Microsemi poised to outperform
Bright military, medical pictures cited for chipmaker
By Susan Lerner, CBS.MarketWatch.com
Last Update: 4:35 PM ET March 6, 2003
NEW YORK (CBS.MW) -- Analyst Rick Schafer thinks Microsemi Corp. is about to reap the benefits of heightened war preparations.
Calling its current price levels attractive, the CIBC World Markets analyst issued a new report saying the chipmaker's military-related orders have been consistently strong and should remain robust for the foreseeable future.
"Since Sept. 11, 2001 and the subsequent increases in national defense spending, investors (and management) have anticipated an uptick in Microsemi's high-reliability military power management business," Schafer wrote in a research note. "We believe the wait could finally be over."
Shares of the semiconductor maker (MSCC: news, chart, profile) popped 90 cents, or 11 percent, to close at $9.10 after Schafer raised his recommendation on the stock to "sector outperformer" from "sector performer." He also set a $12 18-month price target for the stock.
With 40 percent of its business related to military and aerospace, Schafer said that part of Microsemi is benefiting from improved pricing and ramping volumes.
Indeed, the analyst believes orders in the military sector are strong enough to push the company's earnings for both the fiscal second quarter, ending in March, and for calendar 2003 above Wall Street expectations.
Against that backdrop, Schafer raised his second quarter estimate to earnings of 3 cents a share on revenues of $48 million from earnings of 2 cents a share on revenues of $47 million. Analysts surveyed by Thomson First Call expect the company to post earnings of 2 cents a share, on average, for the quarter ending Mar. 31.
Schafer also boosted his earnings estimate for the fiscal year ending in September to 15 cents a share on revenue to $193.5 million vs. the previous projection of 10 cents a share and $190 million in sales. The First Call consensus view is 14 cents a share on $191.7 million in revenue. Schafer also raised his 2004 forecast.
Another factor that Schafer cited are anticipated improvements from the company's lesser-known business in the medical market.
Citing research by John Calcagnini, CIBC's health-care analyst, Schafer said the company stands to benefit from a recent Medicare panel decision that will help the market for implantable cardiac defibrillators.
Schafer said 15 percent of Microsemi's business is exposed to the market for defibrillators.
On the other hand, Schafer sees some risks in his recommendation such as a possible slowdown in military activity and defense spending. And Microsemi may have trouble getting new, higher-margin products onto the market.
Susan Lerner is a reporter for CBS.MarketWatch.com. |
