The Zacks Analyst Blog Highlights: IBM, Yahoo!, Microsoft, Emerson Electric Co and Sanmina-SCI

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Apr 20, 2011, 09:59 ET

CHICAGO, April 20, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: IBM Corp. (NYSE: IBM), Yahoo! (Nasdaq: YHOO), Microsoft (Nasdaq: MSFT), Emerson Electric Co (NYSE: EMR) and Sanmina-SCI (Nasdaq: SANM).

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Here are highlights from Tuesday's Analyst Blog:

IBM Beats, In Flux After-Market

IBM Corp. (NYSE: IBM) bested the 1st quarter Zacks Consensus Estimates for both earnings and revenues. "Big Blue" brought in $2.41 per share with a top line of $24.6 billion, compared with the expected $2.30 per share and $24.0 billion in revenue.

As a result, IBM stock jumped about 2% immediately in after-market trading before selling off just as sharply. So what started after the bell as clearly an earnings surprise which pleased the market, with Software sales rising 10% and Services up 6% in the quarter has turned into a bit of a head-scratcher at this hour.

IBM said profits rose 10% year over year in the first quarter. Its revenues gained 8% from the year-ago quarter; though adjusting for foreign exchange rates takes that figure closer to 5%.

IBM also issued a statement from CFO Mark Loughridge, who said IBM enjoyed its best first quarter of constant currency revenue growth in ten years. IBM also raised its full-year earnings expectation from $13 per share to $13.15, above the $13.07 in the current Zacks Consensus.

Yahoo! Beats by a Penny

Yahoo! (Nasdaq: YHOO) reported first quarter EPS of 17 cents, a penny ahead of the Zacks Consensus Estimate. This marks the company's fifth consecutive positive earnings surprise. It was a 23% decrease from the same quarter in 2010, however.

Revenue Beats

Revenue excluding traffic acquisition costs (revenue ex-TAC) came in at $1.064 billion, a 9% decline from the same quarter in 2010, but ahead of the Zacks Consensus Estimate of $1.054 billion.

The decline was due in large part to the revenue share related to the search agreement with Microsoft (Nasdaq: MSFT). Under the terms of the deal, Microsoft receives $12 of every $100 in ad revenue generated from clicks alongside ads next to search results.

Excluding this item and other special items, revenue ex-TAC for the first quarter of 2011 was essentially flat year-over-year.

Overall, search revenue ex-tac was down 19%. Display revenue, which accounted for 44% of total revenue, climbed 10%.

Meanwhile, operating income was up 1% over the same period.

Solid Cash Position

Free cash flow for the quarter was down 7% to $59 million. The company repurchased 8 million shares in the quarter for $137 million.

Yahoo! had $3.528 billion in cash, cash equivalents, and short-term investments at March 31, 2011.

Outlook

Management expects second quarter revenue ex-TAC between $1.075 billion and $1.125 billion. Total expenses less TAC are expected to be in the range of $915 million to $935 million.

Operating income is expected to be between $160 million and $190 million.

It did not give specific EPS guidance, but the Zacks Consensus Estimate for the second quarter is currently 17 cents.

Yahoo! is a Zacks #3 Rank (Hold) stock.

Emerson to Build Solar Inverters

Emerson Electric Co (NYSE: EMR) is entering a partnership with Sanmina-SCI (Nasdaq: SANM) to build solar power inverters at Sanmina-SCI's Ottawa, Canada, manufacturing facility.

The Emerson grid-tie inverters to be built by Sanmina-SCI are designed for utility and large-scale commercial purposes. Production of the inverters will begin in 2011 and it may be possible to supply to solar energy projects throughout North and South America.

With a global workforce of more than 140,000 employees and 265 manufacturing facilities, Emerson is well positioned backed by infrastructure, knowledge and experience to deliver its technology and product solutions to customers around the world.

The company continues to invest in breakthrough technologies, expand its geographic presence and improve the cost structure of the business, both organically and inorganically.

We anticipate that emerging markets will continue to outperform mature markets and could represent a significant portion of the company's total sales. Furthermore, emrging markets could recover faster compared to the U.S. and Europe.

The company's operations are at multiple locations spread across the world, a majority of which are outside the United States and are therefore exposed to disrupted production causing delays in shipment.

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