Seagate Raises Estimates But Halts Dividend Payout

Shares of Seagate Technology ( STX) are down nearly 7%, despite the company announcing it expects fiscal third-quarter sales to surpass its earlier forecast.

Third-quarter sales are expected to be about $2.1 billion, exceeding the earlier forecast of $1.6 billion to $2 billion. For the fourth quarter, the company expects revenue in the range of $1.9 billion to $2.2 billion, above the consensus for $1.86 billion.

Despite the positive news, the company also announced it was halting dividend payouts, which will cut $60 million a year from its outflow. The company reports on April 21.

Shares of Seagate traded near its all-time high of $30 in 2007. The stock has technical support in the $3 to $4 price area. If the shares can firm up, we see overhead resistance around the $7.50 to $8.50 price levels. We will no longer be rating the stock, but will continue to monitor the news flow closely.

MEMC Electronics First-Quarter Results to Fall Short

Shares of MEMC Electronic Materials ( WFR) are down nearly 14% in early trading after the maker of silicon wafers used in making chips and solar cells said its first-quarter revenue fell $11 million below the expected $225 million.

Management now expects its gross margin for the quarter to be 9% of sales, compared to its previous forecast for a decline somewhere in the range of 20%.

Shares of MEMC are way off the all-time highs of $91 hit in December 2007. The stock has near-term technical support in the $10 price area. If the shares can firm up and shake off today's news, we see overhead resistance around the $20 to $22 price mark. We do not currently rate this non-dividend paying stock, but we do follow it closely.

SPX Corp. Down 15% on Weaker Forecast

Shares of SPX Corp. ( SPW) are down nearly 15% after the company said it expects revenue to be down approximately 14% as compared to the first quarter of 2008.

The company said the reduced forecast is the result of the continued deterioration of global economic conditions in the first quarter of 2009. In particular, demand in its short-cycle flow technology end markets has been lower than expectations. In addition, sales in its tools and diagnostics business have been lower than expected due to the continued stress experienced by global vehicle manufacturers and their dealer service networks.

Management now sees earnings per share from continuing operations to be in a range of $4.40 to $4.80, down approximately 18% from previous expectations.

We had removed shares of SPX Corp. from our "Recommended" list on Aug.12 when the stock was trading at $119.10. The company has a 1.86% dividend yield based on last night's closing stock price of $53.63. The stock has near-term technical support in the $38 to $40 price area. If the shares shake off this morning's news, we see overhead resistance around the $58 to $60 levels. We would remain on the sidelines for now. The stock holds a Dividend.com DARST Rating of 3.1 out of 5 stars.

Express Scripts to Buy WellPoint's NetRx Unit for $4.68 Billion

Pharmacy benefit management company Express Scripts ( ESRX) will buy health insurer WellPoint's ( WLP) NetRx prescription division for $4.86 billion both companies reported on Monday.

The blockbuster deal will include a combination of cash and stock, with up to $1.4 billion worth of Express Scripts common stock going to WellPoint. The acquisition is expected to generate over $1 billion in incremental earnings before charges for Express Scripts.

NetRx currently manages prescription medication benefits for over 25 million Americans, and oversees more than 265 million adjusted prescriptions each year. Companies like NetRx derive much of their revenue by managing prescription benefits for employers and health care providers, as well as through mail-order prescription delivery.

The deal is expected to close in the second half of 2009, with Express Scripts possibly on the hook for a $50 million fee if the deal happens to fall apart before then.

Stock of both companies involved jumped Monday morning. Express Scripts' stock rose 9.1% or $4.52, while WellPoint's stock rose +4.3%, $1.78 or in Monday morning trading.

Shares of Express Scripts are 30% off their all-time highs of $78 a share, hit in September of last year. The stock has technical support at the $43 to $48 price range. If the shares can firm up, we see overhead resistance around the $61 to $62 price area. We do not currently rate this non-dividend stock, but it is a key name in the pharmacy benefits industry.

At the time of publication, the author had no positions in stocks mentioned, although positions may change at any time.

Tom Reese and Paul Rubillo are senior editors of Dividend.com. Visit Dividend.com for more dividend stock ratings, picks, news, and analysis for long-term and income-seeking investors.

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