Nasdaq---Julie (slow)
Coke
Interview: Sanford Bernstein---Van Brugge, Robert---Analyst
>> after remaining just slightly higher for much of the session, the nasdaq finished the day with a gain of 3/4 of a percent. julie hyman with this report from the nasdaq markets site.
>> we did finish the day out with a gain of about .7% on the nasdaq. however, we should note there was lower than usual volume, volume of about 1.6 billion shares. the six-month daily average is 1.8 billion. in the absence of any big news, no earnings, and folks looking forward to greenspan’s testimony tomorrow, they were also looking forward to earnings that we’re expecting later in the week. two of the biggest companies lending the most to the nasdaq’s advance were companies that are reporting earnings later in the week. the first is comcast, which is reporting tomorrow, expected to report its first fourth quarterly profit since the year 2000, boosted by video on demand, as well as by faster web access that it’s offering. the other company is dell. that company is reporting on thursday. of course, the computer maker apparently concerned about pricing pressure, may be overblown. that’s according to one analyst at s.g. cowen, who came out with comments today. both of those shares on the rise in today’s session. also, linear technology is a company that did have news today. the semiconductor maker boosted its third quarter sales and profit forecasts and expect those sales and profit to rise 10% compared with the second quarter as orders accelerate. another company on the move today, or i should say two companies, since we had an acquisition, chip pack. this is a company that does semiconductor testing services. it agreed to be bought by s.t. assembly test services. there’s a tongue twister for you, for $1.6 billion in stock . s.t. assembly is a singapore company. this will form the world’s second biggest provider of chip testing services. this is good news for chip pack shares. they were up 14%. s.t. assembly, however, was down 9%. some investors saying the price they paid for chip pack was a bit rich. back to you.
>> all right. thanks. moving on here, coke’s earnings, as we said, are coming out tomorrow morning. our next guest expects that the shares might add about $5 this year, that would be from about $53 up a share up to $58. he’s still neutral, or ranks it a market perform, i believe is the language. i’m talking about robert van brugge, a beverage analyst at sanford bernstein, and he joins me here in the studios. let me get the language correct. you’re market --
>> market perform.
>> i had it right, market perform on this stock . tomorrow, your estimate is for better than the average. the average estimate is 45 cents. you’re looking for 47. why the surprise?
>> i believe that they’re actually going to get a nice boost from currencies. the currencies have been running up all year, but coke has seen very little benefit because of their hedging strategy. i believe those hedges are going to run off in the fourth quarter and you’re going to see the full impact of the positive currency motion.
>> but who follows coke, a global company with half its sales overseas? who doesn’t know about currencies at this point? or are you just saying they’re underestimated, the currencies? >> correct. people recognize clearly that coke is going to get a currency benefit. the problem is so far this year there’s very little of it. so people are wondering when is this currency benefit going to start showing up on the bottom line. i believe it’s going to show up in the bottom line starting tomorrow.
>> you also say that the street is wrong in terms of the consensus estimates, in terms of the full-year 2004 number averaging $2.10. you say in your report out today, those numbers are much too low. they’re going to have to come up.
>> correct. if you look at everything that’s happening with coke, 2003 was a tough year for them. germany was down by 10e%. they had sars scares in asia, terrible weather in the u.s. all of these things are setting them up for much easier comps next year. you add on top of that that i believe they’re going to get about 5% gains from currency on the operating profit line, i think they’re in for a blockbuster year. i don’t think everyone has fully incorporated that into the numbers yet.
>> but sars in germany, but the problems are things like the absence of growth in noncarbonated beverages, and the fact that they’re focusing on flavering drinks.
>> overall, the brand portfolio for coke has been evolving and actually has been getting stronger in noncarbonated beverages. it is providing a boost to their volume growth. i believe they can actually grow volumes at 4% to 5% per year. i believe there are issues the country makes over the long term that will depress the company’s profit growth. but i think in 2004, everything should be going their way.
>> we’re about a minute left. the s.e.c. and federal prosecutors are investigating coke about improperly accounting to inflate revenue and profit. is that a concern for you, an open-ended investigation like that? do you think there’s merit to it?
>> i can’t comment on whether there’s merit to the case. i mean, it certainly has raised some eyebrows. all the facts right now point to the fact that it happened back in 1999. investors are aware of this. we recently did an analysis looking at recent inventory trend for the bottlers, and we don’t see any evidence that there’s any channel stuffing inflating bottler inventory levels right now.
>> so you’re not concerned about that?
>> no, i’m not concerned about it.
>> final 20 seconds, your thoughts on china and mexico. are they still standout markets for coke?
>> absolutely. china has been a great market for coke. they’ve been growing double digits there for a long time now. this is really what has been driving lots of volume growth for the company. in the meantime, in mexico, even though there have been a lot of competitive pressures, coke is selling more ounces every day and is still the preferred brand for mexican consumers.
>> well put. folks, it’s robert van brugge, an analyst with sanford bernstein. stay with us, because there’s more to come. 2004 has brought us numbers, a lot of acquisitions in the banking industry. we’re going to look at what charles schwab is up to.
