>>> Core Labs beats by $0.01, reports revs in-line; guides Q3 EPS in-line, revs

Core Labs beats by $0.01, reports revs in-line; guides Q3 EPS in-line, revs in-line; guides Q4 (Dec) EPS in-line, revs in-line  

Reports Q2 (Jun) earnings of $1.35 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus Estimate of $1.34; revenues rose 1.7% year/year to $267.56 mln vs the $267.11 mln consensus.

Co issues in-line guidance for Q3, sees EPS of $1.49-1.52 vs. $1.52 Capital IQ Consensus Estimate; sees Q3 revs of $280-290 mln vs. $284.62 mln Capital IQ Consensus Estimate. Within those ranges, operating margins are expected to be approximately 32%, with year-over-year incremental margins as high as 60%. A 23% effective tax rate is assumed for the third quarter of 2014. FCF is expected to be between $77,000,000 and $81,000,000.

Co issues in-line guidance for Q4 (Dec), sees EPS of $1.56-1.61 vs. $1.61 Capital IQ Consensus Estimate; sees Q4 (Dec) revs of $285-295 mln vs. $294.63 mln Capital IQ Consensus Estimate. Within those ranges, operating margins in the quarter are expected to be approximately 33% while exiting the year at 34% with year-over-year incremental margins as high as 60%. A 24% effective tax rate is assumed for the fourth quarter of 2014 as a result of operational activity expected in higher tax rate jurisdictions. FCF for the final quarter of 2014 is expected to range between $81,000,000 and $85,000,000.

>>> Notable after hours earnings movers: SKX +6.9%, FTNT +6.1%, DWCH +5.3%, ANGI

Notable after hours earnings movers: SKX +6.9%, FTNT +6.1%, DWCH +5.3%, ANGI -14.8%, TRIP -9.7%, CRUS -7.2%

Companies trading higher after hours following earnings/guidance:

SKX +6.9%, FTNT +6.1%, DWCH +5.3%, INFN +5%, FB +4.1%, HBI +4%, ILMN +2.5%, FLS +1.9%, GILD +1.4%, ALSN +0.8%, AF +0.7%

Companies trading lower after hours following earnings/guidance:

ANGI -14.8%, TRIP -9.7%, CRUS -7.2%, CA -5.2%, QCOM -3.4%, VAR -3.2%, CAKE -1.6%, DMRC -1.6%, T -1.5%, IIN -0.7%, KALU -0.3% 

>>> Illumina beats by $0.07, beats on revs; guides FY14 EPS & revs higher

Illumina beats by $0.07, beats on revs; guides FY14 EPS & revs higher 

Reports Q2 (Jun) earnings of $0.57 per share, $0.07 better than the Capital IQ Consensus Estimate of $0.50; revenues rose 29.5% year/year to $448 mln vs the $425.75 mln consensus.
Co issues upside guidance for FY14, sees EPS of $2.26-2.28 vs. $2.17 Capital IQ Consensus Estimate
Raises FY14 outlook to 25-26% rev growth from prior guidance of 21-23%

>>> US Close Dow -0,16% S&P +0,18% Nasdaq +0,40%

Closing Market Summary: Earnings Send S&P 500 to Another Record Close

The stock market ended the Wednesday session on a mixed note. The tech-heavy Nasdaq displayed relative strength, climbing 0.4%, while the S&P 500 added 0.2% with five sectors settling in the green. For its part, the Dow Jones Industrial Average (-0.2%) spent the entire session below its flat line.

Equities started the midweek affair on a rather unassuming note in the absence of market-moving news or economic releases. With those pieces missing from the equation, participants turned their attention to quarterly earnings as another dose of better than expected results pushed the S&P 500 to a fresh record close at 1987.01.

The health care sector (+0.8%) surged at the open and never relinquished the lead thanks to a big earnings beat reported by Biogen Idec (BIIB 337.60, +33.93). The stock soared 11.2%, while the iShares Nasdaq Biotechnology ETF (IBB 259.34, +5.66) advanced 2.2%. Elsewhere among biotech names, Puma Biotech (PBYI 233.43, +174.40) nearly tripled in value after announcing positive trial results.

In addition to boosting the health care space, biotechnology provided a measure of support to the Nasdaq, which also drew strength from the shares of Apple (AAPL 97.19, +2.47). The top-weighted tech stock rose 2.6% after beating earnings estimates on below-consensus revenue. However, the company guided Q4 revenue below its Capital IQ consensus estimate.

Sticking to tech earnings, Microsoft (MSFT 44.87, +0.04) missed bottom-line estimates, but beat on revenue. Meanwhile, Broadcom (BRCM 38.15, -0.60) and Juniper Networks (JNPR 22.43, -2.39) retreated despite delivering above-consensus results. Notably, Broadcom and other chipmakers struggled to stay out of the red with the PHLX Semiconductor Index falling 2.3%.

The underperformance of microchip names prevented the technology sector (+0.2%) from extending its slim gain, while other cyclical sectors ended on a mixed note. Energy (+0.6%) and materials (+0.4%) finished ahead of the broader market, while financials (+0.2%) kept pace with the S&P 500. The remaining two growth-sensitive sectors—consumer discretionary (-0.1%) and industrials (-0.4%)—could not make it into the green.

The weakest sector of the day—industrials—lagged amid weakness in the shares of Boeing (BA 126.71, -3.03). The Dow component lost 2.3% despite beating earnings estimates and raising its fiscal-year 2014 earnings guidance.

Also of note, it was reported during the session that the International Monetary Fund lowered its growth forecast for the U.S. to 1.7% from 2.0% and said the Fed may need to delay its first rate hike due to the contraction that took place in the first quarter. However, the remarks had little impact on equities as the major averages held their ground. The Treasury market did not move either and the 10-yr note ended the day flat with its yield at 2.47%.

Participation was well below average with less than 570 million shares changing hands at the NYSE.

Economic data was limited to the weekly MBA Mortgage Index, which rose 2.4% to follow last week's 3.6% decline.

Tomorrow, weekly initial claims (consensus 308K) will be reported at 8:30 ET, while the New Home Sales report for June (consensus 475K) will cross the wires at 10:00 ET. On the earnings front, 3M (MMM 144.68, -0.44), American Airlines (AAL 43.33, +0.95), Caterpillar (CAT 108.38, -1.68), Ford Motor (F 17.78, -0.04), and General Motors (GM 37.41, -0.35) will report ahead of the opening bell.
  • S&P 500 +7.5% YTD 
  • Nasdaq Composite +7.1% YTD 
  • Dow Jones Industrial Average +3.1% YTD 
  • Russell 2000 -0.4% YTD

>>> Gilead Sciences beats by $0.56, beats on revs --> +1,63% After Hours

Gilead Sciences beats by $0.56, beats on revs 

** Reports Q2 (Jun) earnings of $2.36 per share, excluding non-recurring items, $0.56 better than the Capital IQ Consensus Estimate of $1.80; revenues rose 136.1% year/year to $6.53 bln vs the $5.86 bln consensus.
- Sovaldi sales $3.48 bln versus street estimate of ~$3 bln and $2.27 bln in prior quarter
"During the second quarter, Gilead continued to make significant progress led by strong Sovaldi sales. Since December's launch, Sovaldi has been prescribed for more than 80,000 patients in the U.S. and Europe, underscoring the medical community's recognition of the benefits of this product. We look forward to making Sovaldi available in additional countries."
- Atripla sales -7.2% yoy to $870.7 mln
- Truvada sales -0.1% yoy to $806.6 mln

** Updated FY14 guidance (now includes the impact of Sovaldi product sales):
- Sees FY14 net product sales of $21-23 bln (raised from $11.3-11.5 bln ex Sovaldi)
- Sees FY14 non-GAAP product gross margin of 85-88% (raised from 75-77%)
- Reaffirms guidance for "Diluted EPS Impact of Acquisition-Related, Restructuring and Stock-Based Compensation Expenses" of $0.63-0.66

>>> Facebook beats by $0.10, beats on revs --> +4,25% after hours

Facebook beats by $0.10, beats on revs

Reports Q2 (Jun) earnings of $0.42 per share, $0.10 better than the Capital IQ Consensus Estimate of $0.32; revenues rose 60.5% year/year to $2.91 bln vs the $2.81 bln consensus.

** Revenue from advertising was $2.68 billion, a 67% increase y/y. Excluding the impact of year-over-year changes in foreign exchange rates, revenue from advertising would have increased by 65%.
* Daily active users (DAUs) were 829 million on average for June 2014, an increase of 19% year-over-year.
Mobile DAUs were 654 million on average for June 2014, an increase of 39% year-over-year.
* Monthly active users (MAUs) were 1.32 billion as of June 30, 2014, an increase of 14% year-over-year.
Mobile MAUs were 1.07 billion as of June 30, 2014, an increase of 31% year-over-year.
* Mobile advertising revenue represented approximately 62% of advertising revenue for the second quarter of 2014, up from approximately 41% of advertising revenue in the second quarter of 2013.
* Payments and other fees revenue was $234 million, a 9% increase from the same quarter last year.
* GAAP costs and expenses for the second quarter of 2014 were $1.52 billion, an increase of 22% from the second quarter of 2013. Excluding share-based compensation and related payroll tax expenses, non-GAAP costs and expenses were $1.2 billion in the second quarter of 2014, up 18% compared to $1.02 billion for the second quarter of 2013.
Capital expenditures for the second quarter of 2014 were $469 million.
* Cash and marketable securities were $13.96 billion at the end of the second quarter of 2014.
* Free cash flow for the second quarter of 2014 was $872 million.

>>> Fortinet beats by $0.01, beats on revs

Fortinet beats by $0.01, beats on revs 

Reports Q2 (Jun) earnings of $0.11 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus Estimate of $0.10; revenues rose 24.9% year/year to $184.1 mln vs the $171.9 mln consensus.

Forbes ; Is Alibaba Or SoftBank About To Buy Yahoo?

A couple of days ago here on Forbes, I made the case for how, at current levels, Yahoo YHOO +2.95% was a compelling buyout target for either Apple AAPL +3.01%, Facebook, Microsoft MSFT +0.2%, or even Google GOOGL +0.45%.

At the current valuation, any of those companies could buy Yahoo and get the current core business for negative $4 billion. If they paid a premium, they would only get that core business for free. And in addition they would gain the good relationship with Jack Ma of Alibaba and Masayoshi Son of SoftBank which could be spun into all other kinds of gold through partnerships.

However, after publishing the article and chatting with a large Yahoo shareholder that is preparing a presentation to be released soon with many of the ideas described below, I think the most likely outcome which we may even see just after the Alibaba IPO (now rumored to be happening after Labor Day) is that either Alibaba or SoftBank buys Yahoo rather than any of the US tech companies.

Here’s the key reason why: if either Alibaba or SoftBank bought Yahoo, they wouldn’t be tax payers on the investment stakes they’d be getting back. That means they’d be getting an even bigger discount on the price today.

Here is how the math works:

- Currently, Alibaba’s stake owned by Yahoo has a $10 – 20 billion tax bill associated with it, depending on how it trades post-IPO

- The Yahoo Japan (YJ) stake owned by Yahoo has about a $3 billion tax bill associated with it at current market prices


- Yahoo’s Wall Street analysts all discount the taxes Yahoo would have to pay on these stake sales in their current price targets for Yahoo

- Let’s assume that Alibaba becomes a $200 billion market cap company post IPO (which as I said the other day is currently the consensus estimate per Bloomberg)

- Yahoo will have $9 per share in cash (after the Alibaba IPO and assuming their first tranche sale happens at an IPO price for Alibaba of $150 billion)

- They have a stake in Yahoo Japan worth $9 per share (pre-tax)

- They will have a remaining stake in Alibaba worth $33 per share (pre-tax assuming Alibaba goes to $200 billion post-IPO)

- Yahoo’s core business likely has a minimum value of $5 per share (which assumes a very conservative 4-5x EBTIDA on a conservative assumption of EBITDA going forward)

- Added together, you have a per share value of $56 for Yahoo’s assets which is significantly higher than the $33 it trades at today

So, either Alibaba or SoftBank could buy all of Yahoo for $45 per share (a nice premium to today’s price), using the $9 in cash from Yahoo’s balance sheet and $36 in their own stock. Yahoo shareholders get $45 of value for a stock currently trading at $33. Either Alibaba or SoftBank would be paying $36/share for something that’s immediately worth $47/share. They’ve created $11 billion in value for their shareholders at the snap of a finger.

If it was Alibaba buying Yahoo, they could immediately trade their new 35% stake in Yahoo Japan – worth $9 billion – to SoftBank in exchange for $9 billion of their own stock back. Masa would immediately get a controlling stake of YJ, which he doesn’t have now. Jack Ma would get a giant stock buyback of his stock and eliminate the overhang of SoftBank and Yahoo owning so much of his company. The Chinese government would also be happy to see SoftBank go down as such a big foreign owner of Alibaba.

Of course, SoftBank could be the one to do the acquisition of Yahoo as well, and then trade some of their Alibaba stake for something of similar value. Again, the Chinese government would be happy to see their ownership in Alibaba lessened (as well as Yahoo’s).


Such a play for Yahoo could be a big reason why Alibaba has elected – twice now – to allow Yahoo to sell less of the Alibaba stake at the IPO. It wasn’t entirely clear to me what Alibaba gained from allowing Yahoo to do this, when they were first announced. However, in this scenario, Alibaba doesn’t have to borrow cash before the IPO to buy back more of its shares from Yahoo at the IPO. They can use their newly issued stock to do it just after the IPO.

So what happens to Yahoo’s core business if either Alibaba or SoftBank were to do this deal?

Almost certainly, Alibaba wouldn’t keep hold of Yahoo. I suspect they would be concerned that US politicians would object to a big Chinese company having access to Americans’ emails. My guess is that, upon announcing the buyout of Yahoo, Alibaba would simultaneously pledge to immediately sell Yahoo’s core business to someone like Silver Lake (also an Alibaba shareholder) with the blessing of Jerry Yang and David Filo for something like $5 billion. Silver Lake wouldn’t be getting as much of a steal as they were back in 2011 when they tried to buy all of Yahoo with their Asian stakes for a total of $18/share, but $5 billion would still be a bargain for Yahoo given that AOL is worth $3 billion currently.

If SoftBank bought Yahoo, they might toy with the idea of keeping Yahoo’s core business. Recall that Nikesh Arora just left Google to become Vice Chairman of SoftBank and help build out their US Internet operations. That’s the same Arora who tried to get Google to buy Yahoo, then do an encompassing search deal with them, and then finally had to settle for a mobile ad deal with them.

Does Marissa Mayer keep her job working for Silver Lake or Nikesh? It’s unclear. I suspect that Silver Lake would have an operating plan for Yahoo’s core business that doesn’t include 13,000 employees worldwide for a business doing $1 – $1.5 billion a year in EBITDA. I have no idea what the working relationship is like between Mayer and Arora. Maybe they would work together very well.

There’s no real reason why this kind of deal described above wouldn’t be appealing on all sides. Yahoo’s shareholders would likely jump at this kind of opportunity. Alibaba and SoftBank would be happy. US regulators would be happy.

We will have to keep watching what happens after Labor Day, once Alibaba starts trading publicly.

>>> US Rumors

* Advanced Semi's (ASX) Universal Scientific Industrial has received Apple (AAPL) iWatch supplier orders.
* Fox (FOXA) is unlikely to raise percentage of cash regarding the deal for Time Warner (TWX).
* Fiat SpA (FIATY) exec has indicated that Volkswagen (VLKAY) M&A not planned.
* Gentiva Health Svcs (GTIV) and Endeavour Intl (KND) are not in talks as previously rumored.