I thought I was seeing things on Tuesday afternoon when I got an official alert from a New Jersey shore police department about a tsunami warning. After experiencing Hurricane Sandy nothing would shock me, but this still seemed odd. I learned a lot of carpentry skills on the job after Sandy, but they would be no match for tsunami-like devastation. Thankfully, minutes later that warning was rescinded. Seems that the police department in question failed to note that the warning they'd received and repackaged was labeled by the National Tsunami Warning Center as "for test purposes only". Another example of the danger of always believing what you see.
I could not believe what I was seeing yesterday after Corning (GLW) released first quarter earnings, meeting bottom line earnings estimates of 40 cents, and beating top line estimates by $40 million, only to get a 10% haircut in early trading. It did not seem like the punishment fit the crime, but investors were apparently spooked by revised full-year sales growth guidance (+10% versus the previous "low teens") for the company's Optical Communications. Cooler heads ultimately prevailed, to some extent at least, and GLW closed the day down 5.5%.
The company, which has focused on returning capital to shareholders via buybacks and dividends, reduced shares outstanding by another 6 million or so (by my calculation) during the quarter, and has cut the share count by more than 47% since 2013. GLW increased the dividend by 11% in February, and currently yields 2.5%. A great example of the potential power of combining share buybacks with growing dividends, shares currently trade at 14x next year's consensus estimates.
At the opposite end of the spectrum, in terms of both investor awareness and quality, Arlo Technologies (ARLO) , a Netgear (NTGR) spin-off, posted a lower than expected quarterly loss (-47 cents versus -50 cents), beat top line estimates ($57.9 million versus $50.4 million), and was up 12% in post-market trading. The company can use some good news, as shares have fallen nearly 80% since it began trading last August.
ARLO ended the quarter with $180 million or about $2.40 per share in cash and short-term investments, or roughly 60% of its market cap. Such liquidity is certainly less meaningful when a company is in the red and burning cash, and ARLO went through about $21 million during the quarter. The company is not expected to be profitable this year or next, and we'll see if this quarter's better than expected result signals the beginning of a turnaround or not.
The one earnings release I am anxiously awaiting is that of Fitbit (FIT) , which will release first quarter earnings after market close today. Consensus estimates are calling for a 22 cent loss, but the company does have a recent history of beating estimates, including last quarter's 14 cent earnings versus 7 cent consensus. I am hoping for a tsunami of earnings here, of the most positive kind. As a whole, investors remain skeptical.