DIGE, ILMN Beat Expectations

We continue to see our companies beat expectations. This time: DIGE & ILMN

DIGE
The maker of the HPV test is gaining valuable ground in the US and Europe. Asia and Latin AMerica are the next targets, I hope. There is plenty of room to expand geographically.
Sales: Up 33%, and edging expectations by 2%
Earnings: Up 70% (from $0.14 to $0.25), beating expectations of $0.14.

Even more great news
* Forward guidance was raised a teeny bit
* Margins trickled up from 86% to 87%

The only sour note: next quarter they expect $0.23 per share instead of $0.24. A one penny miss is okay considering that they just beat by 11 pennies.

The stock was up ~3% before sagging a bit in after hours, but the AH trading was pretty light.

ILMN
Same story, different star
Sales: Up 160%, beating expectations by 7%
Earnings: Up 3400% to $0.34 from $0.01. That beats expectations by 13%

Even more great news
* Forward guidance was raised 5%+
* Earnings for the last quarter include the acquisition costs, so income is really strong
* Critical customer base expansion including AMGEN (wow!) and Johns Hopkins!

Some sour notes: increasing expenses will hit margins next year and will lead to lower than expected earnings by a whopping 30%. Specifically, they are boosting sales and R&D spending. That is exactly where they should be investing more, and it is a great sign or managed growth.

Nevertheless, investors buy profits, and the stock sagged 3% in after hours trading, and on significant shares.

Nice moves today: TIE, ILMN, PCP, UCTT, HOLX, IMA

TIE - Up 6%+. Up big on the Boeing news. Also earnings are coming and will be a blow out. I wouldn't be surprised to see $35
PCP - Up 2% on Boeing news. Earnings are already out, so this is more about reinforcing the interest.
ILMN - up 2.5% Earnings release today. Cross your fingers.
UCTT - Up ~5%
HOLX - Up another 2%. A quick note about HOLX P/E. It looks like the P/E is ~74 but don't be fooled. Last quarter, HOLX had earnings of -$0.03. Over time (3 quarters), one expects that one quarter negative earnings to disappear. If we are talking about 4 quarters of $0.30+ quarterly earnings, then 12 month earnings is $1.20 or more. Now the P/E is closer to 45, for a company growing almost 200%. In fact, they think it will be $1.40, making a P/E of 40.
IMA - Up 2% to a new 52 week high

HOLX Upside surprise: stock up 12%

HOLX not only beat expectations, they raised 07 guidance
For the most recent quarter
* Earnings up 150% (to $0.3 from $0.12) and bet expectations by 25%
* Revenue up 86%, beating expectations by 1%

Interestingly, earnings this quarter include $0.13 of special expenses, so I would normally ignore this when comparing sales success and margins.

Backlog also increased 13%.
As a result, 07 sales guidance was raised $50M or ~8%.

Catching Up: Stopped out of OCN

We were stopped out of OCN at $15 on Friday.
I love this company but I am holding off getting back in for 2 reaons:
1. The recent history of the stock shows upwards movement around earnings season.
2. There is bound to be some market panic soon - aka buying opportunity
3. May not have any strength until next earnings cycle.

NTRI crashes, DO Smashes

DO did what I thought they might do: a special dividend.
http://liverocket.blogspot.com/2007/01/why-i-bought-do-and-uctt.html
"I think DO is going to announce a surprise in the next week: possibly a large special dividend."
I just had a feling....They did it last year and they are even more cash rich this year.
We'll get $4 per share on 100 shares. Plus the stock is up ~5% since we bought.
I'm happy to get this one right.

NTRI
Announcement today that they will beat this quarter expectatons by ~5% was joined by guidance for 10% lower earnings next quarter. Not good. To put in perspective: they beat this quarter by $0.04 but miss next quarter by $0.1
Compare this to last year, same quarter, when they missed by $0.02 but expected to beat the following quarter by $0.1 (or about that....I don't have time to check the actual number, but the point is that it is better to miss by a few pennies and then beat by a lot more. Versus beating by a few pennies and missing by a dime.)

First of all, NTRI deserves warm kudos for its long, wonderful run. They are seeing a 300% Year-over-year growth this quarter. Wow! But that falls to 40% next quarter. Apparently the upper limit has been reached: there is only so much money and so many people willing to spend it on mediocre tasting diet food.
That's why I said on August 23rd:
"While I think that they can continue to grow, I have concerns about the actual growth rate. The huge growth isn’t over on a Year-over-year basis, but it is slowing on a sequential basis. I think that this is the last 2 quarters of huge growth."
Turns out I was exactly right: they had exactly 2 quarters before showing signs of sluggishness.

Do you buy now that they are down 25% from their high?
Nope, not yet - for fundamental and technical reasons.
Technically, they had massive short pressure. Around 30% of shares were shorted as of 3 weeks ago. The shorts were pushing the price up and will now push it down hard. They have absolutely no momentum.

Fundamentally, is the stock now undervalued? That depends on your faith in management and what they say. So far they have not succeeded in tapping the new markets they've been discussing (older peopler, overseas, etc). I am also curious about something they said regarding future earnings. The CEO said that earnings were going to drop as the company invested in new markets. Cool, sounds great. So why are sales dropping lower as well instead of rising from these new investments? That inconsistency is puzzling, and I don't like it. Sounds like management bullshit. That indicates the possibility that more misses may happen.
Looking closer at the numbers, I see such great things for the last quarter. Improving margins, surging earnings, and everything I want to see. That is yesterday: tomorrow we see a company that is growing but not surging.
If their 2007 earnings will be $3, then I would give them a 35 P/E. That makes them a $105 stock. But I think the truth is that they are about to flatten and earnings will come in closer to $2.20, which in turn moves the P/E down to 25. That puts the price at $55. That's about where they are now.
So I'll pass on NTRI - no momentum, possible future misses, and no major growth.