Through The Fly's Eyes: Oakley

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













High Tech Fashion Statements For Your Eyes

It's unusual for a product to offer high performance, high fashion and safety, all at once. There is an eyewear outfit in Foothill Ranch, California that manages the trifecta.

Oakley, Inc. (OO) makes high-performance goggles and sunglasses for the sports and fashion sunglasses markets. The firm's brand portfolio includes the Dragon, Eye Safety Systems, Fox Racing, Mosley Tribes, Oliver Peoples, and Paul Smith Spectacles lines. Beyond its wholesale operations, Oakley operates about 220 of its own retail shops, including Oakley Stores, The Optical Shop of Aspen, and Sunglass Icon. The company also offers a wide selection of Oakley-branded apparel, footwear, watches and accessories. Competitors include Luxottica Group (LUX) and Nike (NKE).

Oakley pleased investors earlier in the month, when it reported Q1 EPS of eight cents and revenues of $199.2 million. Analysts had been looking for three cents and $182.7 million. Management also guided FY07 EPS to 95-98 cents, versus Street consensus of 96 cents. The CEO attributed the good quarter to growth of its retail endeavor, contributions from acquisitions and the successful implementation of process changes that allowed earlier shipment of the spring 2007 product. The stock popped on the news and then passed into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with one "strong buy," one "buy" and eight "holds." Analysts see a 19% growth rate, through the next year. The OO Price to Sales ratio (2.09), Sales Growth rate (31.29%) and EPS Growth rate (100.00%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 36% of the outstanding shares. Over the past 52 weeks, the stock has traded between $14.86 and $25.50. A stop-loss of $21.25 looks good here.

Through The Fly's Eyes: US Dollar

from Theflyonthewall.com











Sentiment Beginning To Change

Investment sentiment towards the U.S. dollar appears to be changing. Why? Not because of the many economic and political reasons often cited such as the huge U.S. trade and budget deficits improving, plans for getting out of the Iraqi quagmire, or the prospects for political change. But more importantly, the Euro and the British pound have simply gotten too strong versus the dollar.

Today you need many more dollars to buy a pound, the same is true for the euro. While many had questioned the ability for the euro to be a sustainable and viable currency, after a dubious start, the euro has performed quite well.

The simple fact of the matter is that currency valuation is often determined more by the-trend-is-your-friend mentality than a currency's underlying fundamentals -- particularly when talking about the major currencies such as the U.S. dollar, British pound, euro or yen.

What often drives a change in currency valuation are the world's treasury secretaries working together, along with their respective central bankers, to change a currency's course. Ways to play this reversal? Barron's over the weekend listed some Rydex vehicles to invest in:

• CurrencyShares British Pound Sterling (FXB)
• CurrencyShares Euro Trust (FXB)
• CurrencyShares Japanese Yen Trust (FXY)

If you really want to be cute and play the currency reversal, wait for the next G-8 meeting to be held. However, this will most likely be a multi-year reversal in the dollar versus the world's other leading currencies so it is best not to wait for this meeting but to begin shorting these Rydex vehicles now.

Through The Fly's Eyes: Satellites

from Theflyonthewall.com









New Generation Of Military Satellites Needed

Inferential Focus was the focal point of Barron's interview this past weekend. This research driven company combs the world looking for new investment trends.

One emerging trend that could prove profitable for investors is the Department of Defense's need for a new generation of military satellites and communications networks in general. Technology exists, and could easily get into the hands of potential enemies, that can jam communications between US spacecraft and ground stations by messing up the current DOD satellites whose job it is to be the central communications point for all these devices. A simple ground station based in any country could potentially mess up the communications of our military.

Solution: Supposedly, the DOD has embarked on a $34 billion project to build a whole new global networking system similar to the Internet called GIG, or Global Information Grid. The DOD's goal is to make this network the most secure communications network ever to exist.

The companies that are going to benefit from this buildout are Globecomm Systems (GCOM), SAIC (SAI) and Radvision (RVSN). My knowledge about these companies is severely lacking. Please send in comments if you know anything about this satellite buildout or these companies.

Through The Fly's Eyes: Hexcel

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Better Living Through Science

Even before Neil Armstrong, the foot-pads of the Apollo 11 lunar landing module made the first footprints on the moon. Those pads were made of a crushable honeycomb foil manufactured by a Stamford, Connecticut innovator in the development of special purpose materials.

Hexcel Corporation (HXL) is a leading advanced structural materials company. It develops, manufactures and markets lightweight, high-performance materials, including carbon fibers, reinforcements, pre-impregnated materials,laminates, adhesives and composite structures. The firm's materials are found in such diverse products as aircraft components, bullet-resistant vests, auto parts, golf clubs, window blinds and printed circuit boards. Customers include General Electric (GE), Raytheon (RTN) and Boeing (BA). BP plc (BP) is a major competitor.

The company surprised the Street earlier in the week, when it reported Q1 EPS of 17 cents and revenues of $328.7 million. Analysts had been expecting 15 cents and $308.5 million. Management also guided FY2007 revenues to the range $1.25-1.30 billion ($1.28B consensus). The CEO particularly cited a rebound in Space & Defense revenues for the solid first quarter figures.

The issue popped above 30-day moving average support on the news and then passed into a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the shares with one "strong buy", three "buys" and five "holds". Analysts see a 27% growth rate, through the next year. The HXL Price to Sales ratio (1.69) and Return on Equity (25.02%) compare favorably with industry, sector and S&P 500 averages.

Institutions hold about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $13.28 and $24.91. A stop-loss of $18.70 looks good here.

Through The Fly's Eyes: A Quick Look Ahead

from Eric Buscemi of Theflyonthewall.com












Highlights For Next Week

Not much interesting going on except earnings -- so here is a run down of some of the biggies reporting next week.

Monday April 30

* Verizon (VZ) to report Q1 earnings; conference call at 8:30am. Verizon is expected to post adequate revenue but a decline in EPS. Investors will be listening for comments regarding the company's new FiOS cable and broadband service.
* Hilton (HLT) to report Q1 earnings; conference call at 12pm. Hilton is also expected to post a decline in EPS.

Tuesday May 1

* Procter & Gamble (PG) to report Q3 earnings; conference call at 8:30am
* Liz Claiborne (LIZ) to report Q1 earnings; conference call at 10am
* Bristol-Myers Squibb (BMY) annual shareholder meeting to be held at 10am. Note Bristol-Myers just held its Q1 earnings conference call on 4/26.

Wednesday May 2

* Sprint (S) to report Q1 earnings; conference call at 8am.
* PepsiCo (PEP) shareholder meeting to be held at 10am. Note Pepsi just held its Q1 earnings conference call on 4/25.
* Symantec (SYMC) to report Q4 earnings; conference call at 5pm.

Thursday May 3

* International Paper (IP) to report Q1 earnings; conference call at 10am.
* Starbucks (SBUX) to report Q2 earnings; conference call at 5pm. Analysts will evaluate the progress Starbuck's has made with its new store opening plan, as well as its effort to restore the "community" appeal that some executives in the organization feel has been lacking at selected coffee houses of late.

Friday May 4

* Chesapeake Energy Corporation (CHK) to report Q1 earnings; conference call at 9am
* Eastman Kodak (EK) to report Q1 earnings; conference call at 11am. Analysts will evaluate Kodak's restructuring progress under which the company hopes to become a major player in digital age. Wall Street professionals will look for continued cost cuts in the film division, along with beefed-up production and marketing resources for its professional imagery and graphic communications units.

Through The Fly's Eyes: Rumor Mill

from Tedd Cohen of Theflyonthewall.com











Rumor Round-up

While you’ve been busy scouring over this week’s earnings reports, back here at rumor central there’s been a number of “head ups,” but not all that much to write home about, or to send you phoning your broker. But take note of these just for the heck of it.

UNITED RENTALS (URI)

It’s not news that the world’s largest rental company has been for sale for a couple of weeks, but once again, as it is for so many speculative situations as this, there’s an ongoing undercurrent of chatter. The CEO is retiring in June, and the COO will then hold down the fort. UBS (UBS) and Credit Suisse (CS) are offering advice. The company’s in pretty good shape, and should attract some interesting offers. The stock keeps ticking slowly upward. But the rental market has slowed some. Stay tuned.

EASTMAN KODAK (EK)

The stock’s been moving on up. Take over? Cash infusion? Fabulous new product release? Not one of us outsiders knows for sure what’s up. So, what is up? Well, they sold the health imaging business and should get paid its $2.35B soon. Is Hewlett-Packard (HPQ) a potential merger partner? Maybe, maybe not. Last month it was reported that Kodak had eyes for OmniVision Technologies (OVTI). Maybe after quarterly results are released May 4 there’ll be a clearer Kodak moment. Just don’t count on them to try and rejoin the Better Business Bureau anytime soon. Now there’s a rumor.

CUMMINS (CMI)

Shares hit a record high the other day, at least one brokerage firm upgraded the stock, and reports were that the engine maker was…you guessed it…the target of takeover “expectations.” Is that like, expecting? Like expecting to be courted and bought? Fiat (FIA) could be expecting cause they are among the “rumored” to want to expand their truck division in good old North America. Cummins, one of the few remaining independents worldwide, meanwhile has been humming along, with three straight years of record earnings. What a machine, eh? Hmmm.

Through The Fly's Eyes: Reliance Steel & Aluminum

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Fashioning Metal Products for Manufacturers

Preparing blank metal products from primary producers for subsequent manufacturing processes requires much specialized equipment. Many firms cannot afford the equipment and look to metals service centers to deal with the initial preparation for them. One of the best known service center outfits is headquartered in Los Angeles.

Reliance Steel & Aluminum (RS) operates a network of nearly 200 metals service centers, in North America, Europe and Asia. It provides value-added metals processing services and distributes a line of over 100,000 metal products to more than 125,000 customers in the manufacturing, construction, transportation, aerospace and semiconductor industries. Products include galvanized, hot-rolled and cold-finished steel; stainless steel; aluminum; brass; copper; titanium and alloy steel. Services involve slitting, blanking, pipe threading, sawing, bending, punching and polishing, to customer specifications.

The company pleased investors last week, when it reported Q1 EPS of $1.46 and revenues of $1.84 billion. Analysts had been expecting $1.32 and $1.7 billion. Management also guided Q2 EPS to $1.45-$1.55, versus consensus of $1.46. Bear Stearns, UBS and Davenport subsequently reiterated "buy" ratings on the issue and declared price targets in the $66-$72 range. The stock popped on the news and then passed into a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, brokers recommend the issue with six "buys" and two "holds." The RS P/E ratio (11.63), PEG ratio (1.01), Price to Sales ratio (0.69), Price to Book ratio (2.46), Price to Cash Flow ratio (9.89), Price to Free Cash Flow ratio (22.71), Sales Growth rate (86.43%), EPS Growth rate (36.45%), Return on Assets (13.14%), Return on Investment (16.13%) and Return on Equity (26.59%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 72% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 12 months, it has traded between $28.43 and $62.48. A stop-loss of $52.95 looks good here.

Through The Fly's Eyes: Level 3 Communications

from Theflyonthewall.com








Organic Growth Comes In Light; Use Price Weakness To Buy Stock

Level 3 Communications (LVLT) reported very solid results yesterday, however, the organic growth rate seemed to slip from its 24% target down to 17%. This led to the stock getting hit a bit by investors in yesterday's trading.

I would use this price weakness to buy the stock.

Supposedly, Level 3 walked away from weak pricing in the enterprise business, something it can now afford to do since its balance sheet is in much stronger shape. What is also a positive is that most of the restrictive loan covenant agreements on its debt are now gone, which means it can focus on profitability and not revenue generation, which was a covenant that drove business decisions in the past.

Level 3 also remains on the path to being free cash flow positive, which has proven a boon for communications stock prices previously.

The other positive for Level 3 is that video usage is ramping up but revenue has not as of yet. This means when video pricing takes hold, Level 3 revenue growth should accelerate considerably.

The dynamics of this business are two powerful to ignore. Use price weakness to buy this stock and put away.

Through The Fly's Eyes: Microsoft

from Theflyonthewall.com





Growth Rate Up; Free Cash Flow Machine Remains In Place

Microsoft (MSFT) is seeing the benefit of its new product launches, as one would expect. Its massive installed base and new product launches are allowing it to increase its contract prices to customers.

Revenue growth was up 17% for the March quarter, operating income beat estimates by 3 to 4 cents and free cash flow was $7 billion, a typically amazing number for the software giant. The company repurchased $6.7 billion in stock and continues to pay dividends.

Guidance is also solid for 2008, expecting 11% revenue growth or a $5.0 billion revenue increase, which exceeds the total annual revenue for most publicly traded companies, as management mentioned.

Microsoft's stock tends to do best when revenue growth is accelerating, which is currently the case. Also, Microsoft is really low-balling guidance so it should be able to easily beat analyst estimates.

The stock has had a big move, so it is hard to get overly excited about it, wait for market pull-back before jumping in.

Through The Fly's Eyes: Premiere Global Services

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.














Premiere Global: Streamlining Communication-centric Business Processes

The wide range of business communications possibilities available through the Internet is exciting, but it can also be confusing. Fortunately, there is an experienced firm in Atlanta, Georgia that is ready to get you going.

Premiere Global Services (PGI) develops communication technology solutions applicable to such business needs as conferencing, document sharing, marketing and notifications. The firm's Conferencing and Collaboration unit provides teleconferencing and Web-conferencing services, including Internet-based document sharing tools. The unit works with popular presentation software packages from Adobe Systems (ADBE), IBM (IBM) and Microsoft (MSFT), among others. The Data Communications segment automates functions like invoice distribution, appointment scheduling, eMarketing and collections. The company has a customer base of about 60,000 corporate accounts, including nearly eighty percent of the Fortune 500.

Premiere Global pleased the Street last week, when it reported Q1 EPS of 19 cents and revenues of $135.6 million. Analysts had been expecting 17 cents and $129.8 million. Management also predicted FY07 revenues at the high end of its previous guidance range ($517.6M-527.4M), versus consensus of $525.6 million. The company further said it would commence a $150 million self-tender offer, which it projected would be accretive to its diluted earnings per share.

The issue popped above 30-day moving average support on the news and then passed into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside. Altogether, the brokerage community recommends the shares with one "strong buy", one "buy" and two "holds". Analysts see a 24 percent growth rate, through the next year. The PGI Price to Sales ratio (1.71), Price to Book ratio (2.68), Price to Free Cash Flow ratio (20.54) and EPS Growth rate (58.33%) compare favorably with industry, sector and S&P 500 averages.

Institutions hold about 82% of the outstanding shares. Over the past 52 weeks, the stock has traded between $6.83 and $12.45. A stop-loss of $10.75 looks good here.

Through The Fly's Eyes: Newell Rubbermaid

from Theflyonthewall.com





1st Quarter Sales Growth A Bit Light; Full-year Guidance Solid

This morning, Newell Rubbermaid (NWL) reported strong gross margin improvement, jumping 210bps, a big move. Sales growth came in at 3%, a bit light.

Full-year guidance looks good, however, with sales expected to grow 3% to 5%. Gross margin improvement for the full year also looks solid, with a 150 to 200 bps increase.

At first glance, Newell reported solid results. However, the results are not spectacular, either. It will be hard to find news that will drive this stock higher in the near term. There needs to be more evidence of product initiatives that will get investors excited about this stock and push it higher.

Through The Fly's Eyes: Apple Inc

from Theflyonthewall.com














The iPod + the Mac + the iPhone = A Virtuous Cycle

Apple's (AAPL) virtuous cycle continues to build momentum. The iPod brought Apple back to life, a new life which the company is using to drive positive results for its Mac products.

Mac shipments were up 32%, three times the PC industry growth rate. Apple saw 79% growth in notebooks and has inventories under control at three to four weeks.

The Mac is now growing rapidly, and the next thing, the iPhone, is coming to market in June. Apple appears to be working through the software glitches, the product should be ready to ramp by the holiday season.

Additionally, Apple is introducing the Apple TV.

While there are always potential chinks in the armor in the fast moving technology industry, it appears the momentum at Apple continues. I'd stay with this rocket-ship of a stock.

Through The Fly's Eyes: Pool Corporation

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Everything for the Swimming Pool

Spring is when folks start thinking about living out by the pool....or they start thinking about getting one. Either way, they are liable to do some business that benefits an outfit in Covington, Louisiana.

Pool Corporation (POOL) is the world's largest wholesale distributor of pool supplies, operating 282 service centers throughout North America and Europe. Customers include some 70,000 pool builders, retail pool stores and pool service companies. The firm distributes more than 100,000 stock items, including chemicals, pumps, filters, heaters, lights, building materials and various outdoor lifestyle products. Home Depot (HD) is among Pool's major competitors.

The company surprised the Street last week, when it reported solid Q1 results and issued upside guidance for FY07 earnings. POOL shares popped through 90-day and 200-day moving average resistance on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the stock with four "strong buys," one "buy" and six "holds." Analysts expect an 18% growth rate, through the next year. The POOL PEG ratio (1.49), Price to Sales ratio (1.00), Return on Assets (12.33%), Return on Investment (20.56%) and Return on Equity (33.97%) compare favorably with industry, sector and S&P 500 averages.

The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $33.77 and $47.95. A stop-loss of $33.50 looks good here.

Through The Fly's Eyes: ICU Medical

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.














Supplying the Hospital Industry

The accidental transmission of infections is a big day-to-day problem for hospital personnel. There is an outfit in San Clemente, California that makes devices designed to avoid one of the major sources of the problem.

ICU Medical (ICUI) provides disposable medical connection systems for use in intravenous (IV) therapy applications. Its products prevent accidental IV disconnects, protect patients from catheter related bloodstream infections and guard healthcare workers from exposure to infectious diseases through accidental needle sticks. The firm also manufactures various critical care products, including pressure monitoring devices, blood sampling systems, cardiac monitoring systems and angiography kits, under an agreement with Hospira (HSP). Baxter International (BAX) is a major competitor.

The company pleased investors last week, when it reported Q1 EPS of 63 cents. Analysts had been expecting 44 cents. Revenues rose 0.2 percent (yr/yr) to $48.8 million. Management also guided FY07 EPS to $1.97 ($1.79 consensus) and FY07 revenues to $206.0 million ($205.9M consensus). Gross margins rose to 39%, from 33% in Q4. ICUI shares popped above 200-day moving average support on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the stock with one "strong buy" and one "hold." Analysts see a 25% average annual growth rate, through the next five years. The ICUI PEG ratio (1.07), Price to Sales ratio (3.19), Price to Book ratio (2.86), EPS Growth rate (53.66%), Net Profit Margin (12.45%), Return on Assets (11.18%) and Return on Investment (12.02%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $36.23 and $48.51. A stop-loss of $38.35 looks good here.

Through The Fly's Eyes: Sun Microsystems

from Theflyonthewall.com











Poor Results; Muted Guidance

Sun Microsystems (SUNW) reported light results blaming weakening enterprise demand at quarter's end for the revenue shortfall. Gross margins came in at 44.5% versus expectations of 45.2%.

It is too early to jump into Sun's stock. Sun acquired a company called StorageTek a few years ago which contributes a lot of revenue for the server manufacturer, this business will also show weakness as demand for enterprise technology continues to weaken.

Sun also raised a boat load of capital recently from private equity, most likely to be used for a large acquisition. Typically, Sun's business does not turnaround quickly, wait for revenue and some news on what it is going to do with all this cash before getting into this stock.

Through The Fly's Eyes: Amazon.com

from Theflyonthewall.com











Powerful Results; Becoming a Must-own Stock

Amazon.com (AMZN) is continuing to show signs of becoming the Wal-Mart of the Internet era. It has taken a long time for Bezos' creation to develop its business model and results will remain volatile, but the on-line retailer is getting into more business segments and is doing so with better execution.

• Return on invested capital at 30%
• Authorized additional $500 million share repurchase
• Total 1Q revenue up 32% year over year
• Media revenue up 26%
• Electronics and other general merchandise (EGM) grew 55% domestically--powerful number; EGM grew 48% in total

Amazon also provided good guidance. However, this is a company that will suffer from wide swings in margins. It appears to be the nature of this developing business model. However, this business has required a massive amount of infrastructure buildout in terms of software, logistics and marketing. The moat for this business is becoming larger and larger, making it increasingly more difficult for competitors to compete head-on with Amazon.

What could be most impressive about last quarter's results is that it could be the lone Internet company growing faster domestically than internationally.

Don't chase last night's stock rally, wait for the stock to settle down and buy and hold this stock a long time.

Through The Fly's Eyes: Labor Ready

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Labor Ready: Helping Business Solve Temporary Staffing Problems

he difference between success and failure of a business venture sometimes depends on how quickly management can find reliable temporary help for specific projects. America's largest source for assistance along that line is headquartered in Tacoma, Washington.

Labor Ready (LRW) provides temporary employees for manual labor, light industrial and skilled construction trades. The firm serves some 300,000 small and mid-sized businesses in the construction, warehousing, hospitality, landscaping, transportation, light manufacturing, retail, wholesale and sanitation industries. Labor Ready operates through 913 branches in the United States, Canada, Puerto Rico, and the United Kingdom.

The company surprised the Street last week, when it reported Q1 EPS of 21 cents and revenues of $290.2 million. Analysts had been looking for 16 cents and $281.3 million. Management also guided Q2 EPS to 33-35 cents (31 cent consensus), Q2 revenues to $337-$340 million ($327.19M consensus), FY07 EPS to $1.40-$1.45 ($1.24 consensus) and FY07 revenues to $1.35-$1.37 billion ($1.33B consensus). The board boosted its buyback authorization by $100 million. LRW shares popped through 30-day, 50-day and 90-day moving average resistance on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the stock with one "strong buy," two "buys," six "holds" and two "sells." Analysts see a 17% annual growth rate, through the next five years. The LRW P/E ratio (14.84), PEG ratio (0.87), Price to Sales ratio (0.81), Price to Book ratio (3.10), Price to Cash Flow ratio (12.50), Price to Free Cash Flow ratio (11.50), Return on Assets (13.14%), Return on Investment (15.88%) and Return on Equity (21.81%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 94% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $14.94 and $27.75. A stop-loss of $18.75 looks good here.

Through The Fly's Eyes: Intersil

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.














Providing for Semiconductor Needs

From DVD recorders to computers and LCD TVs to satellites, if your electronic devices need analog chips, there is a firm in Milpitas, California that has you covered.

Intersil Corporation (ISIL) is engaged in the design and manufacture of analog integrated circuits. Its product families address power management and signal processing functions in the high-end consumer, industrial, communications, and computing markets. The company sells its devices to original equipment manufacturers, original design manufacturers and contract manufacturers in the United States, Europe and Asia. Customers include Dell (DELL) and IBM (IBM). Texas Instruments (TXN) is a major competitor.

Intersil surprised the Street last week, when it reported Q1 EPS of 29 cents and revenues of $167.7 million. Analysts had been looking for 28 cents and $164.7 million. Management also guided Q2 EPS to 30-31 cents (30 cent consensus) and Q2 revenues to $173-176 million ($170.95 million consensus). The CEO attributed the favorable outlook to a positive book-to-bill ratio and reduced inventory levels at distributors.

ISIL shares popped on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the stock with eight "strong buys", nine "buys", nine "holds" and three "sells". Analysts expect a twenty percent average annual growth rate, through the next five years. The ISIL Price to Book ratio (1.73), Price to Free Cash Flow ratio (23.48), EPS Growth rate (26.09%), Operating Margin (20.50%), Net Profit Margin (20.44%) and Net Income per Employee ($106.58k) compare favorably with industry, sector and S&P 500 averages.

Institutions own about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $20.26 and $30.99. A stop-loss of $26.25 looks good here.

Through The Fly's Eyes: Texas Instruments

from Theflyonthewall.com









Quick and Profitable Downturn

Texas Instruments (TXN), the wireless chip giant, reported strong results last night, citing the wireless semiconductor inventory overhang as being over. Most impressive was the level of profitability during this downturn with TI exiting a semiconductor trough with 51% gross margins and over 20% operating margins.

Since 25% of revenue in semiconductor orders is from consignment or EDI systems, the information is pretty good that an upswing is beginning. Also, along with book-to-bill hitting 0.99, March sales increased 20% versus sales in February. Further, April's numbers remain strong.

TI said the biggest factor for the upswing is the inventory overhang being over, which is having more of an impact than specific product wins. However, its high-end analog products' compound annual growth rate is 19% versus 8% for its primary competitors.

Also, look at National Semiconductor (NSM) which has followed a similar patten during this inventory correction. National will most likely give investors more bang for the buck. Further, it is time to start looking at Motorola. If there was a true inventory overhang, with its stock down big, investors need to start chipping away at the RAZR manufacturer.

Through The Fly's Eyes: Yahoo!

from Theflyonthewall.com






Yahoo! Named Tuesday's Value Pick At Jefferies

Yahoo (YHOO) was named Jefferies' value pick of the day. Yahoo is trading at 11.1x EBITDA versus 12.5x for eBay and 14.5x for Google, according to the report.

Jefferies has a $36 price target which was reduced from $38 following Yahoo's awful earnings release. However, Jefferies analyst, Youssef Squali, remains confident that Project Panama will have a positive impact on revenue which investors should begin to see by the June quarter.

As we have been blogging, stay with Yahoo and continue to chip away at this stock. There are few times when such a high-profile franchise name sells for such a low valuation in a growth industry. Remember the old Peter Lynch line, buy a company even an idiot can run because sooner or later an idiot will run it. At some point, if Yahoo cannot get its act together, it will be sold or someone new will come in to run it.

Through The Fly's Eyes: Lufkin Industries

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Lufkin Industries: Getting Pumped

If you are ever called on to write a piece about vertical business integration, there is an interesting case in Lufkin, Texas. The firm provides oil well pumps, the gears to run them, the electronic systems to control them and the trailers to haul them.

Lufkin Industries (LUFK) serves the heavy industry arena through three divisions. Its Oil Field segment manufactures, services and refurbishes oil field pumping units. It also provides computer control equipment for the units and operates an iron foundry to produce castings for new units. The company's Power Transmission segment provides gearboxes for industrial applications and makes parts for after-market service. Lufkin's Trailer segment manufactures and services
various highway trailers for the freight-hauling market. The company operates primarily in the United States, Canada, Europe and Latin America.

The firm pleased investors last week, when it reported Q1 EPS of $1.17 and revenues of $148.10 million. Analysts had been expecting $1.05 and $146.1 million. Management also offered in-line guidance for Q2 and FY07 earnings.

LUFK shares popped on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

The brokerage community recommends the stock with one "strong buy" and expects a 19% average annual growth rate, through the next five years. The LUFK P/E ratio (12.52), PEG ratio (0.66), Price to Sales ratio (1.51), Sales Growth rate (11.02%), Operating Margin (17.00%) and Net Profit Margin (12.19%) compare favorably with industry, sector and S&P 500 averages.

Institutions own about 70% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $49.05 and $71.47. A stop-loss of $53.90 looks good here.

Through The Fly's Eyes: Adtran

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.














Bridging the Last Communications Mile

When it comes to making the critical connections between a communications service provider and an end-user, you want to get your equipment from a manufacturer which grew up with the industry. At 22 years of age, there is a Huntsville, Alabama outfit that can claim to be a real grandfather in the field.

Adtran, Inc. (ADTN) is a leading provider of networking and communications equipment, with a portfolio of more than 1,600 devices for use in the last mile of today's telecommunications networks. Widely deployed by both carriers and enterprises, the firm's systems enable voice, data, video, and Internet communications across copper, fiber, and wireless network infrastructures. Customers include Verizon Communications (VZ), AT&T (T) and Sprint Nextel (S).

The company surprised the Street last week, when it reported Q1 EPS of 22 cents and revenues of $110.3 million. Analysts had been looking for 20 cents and $105.9 million. Management expected gross margins in the high end of the 50-60% range, going forward. The CEO attributed success to strength in High Data Rate Digital Subscriber Line demand, improving broadband access trends and ongoing momentum in inter-networking products. He anticipated further solid results, on the basis of new business wins and new product launches. ADTN shares popped on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the stock with four "strong buys," three "buys," fifteen "holds" and four "sells." Analysts see a 14% growth rate through the next year. The ADTN Price to Book ratio (4.17), Operating Margin (21.95%), Net Profit Margin (16.66%), Return on Assets (13.18%) and Return on Investment (14.22%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 84% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $19.96 and $27.24. A stop-loss of $22.75 looks good here.

Through The Fly's Eyes: China

from Theflyonthewall.com














Inflationary Concerns Over Overheating Economy Warranted

China GDP growth of 11.1% for the first quarter is not a good number for the world’s central bankers.

What is most worrisome about the recent economic reports is that China’s monetary authorities have been attempting to slow down growth for quite some time. Short-term rates have been pushed up over 100 basis points during the past year with little effect. The stock market continues to boom with retail investors opening more than one million stock trading accounts the last week and 10 million the last four months—greater than the previous four years combined, according to the Financial Times.

Getting economic growth down to the 9% targeted growth rate has remained elusive as the most recent above-par GDP growth rate follows a 10.6% reading for the first quarter of 2006.

US investors have added more fuel to the fire purchasing $5.2 billion of Chinese equities. While this might not seem like a lot by US stock market standards, this level of investment can often be too much for an emerging market to handle. Further, the appreciating yuan is somewhat of a liability this late in an economic expansion. As the yuan appreciates versus the dollar, Chinese companies convert dollar to yuan to profit from the currency appreciation, adding further liquidity to the economy.

Both government and monetary heads were hoping not to have to take a sledgehammer to the Chinese economy prior to the 2008 Olympics. However, they might not have a choice. This also means the Fed will remain on hold until the US economy shows data indicating meaningful economic weakness, not wanting to add more fuel to China’s overheating economy.

From a US investment perspective, if stronger than expected economic data come out the next month or so, take some money off of the table. This means central bankers around the world will tighten to keep world-wide inflation from taking off.

Through The Fly's Eyes: Nabors Industries

from Theflyonthewall.com






Oil Rig Companies Continue To Print Money

While notoriously cyclical, the supply and demand dynamics look so good for the drilling and rig businesses, even private equity firms might start looking at this sector.

As demand for high-quality offshore rigs have these stocks ascending to record highs, land-based drillers, and specifically Nabors Industries (NBR), have sold off. Nabors stock has dropped from a high of $40 per share and is now selling for $31 per share.

The argument from the investment community is that Nabors' rigs are old and are targeted at areas where natural gas reserves are in steep decline—meaning the dayrates for their rigs are in jeopardy of going down.

Nabors management is not very pleased with its recent stock price and has suggested at recent investor conferences if it remains at such depressed levels it will look at options to get the price up. Look at Nabors stock to make some good money. A 30% pop or $40 stock price looks likely.

Through The Fly's Eyes: A Quick Look Ahead

from Eric Buscemi of Theflyonthewall.com












Highlights For Next Week

Monday April 23

* CA World 2007 to be held in Las Vegas
* L-3 Communications (LLL) to report Q1 earnings; conference call at 10am.

Tuesday April 24

* Defense companies Lcokheed Martin (LMT) and Northrop Grumman (NOC ) to report Q1 earnings.
* Low-cost airline Jetblue (JBLU) to report Q1 earnings. Will Jetblue follow Southwest's (LUV) disappointing report, which caused two analyst downgrades? Or is the recent increased investment byu George Soros a sign that Jetblue is doing better?
* Alternative Energy Conference, hosted by Friedland Investment Events, to be held in NY.

Wednesday April 25

* Boeing (BA) to report Q1 earnings; conference call at . Will Boeing discuss Airbus's decision to halve the price of its A350 planes in order to become more compeitive with Boeing's 787 Dreamliner?
* Market darling Apple Inc (AAPL) will also report; Q2 earnings conference call at 5pm.

Thursday April 26

* XM Satellite Radio (XMSR) to report Q1 earnings; conference call at 10am. Investors will look for any comments relating to the state of the potential merger with Sirius Satellite Radio (SIRI).

Friday April 27

* YRC Worldwide (YRCW) to report Q1 earnings; conference call at 9:30am.

Through The Fly's Eyes: Google

Andrew Corn is a contributing editor for Theflyonthewall.com and the CEO of Clear Asset Management.











Understanding Google

It is ironic to write a post about a firm, with 40 or so analysts covering it, opening with how the company is misunderstood. The media has written about how the firm’s revenue and earnings growth are slowing. They are concerned about all the spending going on.

We operate in a market that values the quarter to quarter comparison over all else. Stocks that miss by a penny are hammered. Companies that show weakness for two consecutive quarters may be dropped from coverage as resources become scarcer in the analyst world. Firms investing in their future are called over-funded in R&D, getting ahead of themselves, or, my favorite, spending faster than their revenue growth warrants.

Stay asleep and write Google (GOOG) off. That way Clear Asset Management LLC and its clients can really reap the benefits of Google’s business plan.

May I remind everyone that Google just blew by earnings and revenue consensus estimates.

This is a firm that “has it going on” today and is spending to ensure that age won’t be taking the luster off the firm, or its fundamentals. As the comparisons to Microsoft (MSFT) inevitably continue, there are a few very distinct differences. Both companies spawned numerous millionaires, many of which leave the firm. Both have unique cultures and have very driven and brilliant founders, who were smart enough to hire smart people from business to marketing to programming and product development to grow the companies exponentially. The big separation surrounds how they grow.

There are grumblings about how Google is the big bad boy of the Left Coast and growing globally. They are big and therefore by some definitions bad. Let’s look at growth.

Growth at Google is occurring organically, through innovation and real risk taking, globally and through strategic acquisitions.

Risk taking is demanded. Ideas can originate from almost anywhere. Resuscitating print, venturing into TV and cable, mobile, outdoor and radio, there is no ad media buy that Google doesn’t seek to first reinvent and therefore dominate. BTW, Google is still growing its search market share and revenue. Growing globally is by design and Google aims to grow ex-US to be over 50% of its revenue and earnings this decade. Google is growing by acquisition to expand its offerings and support its core business.

Most important of all, Google invests in people, ideas and markets. That is how new products are developed and brought to market, new territories are explored and acquisitions are made.

The big three automakers should stand up and take notice. So should many other has-been industries. The best defense is the strongest offense. This isn’t football, its business, and it’s the future of this country.

A firm that can accomplish all of this and blow by consensus estimates at the same time is also the firm we rank eighth among all large cap growth stocks based on our multifactor models. This keeps Google’s stock in our portfolio. And we say let the critics have their day, we are happy with our returns.

Disclosure: Google Inc. (GOOG) is held in the Clear Large Cap Growth portfolio which is managed on a separate account platform. Mr. Corn is the CEO of Clear Asset Management LLC and owns (GOOG) directly through his investment in the Clear Large Cap Growth portfolio.

Through The Fly's Eyes: Rumor Mill

from Tedd Cohen of Theflyonthewall.com











Rumor Round-up
This is the week that was, or, actually, wasn’t. Lots of talk in lots of industries, but not much action. Here’s a sampler…

JEFFERIES GROUP, INC. (JEF)

The investment bank may be a takeover target. MassMutual, or Massachusetts Mutual Life Insurance Co., may be the pursuer. Could make sense. Jefferies has lots of clients; MassMutual has big bucks. Back in the good old days of 2004 they actually worked together on a corporate lending venture. The two CEOs are buddies. We don’t know if that’s means fishin’, huntin’ or bridge. But buddies talk, don’t they? Jefferies’ stock is clearly on the rise.

WEATHERFORD INTERNATIONAL (WFT)

Now that Halliburton Company (HAL) has finished up in Iran, and is done with KBR, word is that they have oil and gas equipment and services provider Weatherford in their sights. That can’t be too hard seeing that they have a lot in common and both operate out of Houston. Weatherford’s shares have been trading in the high 40s, up some, higher than the lows and lower than the highs of the last many weeks. Not much has happened in the last few days, but maybe it’s because those good ‘ol boys are deciding whose barbeque place to meet at.

USG CORP. (USG)

This one’s been around for a while now, and it’s worth noting that it‘s still around, and may be for a while longer. The stock seems poised for a breakout. Is Berkshire Hathaway’s (BRK.A;BRK.B) Warren Buffett about to make his move? “Yes, hello. I’m calling with a few questions for Mr. Buffett, please…yes, I’ll wait...”

Through The Fly's Eyes: Tech Food Chain

from Theflyonthewall.com












Tech Food Chain Looking Pretty Weak

Fairchild (FCS), Power One (PWER) and Seagate (STX) all reported slightly weaker results and warned the June quarter will remain weak. All three are very good barometers of tech hardware demand.

FCS was light with revenue declines and guided to weaker results for the June quarter. Power One, the power supply company, revenues also came in lite with revenue of $124 million versus $130 million consensus estimate, blaming a weak North American market for the miss.

Seagate, the disk drive company, also reported weak results. The hard-drive manufacturer's CEO said notebook pricing is very aggressive--not a good sign. The notebook business has been the real growth driver for PC manufacturers. Specifically, the weaker demand led to a price war in 400-750 GB drives, with prices eroding twice as much as it had thought.

With the first quarter coming in weak and second quarter guidance pointing to continued weakness, unless the Fed starts dropping short-term rates substantially, there is little reason to get into these stocks or any of the tech food chain stocks on the hardware side.

Outside of chipping away at Intel on price or stock market weakness, stay on the sidelines until summer.

Through The Fly's Eyes: Google

from Theflyonthewall.com












Google Is Not Yahoo!

Google (GOOG) reported its 11th consecutive quarter of exceeding consensus earnings last night. By the way, Google has only been pubic for 11 quarters.

The most interesting comments were focused around Google's international business. For example, Google just released gmail in China which is seeing strong uptake. It appears Google is launching international product wrapped around its application offerings which will further increase the amount of time users will spend on the Google platform.

Gross revenue was up 63% being driven by Google's core business, Google.com. Adsense grew 45% supported by booming international revenue. Paid clicks aggregate growth was 52% year over year and 13% sequentially.

Operating cash flow was 1.2 billion and free cash flow was 623 million.

Google believes advertising is not a zero sum game and by making advertising less intrusive you can actually improve the relationship between consumer and advertiser.

Search market share for Google moved up slightly to 48%, versus 27% for Yahoo, according to industry sources. Google appears to be looking more and more like the Microsoft of the Internet era. It is too powerful of a company not to own.

Through The Fly's Eyes: Callaway Golf

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Callaway Golf: A Lot More Than Just Big Bertha

Go into a golf proshop and ask to see a "Big Bertha." They will hand you a club that puts you in mind of a breadbox on the end of a stick. Still, the line is a big seller and the Carlsbad, California outfit that created it is one of the most successful in the business.

Callaway Golf Company (ELY) is engaged in the design, manufacture, and sale of golf equipment. Products include drivers, fairway woods, hybrids, irons, wedges, putters and balls. The company also sells such accessories as golf bags, golf gloves, golf headwear, golf footwear, golf towels, and golf umbrellas. In addition, Callaway licenses its trademarks to third parties for use on apparel, watches, travel gear and eyewear. The firm markets its products to pro shops, sporting goods retailers and mass merchants.

Callaway had good news for investors earlier in the week, when it said it expected Q1 EPS of 46-48 cents and revenues of $330-335 million. Analysts had been
looking for 39 cents and $321.6 million. The CEO attributed the favorable forecast to "improved product development and supply chain processes." Wedbush Morgan subsequently reiterated its "buy" rating on the issue and boosted its price target from $18 to $21.

ELY shares popped into the initial stage of a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Altogether, brokers now recommend the stock with three "strong buys," four "buys," five "holds" and a "sell."

Analysts expect a 39% growth rate through the next year. The ELY Price to Sales ratio (1.32), Price to Book ratio (2.33), Sales Growth rate (16.44%) and EPS
Growth rate (43.53%) compare favorably with industry, sector and S&P 500 averages.

Institutions own about 88% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $11.49 and $18.75. A stop-loss of $15.90 looks good here. Note that the firm is expected to report Q1 results on May 3, after the close.

Through The Fly's Eyes: JDA Software

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Up Nearly 30% YTD But More Upside Seen

The successful management of business supply and demand processes is an art, requiring discipline and attention to many details. There's a firm in Scottsdale, Arizona that many turn to for help along that line.

JDA Software Group, Inc. (JDAS) provides programs that helps retailers, manufacturers and distributors manage their supply and demand chains, plan operations and manage revenues. It also offers point-of-sale applications to handle an array of back-office functions. The company helps some 5,500 customers in more than 60 countries. Clients include Colgate-Palmolive (CL), OfficeMax (OMX) and Wal-Mart (WMT). Microsoft (MSFT) is a leading strategic partner. Oracle (ORCL) and SAP (SAP) are major competitors.

The firm surprised the Street earlier in the week, when it issued upside guidance for Q1 results. Management now sees EPS of 26-28 cents (21 cent consensus) and revenues of $89.7-90.7 million ($85.83M consensus). The CEO attributed the positive outlook to organizational changes put into place last year and to the impact of the company's acquisition of Manugistics (7/5/06). CIBC World Markets and Brean Murray subsequently reiterated "buy" recommendations on the issue and boosted their price targets to $20.

JDAS shares popped into the initial stage of a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside. Altogether, brokers now recommend the stock with one "strong buy", two "buys" and five "holds". Analysts see a 15% average annual growth rate, through the next five years. The JDAS Price to Sales ratio (1.83), Price to Book ratio (1.74), Sales Growth rate (60.80%) and EPS Growth rate (33.33%) compare favorably with industry, sector and S&P 500 averages.

Institutions hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $12.46 and $18.20. A stop-loss of $15.30 looks good here. Note that the firm is expected to announce first quarter results on April 23rd, after the close.

Through The Fly's Eyes: Atwood Oceanics

Andrew Corn is a contributing editor for Theflyonthewall.com and the CEO of Clear Asset Management.










The Long View on ATW

A recent addition to the Clear Mid Cap Growth portfolio is the Houston, Texas based Atwood Oceanics Inc. (ATW). ATW and its related subsidiaries are engaged in the business of international offshore drilling of exploratory and developmental oil and gas wells, and related support, management and consulting services in the United States.

ATW, founded in 1968 provides various rigs, such as semi submersible, semi submersible tender assist, jack-up drilling, submersible drilling, and modular platform rigs. It also offers various services to third party owners of drilling rigs, such as supply of personnel and rig design, fabrication, installation and operation. ATW has offshore operations in Southeast Asia, Africa, Australia, the Black Sea and the U.S. Gulf of Mexico. The company currently owns and operates a fleet of eight drilling rigs including five semi submersible rigs, two jack-up drilling rigs, and one submersible rig. The firm employs 1,100 people.

Currently, seven of the eight active drilling units are owned and operated by Atwood Oceanics Pacific Limited (a Cayman Islands subsidiary). ATW is in the process of constructing a new jack-up drilling unit (the Atwood Aurora) in Brownsville, Texas, which is expected to be delivered by September 2008 at an expected cost of around $160 million.

This business model has proven to be quite successful in generating impressive financial results and company growth. Its current market capitalization is over $1.8 billion and annual revenue exceeds $300 million. The growth data includes a year over year quarterly revenue rise of 55.6% and during the most recent quarter and a 66.26% revenue increase over last year. Net income grew 190.64% over the last year and has risen an average of 27.54% annually over the course of the past five years.

Even with such a high growth rate, ATW has maintained a significant 11.32% return on assets (ROA) and a robust return on equity (ROE) of 21.51% over the past twelve months which is in the top 25% of the industry.

Our multifactor model continues to calculate that the valuation of the stock is at a reasonable level when compared both to its peers and other mid cap growth companies. A strong indicator of this is found in a relatively modest price to earnings to growth (PEG) ratio of 0.109 over the past year.

Disclosure: Atwood Oceanics Inc. (ATW) is held in the Clear Mid Cap Growth portfolio which is managed as a separate account. Mr. Corn is the CEO of Clear Asset Management LLC and owns (ATW) directly through the Clear Mid Cap Growth portfolio.

Through The Fly's Eyes: Novellus

from Theflyonthewall.com

A Technical View

Think took their target on Novellus (NVLS) shares down to $26. The company disappointed on both earnings and guidance last night, with guidance much weaker than expected.

On a technical basis (daily chart) we can see the up move since July of last year as fairly normal, following an uptrend line with a base then at $23 up to $32.30 yesterday. There was however one notable excursion away from the line late last year that was corrected in early 2007. The pattern is not quite a bearish head and shoulders. In studies of this pattern we have noted that when there is a large gap away from the line, generally one sees an equally large move to the opposite side of the line at some point in the future.

As it turns out Think's price target and the potential downside objective from this pattern are the same: $26. In the pre-market shares are down a dollar from yesterday's close as this is being written.

Next support levels to watch as potential downside objectives are at $31.55, $30.99, $30.46, $30.00, $29.48, $29.04, $28.46, $28.00, $27.53, $27.10, $26.65. Resistance is at $32.13.

It is worth noting this disappointment is likely to weigh negatively on the sector which has been the favored turn-around play of the hedgies. The potential for a melt of some size is higher than average given the low short-bases in this and other names.

This and more technical analysis available on Theflyonthewall.com's subscription site.

Chart created with Equis MetaStock

Through The Fly's Eyes: eBay Inc

from Theflyonthewall.com








eBay Reports Very Solid Results: A Must Own Stock

Last night, in addition to reporting strong results, eBay (EBAY) also provided good guidance, increasing revenue and earnings forecast for the company.

• Total revenue growth was 27%, with organic growth being up 21% -- strong numbers
• EPS up 39% -- 3 cents ahead of consensus estimates
• Over $400 million in free cash flow, very solid considering the huge investment in current and new growth opportunities

PayPal continues to grow rapidly adding to its position as the largest on-line payment platform. An area of strong growth is Europe as eBay added some 35 million accounts with 5 million accounts in Germany alone. In addition, PayPal continues to build on new product launches. Specifically, PayPal's buyer protection program, which covers purchases of 95% of products on eBay, is turning into a cash flow machine as it continues to grow.

Skype, its VOIP communications platform, continues to be monetized successfully as it added 24 million new users in the quarter. But more importantly, revenue jumped 87%, hitting $79 million and turned profitable in the quarter. This business has potential to be another free cash flow, with a 196 million user base. Adoption of paid subscription is taking traction.

Marketplaces grew revenue 22% year over year due to higher ASP and its huge 230 million user base. However, overall listings in the US and Germany are weaker than eBay would like. Emphasis on reducing lower-end products and lower-end sellers is negatively affecting listings which is somewhat to be expected and has eBay focusing on higher margins and higher ASPs.

We blogged earlier in the year that eBay was due to take-off again, which is proving correct. Stay with this stock and if you do not own it, BUY IT.

Through The Fly's Eyes: Nu Skin Enterprises

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Nu Skin Enterprises: When You Want Skin Lotion With Your ISP

So, you're an efficiency expert and want to buy your moisturizers, your vitamins and your Internet service all from the same company. Your desire is uncommon, but there is an outfit in Provo, Utah that can satisfy it.

Nu Skin Enterprises (NUS) is engaged primarily in the development and distribution of personal care products and nutritional supplements. Products offered under the Nu Skin brand include cleansers, toners, moisturizers, cosmetics, fragrances, hair care items and mouthwash. The firm's Pharmanex division sells nutritional supplements under the LifePak brand name. Nu Skin's Big Planet unit offers personal and small-business technology products. Nu Skin operates in 45 markets throughout the Americas, Asia, and Europe. Avon Products (AVP) is a major competitor.

The company pleased investors last week, when it announced that it expects a Q1 EPS range in-line with the average Street estimate and Q1 revenues that top the consensus view. The CEO said management was encouraged by strong growth in South Korea and Europe, as well as sustained improvement in Japan and mainland China. The stock popped through 30-day moving average resistance on the news and then entered the initial stage of a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with four "strong buys," one "buy" and three "holds." Analysts expect a 20% growth rate, through the next year. The NUS Price to Sales ratio (1.00) and Price to Book ratio (3.72) compare favorably with industry, sector and S&P 500 averages.

Institutions own about 59% of the outstanding shares. Over the past 52 weeks, the stock has traded between $13.40 and $19.42. A stop-loss of $14.70 looks good here. Note that the firm is expected to report Q1 results on May 3, before the open.

Through The Fly's Eyes: CDW

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Get Your Computer Systems Right Here

So, you represent a big outfit in need of specially configured computer systems and on-site services. Who you gonna call? For many, the answer is a Vernon Hills, Illinois firm that offers the products of virtually all the big name manufacturers.

CDW Corporation (CDWC) is a technology retailer, providing more than 100,000 computer hardware, software and accessory items through catalogs, telesales and company Web sites. It features product lines from such leading manufacturers as Apple (AAPL), Cisco Systems (CSCO), Hewlett-Packard (HPQ), IBM (IBM), Microsoft (MSFT) and Sony (SNE). The firm also arranges for system configuration, license management and on-site services. Customers are primarily businesses, government entities and educational institutions.

The company pleased investors last week, when it announced that it expected Q1 revenues of $1.859 billion. That topped the consensus Street estimate of $1.79 billion. Management also pointed out that average daily sales in March rose 24.6% (yr/yr) to $31.6 million.

CDWC shares popped through 50-day, 200-day and 90-day moving average resistance on the news and are now forming a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with three "strong buys" and eleven "holds". Analysts see a fourteen percent average annual growth rate, through the next five years. The CDWC P/E ratio (20.29), PEG ratio (1.45), Price to Sales ratio (0.78), Return on Assets (14.78%) and Revenue per Employee ($1.23M) compare favorably with industry, sector and S&P 500 averages.

Institutions hold about 77% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $50.28 and $73.32. A stop-loss of $58.25 looks good here. Note that the firm is expected to announce first quarter results on April 24th, before the open.

Through The Fly's Eyes: Intel Corp.

from Theflyonthewall.com











Good Gross Margin Guidance; Revenue Forecast Still Sloppy

Intel (INTC) reported flat average selling prices (ASPs) which is a good sign for the company versus week ASPs for quite some time. In addition, gross margins increased sequentially from 4Q06 to 1Q07, another good sign. Typically, investors would expect gross margins to drop in the first quarter.

• Revenue for 1Q07 hit the lower end of guidance, not too impressive
• Gross margin and revenue guidance for 2Q is weak, but it appears Intel is low-balling gross margins for 2Q, possibly due to start-up costs for 45 nanometer technology

Intel continues to focus on manufacturing scale and product introductions. In manufacturing, producing microprocessors at 65 nanometer technology and transitioning to 45 nanometer platforms by the end of 2007 continues to provide it with a competitive advantage. Intel will have six different applications running on five operating systems on this platform. This, plus product initiatives, is allowing Intel to build a wider and deeper moat to protect and expand its position in the microprocessor business.

As we blogged last week, Intel's stock appears to be washed out--with not too many sellers remaining. Historically, Intel's stock has done well with gross margin expansion, which appears ready to occur by year end.

There is not a big rush to get into this stock, but chip away during the spring and summer on market weakness for what appears to be a stronger fall and winter on the horizon for the chip giant.

Through The Fly's Eyes: Lubrizol

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Making Your Hydrocarbons Work Better

To a significant degree, the national infrastructure is dependent on the lubrication properties of various hydrocarbon substances. A leader in the art of enhancing those properties is headquartered in Wickliffe, Ohio.

Lubrizol Corporation (LZ) is a specialty chemical company, operating through two units. The Additives segment offers a range of substances that enhance the performance of engine oils, fuels and oilfield chemicals. It also supplies viscosity improvers and additives for paints, inks and greases. The company's Advanced Materials segment offers a diverse portfolio of performance chemicals used in personal care products, pharmaceuticals, coating emulsions and specialty plastics. A key competitor is Chevron Corporation (CVX) subsidiary Chevron Oronite.

The firm pleased investors last week, when it issued upside guidance for Q1. Management said it expected EPS of 98 cents, twenty-two cents above the average Street estimate. Officials noted that shipment volumes in the quarter were higher than expected and reflected a return to normal order patterns. Jefferies and Deutsche Securities subsequently reiterated their "buy" ratings on the stock and boosted their price targets to $65.

The stock popped above 30-day/50-day moving average support on the news and entered the initial stage of a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with four "buys", three "holds" and one "sell". The LZ P/E ratio (22.10), Price to Sales ratio (1.00), Price to Book ratio (2.34), Price to Cash Flow ratio (11.70) and Price to Free Cash Flow ratio (30.31) compare favorably with industry, sector and S&P 500 averages.

Institutions own about 82% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $38.03 and $58.99. A stop-loss of $50.75 looks good here. Note that the firm is expected to report Q1 results on April 27th, before the open.

Through The Fly's Eyes: Google

From Laurie Pasternack of Theflyonthewall.com











Rumored Google Phone Could Impact Entire Market

Many would concede that analysts have been under an "iPhone spell," attempting to figure out what impact the upcoming mobile device from Apple (AAPL) could have on wireless devices and handsets from Palm (PALM) and Research in Motion (RIMM). What they may soon have to consider is what impact a rumored phone from Google (GOOG) could have on the iPhone.

The Google phone, perhaps a joint effort with Samsung, could look like RIMM's BlackBerry with more Internet capabilities and could be code-named "Switch." Google could also be working with telecom giant Orange and High Tech Computer Corp - which DigiTimes.com reported was working on manufacturing Google handsets - to build a mobile phone with Google software and could perhaps go on sale in 2008.

A post on a blog written by Don Dodge, director of business development for Microsoft's (MSFT) emerging business team, quoted Simeon Simeonov, former CTO of Allaire Corp, on what he feels could be Google's "go-to" market strategy for a phone: "Apparently, Google is planning to build distribution relationships with multiple carriers by allowing them to minimize subscription and marketing costs. In other words, Google will market the phone online and carriers will fulfill."

With the iPhone, Apple has promised customers a "new era" of media and information, but their no-third-party-software-allowed policy doesn't appear to bring an "open Internet" way of thinking to a device. Should Google go forward with this market strategy, it could really re-invent this type of device, which could be, essentially, a handheld computer, and blow Apple out of the water.

Someone in the mobile industry needs to start thinking "outside the box," and with Google's recent advances in areas like voice search technology and other applications, it might end up being the company to do just that. Even if, as some speculate, Google is investing in only the software side of things, it appears that it has many of the resources needed to reshape the industry.

Then again, on the news that Apple and Cisco Systems (CSCO) are looking to work together to make Apple's device compatible with Cisco's business and consumer equipment, as reported by Apple Insider, maybe Apple has some tricks left up its sleeves. Either way, a competition between the two should be interesting, to say the least.