Briefing.com:
Fairchild Semiconductor International (FCS) 38 7/8 +2 1/8: Fairchild Semi will post Q1 earnings after the close today, and they will be strong. The company has made a point of keeping the investment community aware that this quarter will be a standout. Three press releases in the past six weeks have been devoted to announcements of expected Q1 results exceeding prior estimates. On March 16, Fairchild announced that Q1 revenues are running 6% higher than Q4, a rate approximately double earlier projections in a traditionally weak quarter. April 4 saw the company again raise the bar, this time declaring that revenues will be up approximately 10% from Q4. Fairchild again issued guidance on April 17, announcing that Power Device product (PDD) sales are tracking 30-40% higher than Q1 of 1999. PDDs are key components in communication appliances like wireless applications, Internet hardware and digital appliances, a very high growth area. Thanks to the guidance, the Street consensus EPS estimate for the quarter has risen from $0.24 90-days ago, to $0.40 going into today's release. Strong demand in Korea was cited as a key element in the acceleration of both non-PDD and PDD sales, a benefit of Fairchild's April 1999 acquisition of the Power Device business of Samsung Electronics which included a manufacturing site in Puchon, Korea which is currently in the process of receiving an $80 mln facelift designed to increase capacity. Very opportune timing by Fairchild management in recognizing future strong demand for PDD products as well as a recovering Korean economy as catalysts for the Samsung division purchase. Q4 revenues came in at $356.8 mln, so expect Q1 sales of $392.5 mln, anything lower will be viewed as disappointing and will trigger a sell-off. Regarding PDD sales, it is not clear that FCS will break out the number for the quarter, but the comparisons to past quarters will be meaningless due to the Samsung acquisition, naturally their PDD sales will be much stronger. Still, expect PDD sales to come in north of $190 mln. The current stock price has built in an upside surprise as the shares are up 22% since the March 16 announcement. The high estimate on the Street is $0.44, consensus is $0.40. Should they report EPS of $0.42 on revenues above $392.5 mln or better, look for the stock to hold its recent gains; a miss on either of those figures will likely result in a Wednesday "buying opportunity." We continue to like FCS in the semiconductor group for their: 1) broad product base (analog, discrete, mixed, PDD, logic and memory), 2) broad geographic exposure, 3) participation in the booming wireless market, 4) 35-year operating history and 5) continued emphasis on R&D. |
