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Monday, January 25, 2010

Tech sector earnings scorecard - Time to get bullish on tech?


Stocks have been struggling lately, to put it mildly, but earnings season has been pretty decent. Stock prices in the tech sector has been especially weak but I don't believe tech deserves the cold shoulder. Here's why.

I've been keeping track of some of the tech bellwethers as well as some of the smaller players.All in all, the results of this earnings season have been pretty positive.

The following table is our tech scorecard. Results include a good selection of tech stocks that have reported this month right up through Monday, Jan 25. 40 out of 47 companies on our list have beat earnings expectations thus far in this earnings season. That's 85%, which to mind is pretty good.

There has been some grumbling among investors that topline growth has been lacking. This scorecard shows that 31 out of 47 companies have shown year-over-year growth in revenues. Not spectacular but not bad; it's about two thirds of companies reporting thus far and that's a decent percentage.

In any case, here is our tech scorecard thus far. We've identified which ones beat earnings expectations and which ones had topline revenue growth.

Name
Symbol
Earnings Beat?
Topline Growth?
Guidance
Infosys
INFY
Beat
Yes
Upside
EXFO
EXFO
Miss
No
Upside
Linear Tech
LLTC
Beat
Yes
Upside
Xyratex
XRTX
Miss
No
Upside
Intel
INTC
Beat
Yes
In-line
ADTRAN
ADTN
Beat
Yes

Cree
CREE
Beat
Yes
Upside
IBM
IBM
Beat
Yes
Upside
Supertex
SUPX
Beat
No

Wipro
WIT
Beat
Yes

ASML Holding
ASML
Beat
Yes

iGATE
IGTE
Miss
Yes

Amdocs
DOX
Beat
No
Mixed
eBay
EBAY
Beat
Yes
Mixed
F5 Networks
FFIV
Beat
Yes
Upside
Logitech Intl SA
LOGI
Beat
No

NVE Corp
NVEC
Beat
Yes

Plexus
PLXS
Beat
No
Upside
Seagate Tech
STX
Beat
Yes
Upside
Skyworks
SWKS
Beat
Yes
Upside
Xilinx
XLNX
Beat
Yes
Upside
Amphenol
APH
Beat
Yes
Upside
Fairchild Semi
FCS
Beat
Yes
Upside
Affiliated Computer
ACS
Beat
Yes

Xerox
XRX
Beat
No
Upside
California Micro
CAMD
Beat
Yes

Advanced Micro
AMD
Beat
Yes

Digi Intl
DGII
Beat
Yes
In-line
Elec For Imaging
EFII
Beat
No

Emulex
ELX
Beat
No
Mixed
Google
GOOG
Beat
Yes
Upside
Intl Game Tech
IGT
Beat
No

Microsemi
MSCC
Beat
No
Mixed
NetScout Systems
NTCT
Beat
No
In-line
Synaptics
SYNA
Beat
No
Mixed
Western Digital
WDC
Beat
Yes

LM Ericsson
ERIC
Miss
No

Apple
AAPL
Beat
Yes
Upside
Atheros Communications
ATHR
Beat
Yes

JDA Software
JDAS
Miss
Yes

Mindspeed
MSPD
Beat
Yes
Upside
PLX Tech
PLXT
Beat
Yes
Upside
Texas Instruments
TXN
Beat
Yes
Upside
VMware
VMW
Beat
Yes
Upside
Volterra Semi
VLTR
Beat
Yes

Zoran
ZRAN
Beat
Yes
Upside

Since earnings reports are backwards looking, I've included forward guidance. Out of 46 stocks in the list, there are 29 that have provided guidance that I was able to include. Out of that 29, fully 21 have provided upside guidance, and the rest have provided mixed or in-line guidance.

So with 85% of tech stocks beating earnings expectations and 66% reporting year-over-year growth in revenues the tech sector is looking pretty good from the point of view of fundamentals. Given how hard tech stocks have fallen, I'm thinking this is getting to be a pretty good entry point for those looking to invest in the tech sector (ETFs IYW, XLK and ROM are pretty good candidates). And with a significant number of stocks providing positive forward guidance, the risk at this point seems to be somewhat diminished.

The next few weeks will feature plenty more earnings reports so stay tuned for updates to the tech scorecard.

Disclosure: no positions in stocks mentioned in this post though I am currently long ROM

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