said. Investors with wide-ranging sector portfolios "are going to sell on that kind of result."

In the past year, Aetna was able to recognize gains from the money it sets aside to cover medical claims, when actual claims submitted turned out to be lower than the company had forecast.

Analysts were expecting that trend to continue in the first quarter of 2012, but Aetna said it did not benefit from any such gains during the period.

"We do not see trend decelerating any further," Aetna Chief Executive Officer Mark Bertolini said of medical claims costs on a conference call. "From a utilization standpoint, we don't see anything that is alarming in the marketplace."

For 2012, the executives said the company was keeping its current projection for medical claim costs, which calls for a slight increase over the year before. They noted it was very early in the year to draw many conclusions and that the company had so far reserved appropriately.

"We did predict and forecast an increase in utilization into 2012," Aetna Chief Financial Officer Joseph Zubretsky said in an interview. "We saw nothing in the first quarter that would allow us or steer us to change that forecast."

Aetna shares were down 8.2 percent at $45.33 on Thursday afternoon on the New York Stock Exchange. Through Wednesday, Aetna shares had risen about 17 percent this year, compared with a 14 percent rise for the Morgan Stanley Healthcare index .HMO of health insurers.

MISS DISAPPOINTS

Aetna's first-quarter net income fell to $511 million, or $1.43 per share, from $586 million or $1.50 per share a year earlier.

Excluding items, earnings of $1.34 a share missed the analysts' average estimate by 6 cents, according to Thomson Global Markets I/B/E/S.

Revenue rose 6 percent to $8.92 billion.

"The main issue that people are having with this quarter is they missed consensus slightly and some of what they're saying about their reserves for medical costs is confusing," said Sarah James, an analyst with Wedbush Securities.

In the interview, Zubretsky said investors should take note of Aetna's revenue increase and strong profit margins.

"What I would tell people to be focused on is the quality of the operating metrics underlying our first-quarter result," he said.

Aetna spent 81.5 percent of premium revenue on medical claims, up from 79.2 percent a year earlier. Its operating expenses rose nearly 7 percent.

Aetna's membership stood at 17.92 million at the end of March, up 0.6 percent from a year ago. The company expects enrollment to swell to 18.2 million by year-end.

The insurer still expects operating earnings per share of about $5.00 for 2012. Analysts are looking for $5.15.

(Reporting By Lewis Krauskopf in New York; Editing by Lisa Von Ahn, Gerald E. McCormick and Matthew Lewis)

Arkansas Best loss wider than expected; shares fall

Stock Market Predictions

Daily tonnage -- the amount of cargo a truck carries -- was 12.5 percent below last year levels, hurt mainly due to the company's pricing actions.

For the quarter ended March 31, the company posted an adjusted loss of 63 cents per share, according to Thomson Global Markets I/B/E/S. Analysts on average expected a loss of 18 cents per share.

Todd Fowler, an analyst with KeyBanc Capital Markets, said the impact of the pricing actions on tonnage, network utilization, margins and earnings were underestimated.

"Lower tonnage levels could now have a greater impact on results than previously anticipated," Fowler said. The analyst downgraded his rating on the stock to "hold" from "buy."

However, the company said it experienced good sequential tonnage trends in April as it added new customers and saw additional shipments from existing customers. On a year-over-year basis, tonnage for April was lower.

"April would be the weakest month of that (second) quarter, June is always stronger than April or May," CEO Judy McReynolds said in a conference call.

Arkansas Best's shares, which have fallen 9 percent since the Fort Smith, Arkansas-based company reported fourth-quarter results, were down 6 percent, or $1.05, at $16.33, in midday trading on the Nasdaq. Earlier in the day, the stock touched a near seven-month low of $15.50.

(Reporting by Suzannah Benjamin in Bangalore; Editing by Joyjeet Das, Maju Samuel)

Allscripts shares plunge on weak outlook, board changes

Stock Market Predictions

On Thursday, the healthcare information technology provider reported a lower-than-expected quarterly profit and also announced the resignation of its CFO, three directors and board Chairman Phil Pead.

Citigroup analyst George Hill said the results were strongly disappointing and downgraded the company's stock to "neutral" from "buy."

Hill said he was most troubled by the loss of long tenured CFO Bill Davis, who had been the public face of Allscripts to investors for many years.

"We suspect CEO Glen Tullman won a power struggle at the 11th hour leading to the board departures," Hill said.

"Too few customers are buying its products, due to lack of confidence or satisfaction," Barclays Capital analyst Lawrence Marsh wrote in a note.

Allscripts shares were trading at $9.27 in premarket trade. They had closed at $16.02 Thursday on the Nasdaq.

(Reporting by Shailesh Kuber in Bangalore; Editing by Joyjeet Das)

China state news portal jumps on debut after $219 million IPO

Stock Market Predictions

Demand for People.cn shares were so high that the stock was suspended for most of the afternoon, after triggering multiple stock exchange circuit breakers.

"Investors are scrambling for People.cn due to its scarcity. As long as you're a Chinese person, you would know the company," said Liu Guanwu, a media IPO analyst with Beijing-based consultancy Analysys International.

At its Friday closing price of 34.72 yuan, 73.6 percent higher than the initial public offering price of 20 yuan, People.cn was worth 9.6 billion yuan ($1.5 billion), more than New York Times, which has a market capitalization of $951 million.

The stock opened at 31.01 yuan and was temporarily suspended when it triggered a stock exchange circuit breaker after rising 10 percent from its opening price. It was suspended again till the last five minutes of the trading day, after triggering another stock exchange circuit breaker when more than 80 percent of the stock changed hands.

"Institutional investors I have spoken to seem rather interested in this stock primarily because it's a government entity," said Chen Yi, an equity analyst with Xiangcai Securities in Shanghai.

"From the look of things, retail investors seem to have also followed suit today," Chen said.

The Shanghai Composite Index closed 0.35 percent lower at 2,396.3 points.

DIFFERENT POSITIONING

Beijing has actively encouraged its state-owned news media organizations to list in the domestic market in order to secure capital to improve services and extend Beijing's control in the free-wheeling Internet sector.

Xinhuanet, the Internet portal of state news agency Xinhua, is also set to raise 1 billion yuan in Shanghai, but like People.cn, it will have to compete hard for advertising dollars with new media Internet darlings Sina Corp and Sohu.com Inc.

Analysts said the positioning of People.cn and Xinhuanet is different from that of Sina or Sohu because state-backed media focuses on political news, while Sina and Sohu are more entertainment focused.

Moreover, Sina and Sohu are not technically news organizations and their websites work more like news aggregators with some original content available. However, People.cn and Xinhuanet hire reporters and analysts to conduct interviews and generate content.

BIGGEST CUSTOMER

The challenge for these state-backed media firms would be to get transformed into more commercial entities and to draw eyeballs and advertising dollars.

In 2010, China's Ministry of Finance was People.cn's biggest customer, accounting for 22.2 percent of its revenue.

People.cn raised 1.38 billion yuan in its initial public offering, more than twice its target, and is one of the first state-controlled media groups to list. It sold 69.1 million shares near the bottom of its indicative range of 20.0-22.50 yuan.

People.cn had said it was aiming to raise about 527 million yuan for working capital and to fund expansion.

In February, China Xinhua News Network Corp (CNC), the TV unit of state-run Xinhua News Agency, debuted in Hong Kong through a back-door listing initiated via a HK$700 million share-swap of a listed firm previously known as Tsun Yip Holdings Ltd.

CNC Holdings closed at HK$0.90 on Friday, down 32 percent from the close of its first trading day as CNC Holdings on Feb 8. ($1 = 6.3060 Chinese yuan)

(Additional reporting by Clement Tan in HONG KONG; Editing by Kazunori Takada)

Amazon soars as digital sales boost margins

Stock Market Predictions

Shares in Amazon leapt 15 percent on Friday after it reported first-quarter earnings and margins well above investors' most bullish expectations, tacking on some $10 billion in market value and marking its biggest single-day gain since October of 2009.

CEO Jeff Bezos has tried to convince investors to stick with the company for the long term as it flirted with losses in recent quarters. He is trying to transform Amazon from an online version of a big-box retailer like Wal-Mart into a provider of technology services.

Some investors argue that its valuation of over 70 times forward earnings -- dwarfing companies like Apple Inc and Google Inc that produce record profits -- is justified because Amazon is on track for enormous margin expansion as it expands into more-profitable services from hosting websites in the cloud to providing an online marketplace connecting buyers and sellers.

"These services will become an increasingly important part of Amazon's overall business and will be a driving force of profitability going forward," Bernstein Research analyst Carlos Kirjner wrote.

Amazon is trying to be "not a bookseller or a retailer, but a company that uses technology and (now) its scale to transform whole value chains" from retail to publishing and video distribution.

Heavy spending has pressured profit margins in recent quarters, hitting the company's shares. But in the first quarter, gross margins rose by about 120 basis points to roughly 24 percent, Macquarie analyst Ben Schachter estimated.

Amazon shares rose to $225.75 on the Nasdaq.

A FLURRY

That surprise increase in gross margins prompted a flurry of price target increases by analysts.

Faster growth at its online marketplace business and cloud unit Amazon Web Services, along with sales of digital goods, drove the improvement in margins, analysts said.

Amazon's 34 percent revenue increase to $13.18 billion also impressed Wall Street which had expected revenue of $12.9 billion, according to Thomson Global Markets I/B/E/S.

"The biggest surprise in the quarter was Amazon's gross margin increase of 120 basis points year-over-year, the largest uptick in 10 years," RBC Capital Markets analyst Ross Sandler said.

During the first quarter, nine of the 10 top-selling products on Amazon.com were digital products, including Kindle e-books, movies, music and apps.

"Bulls have been waiting a long time for this gross margin upside and it finally came in the first quarter," Macquarie Equities Research analyst Ben Schachter said.

The company's shares had been hit by margin pressure over the past few quarters.

Schachter expects gross margins to continue to ramp up in the long term as the company benefits from the increasing use of the Internet.

Analysts at Macquarie, RBC, Citigroup and at least nine other brokerages raised their price target on the stock. Nomura upgraded it to "buy" from "neutral.

According to Thomson Global Markets StarMine, 12 analysts rate the stock "strong buy," 11 a "buy," 15 a "hold" and one a "sell." Only one rates the stock "strong sell." Analysts have a mean price target of $218.69.

The company released its quarterly results after the market's close on Thursday.

(Editing by Phil Berlowitz)