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05/26/16 12:00:02 PM
MARKET MOVERS

Movers: Guess'', Inc., Abercrombie & Fitch Co., NetApp, Inc.

Guess', Inc.(GES) : Mizuho's Betty Chen believes that the Q1 miss reported by Guess?, Inc. (NYSE: GES) and the lowered FY16 guidance "reflects ongoing weakness domestically and slower growth in Asia." Chen maintained a Neutral rating on the company, while lowering the price target from $19 to $17. Some Positives "While we were encouraged by improvements in the European segment and proactive global cost reductions, we would like to see more balanced improvements across multiple territories and increased visibility on the gross margin opportunity," the analyst mentioned. Chen believes that despite near-term macro challenges, Guess' cash per share of $5 and dividend yield of 5.5 percent could be attractive for long-term investors. All But Europe Although management reiterated its three-year goal to grow the company's top line and EBIT by 2019, they also noted that the pace of the APAC business was more challenging and likely to skew growth and profitability. In addition, Chen noted that trends in the Americas continued to be tough, with weakness in Guess' domestic business. "Challenging weather negatively impacted April and resulted in underperformance of Spring product including key categories such as dresses, denim, and watches," the analyst said. On the other hand, trends have been improving in Europe, with the Q1 comps in the high mid-teens and positive across all regions.



Abercrombie & Fitch Co.(ANF) : EPS $(0.59) vs $(0.51) Est, down 11 percent YoY Sales $685.5M vs $710M Est, down 3 percent YoY Comps down 4 percent What This Means For Abercrombie & Fitch Arthur Martinez, Executive Chairman of Abercrombie & Fitch Co. (NYSE: ANF), said, "We expect the second quarter to remain challenging, but to see better results in the back half of the year as our assortments continue to improve and we see returns from significant investments in marketing, store management and omnichannel." What This Means For Investors Abercrombie's results follow a trend of disappointing results from clothing and footwear retailers. Recent examples include L Brands Inc (NYSE: LB) and The Buckle Inc (NYSE: BKE), both down 16 percent and 22 percent, respectively. Abercrombie shares were trading down 15 percent at $21.15.



NetApp, Inc.(NTAP) : Brean Capital's Ananda Baruah expects NetApp Inc. (NASDAQ: NTAP) to be "off" Thursday following the soft April quarter revenue and below consensus July quarter guidance issued by the company. Therefore, Baruah maintains a Hold rating on NetApp. The analyst believes the Street might not be modeling in the $1.5 billion remaining from the company's share buyback authorization while forecasting the FY18 EPS. April Quarter NetApp reported its revenue for the April quarter revenue and EPS below the consensus expectations, with the overall revenue declining 10 percent year on year and product revenue declining 17 percent year-on-year. Related Link: NetApp's Challenging Fundamentals Have Goldman Still Selling However, overall revenue grew sequentially, at 1 percent year-on-year. Product revenue also grew at the same rate, partially affected by the global IT spending environment through the quarter. Baruah noted, however, that "demand has since shown improvement and acceleration especially in the strategic product segments." July Quarter Guidance For the July quarter, NetApp guided to revenue of $1.20-$1.35 billion and EPS of $0.34-$0.39, as compared to the consensus expectations of $1.26 billion and $0.45, respectively. Baruah pointed out that the revenue guidance implies a 4 percent year on year decline "due to further decline of mature business offset by growth in strategic products." On the other hand, management expects a rebound in gross margins from the April to the July quarter, as well as operating margins of 10 percent. For FY17, the company guided to a moderation in the revenue decline, with strategic sales growing into a "stronger overall mix." At Time Of Writing...



NetApp, Inc.(NTAP) : NetApp Inc. (NASDAQ: NTAP) reported its F4Q results and announced F1Q guidance below expectations. DA Davidson's Mark Kelleher maintained a Buy rating for the company, while reducing the price target to $35. NetApp reported its April quarter revenue at $1,380.0 mm, missing the DA Davidson estimate of $1,403.5mm and the consensus expectation of $1,405.0mm. The adj. EPS came in at $0.55, below the DA Davidson estimate of $0.58 and the consensus expectation of $0.59. Key Takeaways Analyst Mark Kelleher mentioned three key takeaways: Disappointing guidance - This is likely to exert pressure on the company's shares. NetApp's revenue growth was impacted by a sluggish macro environment and continued headwinds of product transition, and it likely to continue to be impacted, Kelleher said. He wrote further, "Increased spending on customer incentives to transition to Clustered ONTAP pulled product gross margins down." Product mix - Strategic solutions contributed 61 percent of product revenue in the quarter, up from 55 percent in the prior quarter. Mature products contributed the remaining 41 percent of revenue, but these were down 40 percent y/y. Impact of SolidFire - The company completed the SolidFire acquisition on February 2. SolidFire contributed nominal revenue, while increasing NetApp's cost structure. This is likely to continue till SolidFire revenues ramp.



 

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