Varian Shares Gain 4 Percent on Upgrade
Thursday August 11, 3:42 pm ET
Shares of Varian Semiconductor Rise on Prospects in Japanese, High Current Markets
NEW YORK (AP) -- Shares of Varian Semiconductor Equipment Associates Inc. advanced more than 4 percent Thursday after a JP Morgan analyst upgraded the stock on the company's prospects in Japan and in the high current chip market.
Varian shares gained $1.89, or 4.4 percent, to $43.29 in earlier trading on the Nasdaq. The stock, which traded as low as $25.61 a year ago and hit a 52-week high of $44.20 in July, is up about 12 percent since the start of the year. Shares recently gained $1.48, or 3.6 percent, to $42.88 in afternoon trading.
Despite the company's flat third-quarter earnings and lukewarm fourth-quarter forecast, JP Morgan analyst Jay Deahna called the stock "a top pick," and upgraded it to "Overweight" from "Neutral," citing Varian's prospects in Japan and in the high current market.
The brokerage also raised its fiscal 2006 earnings estimate to $2.50 from a previous view of $2.40. Wall Street analysts have pegged the company to earn a more moderate $2.07, according to Thomson Financial poll.
Varian has made headway in Japan, where its market share has historically been near zero, Deahna said. Japanese chipmakers are increasingly adopting a single wafer platform -- Varian's forte -- and Chief Executive Gary Dickerson has been leveraging his experience in Japan to win new deals there, such as the one earlier this month with Hiroshima, Japan-based Elpida Memory Inc.
"Elpida is the first big win in Japan and we expect additional wins in the region to be announced in the second half of 2005," he said.
On another front, Varian's single wafer platform has long been successful with medium-current chips but lagged in the high-current market where other technologies were more prevalent, the analyst said. However, manufacturing issues related to the other technologies are cropping up.
"It seems the high-current market has come to Varian," Deahna said, noting that Varian's single-wafer platform should best other chipmakers who are just beginning to look at single wafers for the high-current market.
A company spokesperson could not be reached.
In July, the company reported third-quarter net income of $19.3 million, flat with a year ago. Per share results fell to 51 cents from 52 cents per share. Revenue rose 14 percent to $166.7 million from $146.1 million last year, but gross margins declined to 42.3 percent from 45.8 percent a year earlier.
Varian also forecast fourth-quarter earnings per share of 29 cents to 37 cents and projected revenue in a range of $138 million to $148 million. Analysts currently expect a profit of 35 cents per share on revenue of $145.6 million.
Elsewhere in the sector, shares of rivals Axcelis Technologies Inc. rose 16 cents, or 2.6 percent, to $6.16, and shares of Applied Materials Inc. gained 36 cents, or 2 percent, to $17.76 in afternoon trading on the Nasdaq. |
