Tech Sector Flexes Muscle, Beating Earnings Estimates
New economy, same story.
The Dow’s 499-point romp Thursday might have thrown the spotlight on industrial stocks, but the tech sector still appears to be the boss when it comes to beating earnings estimates. Three of the latest examples:
* Adobe Systems Inc. (ticker symbol: ADBE), the San Jose-based maker of software for Web-page design, said its fiscal first-quarter net income rose 69%, topping estimates for the sixth straight quarter.
The company said net income was $64.6 million in the period ended March 3, or 51 cents a share, versus $38.3 million, or 30 cents, in the year-earlier period. Excluding investment gains and other one-time items, Adobe earned 47 cents a share, beating the average estimate of 43 cents.
Adobe released its results after the close of trading. Its shares rose $10.88 to $94.44 on Nasdaq, bringing their 12-month gain to 277%.
* Corning Inc. (GLW), the No. 1 maker of glass fibers used in high-speed telecommunications networks, said first-quarter earnings will exceed analysts’ forecasts on rising sales of its most profitable type of fiber.
Profit from operations will climb to 53 to 55 cents a share, versus 36 cents a year earlier. That would top the 48-cent estimate from First Call/Thomson Financial.
Sales of Corning’s glass fiber used by long-distance providers will triple this year as telecom companies beef up their networks to handle Internet and data traffic, Chief Financial Officer Jim Flaws said. Corning, once known as a maker of ceramic cookware, initially expected sales of its so-called Leaf fiber to more than double.
Shares of the Corning, N.Y.-based company rocketed $24.75 to $195 on the New York Stock Exchange, lifting their 12-month gain to 234%.
* Oracle Corp. (ORCL) shares rose 4% on Thursday after the world’s largest database-software maker reported better-than-expected earnings and said it was on track to cut more than $1 billion in expenses by June.
Oracle gained $3.31 to $81.94 on Nasdaq after reporting late Wednesday that operating profit for its latest quarter rose to $498 million, or 17 cents a share, from $277 million, or 9 cents, a year ago.
The Redwood Shores, Calif.-based company said more companies bought its software to connect their supply chain, inventory and other internal functions with customers. Executives said sales for the current quarter, which ends May 31, “look good.”
The company, whose stock has quintupled in the last year, has been cutting costs by automating more of its sales, simplifying tasks by using centralized Internet sites and eliminating jobs.
“We’ve had our profit margins growing for the last seven quarters [and] the last two have been much larger, " said Jeff Henley, chief financial officer. “We don’t think the productivity gains are over.”
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New vs. Old
If you’re looking for earnings growth this year, the numbers are still with “new economy"stocks. A look at expected earnings-per-share growth rates for 2000, and current price-to-earnings ratio, for a sampling of stocks:
Est. EPS P/E on growth est. EPS New Economy Broadcom +57% 296 Cisco Sys. +36 129 Adobe Sys. +25 50 Intel +23 44 Corning +23 83 Old Economy Alcoa +54% 16 Wells Fargo +15 15 Target +13 25 Coca-Cola +9 34 Ford Motor +2 7
Sources: Bloomberg News, Zacks Investment Research