Fairchild Semiconductor (FCS: 10.50 +0.23 +2.24%) is a Zacks #1 Rank (’strong buy’) company that’s less than a month removed from a very solid fourth-quarter report, which included another positive earnings surprise along with year-over-year improvements in EPS and revenue.
Earnings estimates moved sharply higher after the report, helped by an encouraging sales outlook for the current quarter. Furthermore, FCS has some nice value fundamentals, including a price-to-book of 1.24 and a forward P/E of 9.99.
Fairchild Semiconductor is a global company focused on designing, manufacturing and marketing high performance semiconductors for multiple end market uses. Its multi-market components are used in computer, telecommunications, automotive, consumer and industrial applications.
Earnings Estimates for Fairchild Semiconductor
The fourth-quarter report inspired a lot of upward revisions from analysts. The Zacks Consensus Estimate for this year has jumped more than 58% from 30 days ago to $1.03. It’s easy to understand such a sharp jump when you take into account that all 13 estimates for the period were revised higher; marking unanimous agreement among analysts.
As for next year, the Zacks Consensus Estimate of $1.10 per share gained 17% in 30 days. Analyst agreement for 2011 was nowhere near as dramatic as that of 2010, but was still very respectable as 5 estimates were revised higher out of 11 total. That leaves a good degree of upside potential as we progress through this year.
At the moment, analysts foresee year-over-year profit growth of nearly 7%.
A Strong Fourth Quarter
According to the company, Fairchild Semiconductor delivered results in the fourth quarter that exceeded initial expectations in virtually all aspects of the business.
The company announced adjusted earnings per share of 23 cents, which easily surpassed the year-ago performance. The result was also more than 35% atop the Zacks Consensus Estimate.
FCS is no stranger to exceeding expectations; it has now done so for 6 consecutive quarters. It has constructed an average surprise of more than 45% over the past 4 quarters (due mainly to a pair of 70%+ surprises in the second and third quarters).
Sales in the quarter reached $354.5 million, up 11% from last year’s $320.9 million.
“We pushed adjusted gross margin over 30% and have strong momentum heading into the first quarter to exceed our past gross margin peak,” said Fairchild Semiconductor President/CEO Mark Thompson. “Strong execution on sales growth, margins and cost reductions also enabled us to generate $43 million of free cash flow in Q4 and a record $129 million for all of 2009.”
FCS expects sales at about $370 million in the current quarter, given solid order rates and its starting backlog position.
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