Azenta Message Board - Msg: 23271041

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Technology Stocks : Azenta

AZTA 29.28

-4.2%

11:56 AM EST

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From: mopgcw	2/10/2007 4:08:49 AM
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gs: What"s changed Brooks reported CY4Q06 sales of $191mn (-9% qoq), 2% above our estimate with EPS of $0.28 (including ESOs but excluding discontinued operations and one-time items), in-line with our and the Street?s $0.28 estimate. Slightly higher sales and slightly lower expenses were offset by lower margins (32.4% vs. our 33.5% estimate). CY4Q06 orders of $159mn (-14% qoq) were below expectations, as $10mn in orders were placed at the end of the quarter and were thus pushed into CY1Q07. CY1Q07 sales/EPS guidance of ~$188mn/$0.28 is above the Street?s $181mn/$0.24 estimate. We are leaving our estimates unchanged, with slightly better sales offset by lower margins: CY2007 remains at $0.60 and CY2008 remains at $0.75. Implications While Brooks has executed well and has likely gained share from captive tool automation suppliers, we believe investors should be underweight the stock, as: (1) we expect subcomponent companies like Brooks to be impacted most during the memory-driven downturn we expect over the coming quarters, as Brooks operates at the bottom of the supply chain and thus has a limited ability to cut opex ahead of a downturn; (2) we believe the shipment push-outs highlighted on recent earnings calls by Lam Research, Novellus Systems and Axcelis Technologies mark the beginning of a weakening in SPE shipments. Given that Brooks? business is tied to SPE tool shipments, we would expect this to have a negative impact on the company?s fundamentals over the coming quarters; and (3) valuation remains rich at 36X our estimate of normalized EPS of $0.40. Valuation We continue to expect meaningful downside in the stock to our 12-month price target of $7, which is based on an 18X multiple applied to estimated normalized EPS of $0.40. Key risks The key upside risk is a shallower than expected downturn.

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