Another SSB's comment on BTB number.
Very bullish on LRCX..
Dec. total equipment book-to-bill was 1.18, up from Nov.'s 1.10. Total
bookings up 8% with shipments up a slight 1%.
Front-end b-to-b increases slightly to 1.15 from 1.12 (Nov.). Orders up
5%, shipments up 3%.
Back-end b-to-b increases sharply to 1.25 from 1.05 (Nov.). Orders up an
impressive 15%, shipments down 4%.
Lam Research (1H, Top Pick) and Teradyne (1H) are our top two picks.
--OPINION:------------------------------------------------------------------
Solid Bookings Growth Inline With Strong Equipment Earnings Reports
Inline with the upside earnings announcements of the equipment companies
for the December quarter, overall equipment bookings rose by a healthy 8%
in December, versus our estimate of 8%-10% sequential growth. While we
had expected similar strength from both the front-end and back-end
equipment companies, the back-end was disproportionately stronger with
bookings growth of 15% versus the front-end growth of 5%. However,
shipments grew at a much slower pace than what we had expected with an
overall 1% sequential growth versus our expectations of 5%-7% growth.
Back-end shipments actually declined by 4% with front-end shipments
growing 3%. We find the shipments decline difficult to understand in the
context of the 20%-30% sequential revenue growth posted by most equipment
companies, and we believe that it could be revised up over the next few
months. This slow increase in shipments resulted in a higher than
expected total book-to-bill of 1.18 versus the expected 1.13 - 1.15
range. Front-end book-to-bill of 1.15 was in the low end of our 1.15 -
1.18 range with the back-end book-to-bill of 1.25 well above our estimate
of 1.08.
Total Book-To-Bill Rises To 1.18 From 1.10
SEMI's December book-to-bill rose sharply to 1.18 from 1.10 in November
as bookings grew as expected while shipments grew at a more modest rate.
Total U.S. equipment bookings rose 8% to $1,833 million after a 6% growth
in November. Shipments, however, only grew 1% sequentially to $1,558
million after 4% growth in the previous month. The slower than expected
rise in shipments led to a total book-to-bill which was in the high end
of our expected range.
Front-End Book-To-Bill Rises Slightly To 1.15 From 1.12
The front-end book-to-bill fell in the low end of the expected range at
1.15, up from 1.12 in November. Bookings increased 5% to $1,309 million
after a similar 5% increase in the previous month. After strong December
quarter commentary from the front-end equipment manufacturers we had
expected stronger growth, but an even slower ramp in sales led to the
uptick in the book-to-bill. Sales grew 3% sequentially to $1,140 million
after growing 4% in November.
Stong Growth In The Back-End To 1.25 From 1.05
As in November, the biggest upside came in the back-end with the
book-to-bill rising sharply to 1.25 from 1.05 in the previous month.
Bookings rose by an impressive 15% to $524 million versus a 9% rise in
November. The spike in the back-end book-to-bill was compounded by the
4% sequential decline in back-end shipments to $418 million. Shipments
rose 4% in the previous month.
Year-Over-Year Comparisons Are Still Strong
Year-over-year shipments and bookings patterns are still very impressive
as the industry continues to grow at a rapid pace. Total bookings are up
107% from December-98 after a 122% year-over-year improvement in
November, with shipments up 69% versus a similar 69% rise in the previous
month. Front-end bookings are up 93% (104% in November) with shipments
up 67% (61% in November). The most impressive year-over-year comparisons
are still evident in the back-end, with a 154% rise in bookings (190% in
November) and 77% increase in shipments (91% in November).
Total 1999 Bookings And Shipments Well Above 1998 Levels
1999 was an extremely positive year for the equipment industry and was a
sharp contrast from the terrible downturn of 1998. As such, total,
front-end, and back-end bookings and shipments for 1999 were well above
the depressed levels of the previous year. Total bookings for 1999 rose
60% to $17.5 billion, front-end bookings also rose 60% to $12.9 billion,
and back-end bookings rose an impressive 64% to $4.6 billion from 1998.
Shipments, however, rose by a more modest rate as equipment companies
started to build more backlog. Total shipments rose 9% to $15.1 billion,
front-end shipments rose 11% to $11.2 billion, and back-end shipments
rose 2% to $3.8 billion.
Orders Surpass The 1997 Cycle Peak For Both The Front And Back-End
This is the first month in which both the front and back-end surpassed
the peak bookings level achieved during the 1997 upturn. December's
total bookings of $1,833 million are now a healthy 12% above the November
1997 bookings of $1,633 million, with front-end bookings of $1,309
million also 12% above the November 1997 peak of $1,170 million.
Similarly, back-end bookings of $524 million are a full 13% above the
1997 cycle peak of $463 million. We should see continued growth in
bookings as the current upturn has additional drivers
(communications/networking/consumer) versus the 1997 cycle, which was
predominantly PC driven.
Shipments Still Below Cycle Peak As Industry Builds Backlog
As the industry is more keen on building more backlog as compared to the
previous cycle, it is only the back-end which surpasses the 1997 peak
levels in shipments. Back-end shipments of $418 million are 4% above the
peak level of $401 million in December 1997. However, total and
front-end shipments are still off the November 1997 levels, illustrating
the industry's urge to build backlog. Total shipments are still 5% off
the peak of $1,634 million and front-end shipments are 8% below the peak
of $1,240. In addition, for the first time in recent memory, the
previous months' bookings and shipments data were not revised (less than
1%), resulting in more meaningful sequential comparisons.
Top Two Picks Are Lam Research And Teradyne
Our top two picks are Lam Research and Teradyne. We rate Lam Research 1H
(Buy, High Risk) with a price target of $191, or 35 times our calendar
2001 EPS estimate of $5.46, and Teradyne 1H (Buy, High Risk) with a price
target of $98, or 40 times our 2001 EPS estimate of $2.45. |
