Morning Call from Goldman Sachs:
9/05/03
NSM reported revenues of $424.8 million (down 0.1% Q/Q), in line with our estimate of $423.3 million, and pro forma EPS of $0.18, well above our estimate of $0.13. The EPS upside came from a better than expected gross margin: 47.2%, compared to our estimate of 44.2%, and up from 44.6% in the May qtr. Gross margin improvement was due to higher fab utilization and an improved product mix as NSM divested its lower margin non-analog businesses. We are raising our estimates substantially. FQ2 goes from $438.0m/$0.22 to $448.2m/$0.29, and FY04 from $1,752.5m/$0.83 to $1,787.1m/$1.08. To date we have been a little conservative on NSM stock with an UNDERPERFORM rating. However, we still believe this is the correct rating as NSM's margins and returns are likely to stay below those of key analog peers ADI, Linear and Maxim. In addition, at an 89% premium to its historical EV/S multiple, compared to our coverage group trading at a 28% premium, we believe NSM's improvement in margins is priced in. |
