As the rebound in technology stocks continues, it is likely that this recovery will be further validated by higher fourth-quarter earnings as companies begin to report their results in the days ahead. The following four companies in the tech space are worth watching when they release their earnings next week. (For a review on the technology bubble, refer to Tech Bubble.)
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Big Blue
The biggest name set to announce next week is IBM (NYSE: IBM) on Tuesday after the closing bell. Despite expected flat sales when compared to the company's year-ago quarter, analysts are predicting that IBM will see a 132.9% increase in EPS. After rising 58.1% in 2009, IBM shares currently trade near a 52-week high.
In Q3, the company's revenue fell by 6.9%, but diluted EPS rose 17.6% as IBM was able to trim its SG&A and interest costs. The company's gross profit margin was up slightly and has increased 20 of the last 21 quarters. An especially positive sign for IBM is the notion that its services backlog rose $5 billion from a year ago to $134 billion today.
Logitech International (Nasdaq: LOGI), a mid-cap manufacturer of computer peripherals, is slated to release its fiscal Q3 earnings on Wednesday of next week. Analysts are expecting the company to report a 22.7% increase in EPS on a 4.1% decrease in sales when compared to Logitech's year-ago quarter. Last quarter the company returned to profitability, but its sales to original equipment manufacturers fell 25% compared to its 2009 fiscal Q2.
Power Surge
On Tuesday of next week, the LED and semiconductor manufacturer Cree (Nasdaq: CREE) will announce its fiscal Q2 results. Wall Street is expecting the company to report double-digit revenue and earnings growth.
In Q1, Cree announced that its EPS doubled on a year-over-year basis as the company achieved record revenue, which was 20% greater than the prior year's quarter. Cree has benefited from a high number of commercial and industrial customers that have adopted LED lighting options. Net income has increased by 255%, while diluted earnings per share increased by an impressive 229% in 2009. Further growth is still predicted for this company.
The programmable logic device maker Xilinx (Nasdaq: XLNX) will report its fiscal Q3 results on Wednesday of next week. Analysts are projecting the company to come in with 9.4% EPS growth on a 7.2% upswing in sales versus the year-ago quarter. Xilinx experienced a significant improvement in operating margins in its most recent quarter, as management noted a broad-based industry recovery as a contributing factor.
The Bottom Line
A general theme likely to persist among tech stocks releasing earnings is bottom line growth. Some of these companies will achieve rising profits from increased sales, while others will be doing it by managing expenses. Each of these stocks is at or very close to its 52-week high. Now we will have to see if earnings can provide them with the next leg up. (For more information about investing in tech stocks, read Averaging Down: Good Idea Or Big Mistake?)
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