For the thread's consideration...BBRC is another stock that I believe, got unfairly whacked in this week's semi-selloff. Off about 8 points from it's recent high, and at 36 1/2 may be a good entry point. Earnings soon...around Oct. 21st....
Here's a couple of reports that I have been able to find...First SG. Cowen's opinion of BBRC's 2nd qtr and future prospects...
Key Points:
1. Burr-Brown Earned $0.27 In June, Well Ahead Of Expectations.
2. If Anything, The Growth Trend Is Accelerating.
3. The Analog Story Will Unfold For Several Years-BBRC Is A Strong Buy.
Investment Thesis: BBRC reported earnings of $0.27 in June, easily beating our $0.23
estimate. The performance was driven by a 12% sequential jump in sales, a reflection of
the broad strength that we have seen across the analog sector. While communications
demand may have led the surge, all end markets exhibited strong growth. Order activity
accelerated during the quarter, making sequential growth in the current quarter likely,
despite historic seasonal weakness. Improved manufacturing should continue to help the
margin line. At 23x 2000 EPS, BBRC is actually a bargain relative to some of the other
analog high flyers. We continue to rate the stock a Strong Buy.
* BBRC reported EPS of $0.27 on revenues of $68.2M for June.-Sales were up 12%
sequentially and beat our forecast by $2.2M. The improved sales enhanced the gross
margin line, which gained 160 basis points to 52.1%, the highest level in 8years.
Operating expenses fell slightly below our model in absolute dollars, despite the fact that
revenues were better than anticipated. Operating margins soared nearly 400 basis
points to 19.7%. On the balance sheet, inventories were virtually flat at $51M. Accounts
receivable were up 10.4%, less than sequential sales growth. Cash grew by $10M to
$131M.
* Accelerating orders remain the story.-Bookings jumped 40% (!) sequentially, a
phenomenon that the company said occurred across all geographies and product lines.
The consumer sector was cited as a source of particular strength, with demand from
manufacturers such as Denon, Pioneer, Sanyo, Seiko, Sony and Yamaha placing large
production orders for components used in DVDs, digital cameras, scanners, digital
camcorders and set-top boxes. Total consumer orders grew by 50% sequentialy.
Bookings from telecom manufacturers were up 20% Q/Q, the more modest growth
because of the 40% jump in the prior quarter. The company said that lead-times remained
a relatively short 4 weeks, and that turns still dominated much of the bookings. In light of
the extraordinary demand growth, that is a significant factor-the short lead times
suggest that customers are not panicking and double ordering for subsequent quarters.
Management guidance was for sequential revenue growth of 5%-10% in the current
quarter. In light of the demand activity, that figure doesn't sound like a difficult target. The
company said that it would prefer to build its backlog if possible-but the potential for
upside is pretty obvious.
* Bottom Line: The order activity at BBRC is strong even by the standards of the rapidly
growing analog sector. In addition, there is ample leverage-management has raised its
long-term gross margin model from 53% to 57%, although we are not yet incorporating
that figure into our model. Short of a major economic dislocation, we see the growth in
analog demand as a secular trend, with an average of more than 20% expansion for
each of the next five years. This should be a focus sector for technology investors, and
BBRC is among the better values in the group. We also feel that the company's relatively
high exposure to the consumer sector will be an advantage during the next two years.
BBRC is a Strong Buy.
Gruntal also weighs in
INVESTMENT SUMMARY
Burr-Brown reported strong second-quarter earnings per share (EPS) of $0.27, beating consensus by $0.03 and
exceeding our aggressive estimate by $0.01. The results were driven by strong revenue from its communication and the
industrial market. Moreover, the company experienced a surge in bookings from all its major markets, resulting in strong
backlog and an upbeat outlook. BBRC also improved its gross margin and lowered its operating expenses relative to sales,
while expanding its aggressive drive for new products. Management increased its objective for gross and operating margin as
new vertical markets for xDSL continue to generate strong order momentum and the company's traditional industrial market
recovery is giving BBRC a stronger product mix with higher manufacturing leverage. We maintain our aggressive EPS
estimates for 1999 of $1.18 and $1.50 for 2000. We are introducing our 2001 EPS estimate of $2.20 based on our expectation
of improved visibility for earnings BBRC. We are raising our 12-month price target to $60 from $40 and reiterate our
Strong Buy rating of the stock.
KEY POINTS
· Revenue increased 1.8% sequentially and 2.6% year over year. Revenue gain was driven by exceptional strength from
BBRC communication business, which increased 32% sequentially and 50% year over year. Shipment to xDSL
customers gained momentum. Communication products accounted for 30% of revenue. Industrial market revenue
increased 22% sequentially driven by recovery in the automatic test equipment (ATE), motor control, and medical
imaging.
· Order boomed, gaining an estimated 35% sequentially driven by strong orders for communication products with repeat
orders from major clients for new products for xDSL base station and handset for the wireless market, in addition to fiber
optics communications. Industrial market orders increased 35% sequentially as major industrial segments and medical
equipment recovered in the U.S. and Asia. The industrial market accounts for 42% BBRC revenue and was depressed
throughout 1998. Distribution orders gained 54% sequentially during the quarter.
· Gross margins improved to 52.1% from 50.5% in the previous quarter, benefiting from improved volume, better mix,
and the various enhancement of the manufacturing cost structure implemented during the downturn. Management
expects gross margin to expand through the second half reaching 53% in the fourth quarter. Management set a new goal
of 57% gross margin for the next two to three years.
· Major contract design wins were scored during the second quarter across a broad range of products and markets. BBRC
received large orders from Nokia, Lucent, Nortel, Sony, Toshiba, and other major customers. Backlog continued to build
up, management indicated that 63% of third-quarter revenue is already in backlog giving BBRC improved visibility.
VALUATION / PRICE TARGET
Burr-Brown currently trades at 17.1 times our 2001 EPS estimate of $2.20, which represents a 22% discount to the
company's long-term growth rate of 22%. We derive our 12-month price target of $60 by applying a 27.3 multiple (a slight
premium to its historical growth rate) on our 2001 EPS estimate. The analog market continues to improve in 1999 as demand
increases for analog-to-digital converters, a specialty of Burr-Brown. We believe BBRC represents an outstanding value play
among major analog companies and as this segment improves, the company will clearly benefit. BBRC's last 12 month's
sales ratio of 3.8 pales in comparison to its peer group average of 14.4, Analog Devices (ADI-NYSE-$46.00-Not Rated),
Maxim Integrated (MXIM-NASDAQ-$62.00-Not Rated), and Linear Technology (LLTC-NASDAQ-$64.88-Not Rated). In
addition, we are encouraged by the company's improvement in its industrial product segment. We maintain our Strong Buy
rating on BBRC stock for aggressive growth investors and believe that the company is in a positive position to grow revenue
and EPS through the balance of the year.
And Hambrecht & Quist
initiate coverage with buy, believe accelerating top line growth and margin
expansion will drive 30% + EPS growth next 12 - 24 months |
