SAN FRANCISCO—Wall Street analysts were lukewarm on Linear Technology Corp.'s stock following a quarterly report Tuesday (April 17) that came in in-line to slightly better than expectations. But one analyst said the company's better than expected guidance for the current quarter indicates that the semiconductor industry has begun to recover from its latest downturn.
Craig Berger, an analyst with FBR Capital Markets, said his firm was "apathetic" about Linear Tech's stock. In a report circulated Wednesday, Berger listed several semiconductor stocks that FBR finds more appealing, including Broadcom Corp., Qualcomm Inc., Atmel Corp., Maxim Integrated Products Inc., International Rectifier Corp. and Fairchild Semiconductor International Inc. Berger maintained FBR's "underperform" rating on Linear Tech's stock, increased his estimates for firm slightly and increased its price target to $31 from $30.
Berger said part of FBR's apathy toward the stock stems from the fact that Linear Tech is "well run with few operational improvement initiatives, that margins are near a peak, and that Linear walks away from too much business."
CJ Muse, an analyst with Barclays Capital Inc., said in a report circulated Tuesday that Linear Tech's "lower quality" earnings for the quarter, including higher operating expenditures and the benefit to the financials of a lower tax rate could prove to be a headwind for Linear Tech.
Linear Tech (Milpitas, Calif.) reported sales of $312.4 million for the quarter ended April 1, up 6 percent from the previous quarter and down 12 percent from the year-ago quarter. The company reported a net income for the quarter of $98.5 million, up 12 percent from the previous quarter and down 30 percent from the year-ago quarter.
"This was a transitional quarter for us as we returned to growth in revenue and profit," said Lothar Maier, Linear Tech's CEO, in a statement. Maier said Linear Tech's bookings continued to improve through the quarter and that the company had a positive book-to-bill ratio for the quarter
Maier said Linear Tech expects sales in the current quarter to grow 4 to 8 percent sequentially to between $324.9 million and $337.4 million based on the improvement of bookings and "broad distribution of this strength across all our major end-markets."
Muse said Linear Tech's guidance for the current quarter "clearly offers confirmation that the [semiconductor] industry has reached a trough, with a gradual recovery emerging from here." The focus of the industry now "clearly turns to timing of inventory replenishment," Muse wrote.
"From an end market perspective, the biggest surprise was commentary from management citing broad-based order strength across all end markets," Muse said in his report. "The market was clearly anticipating well-known strength in [automotive] and industrial, but this comment could suggest comm infrastructure is starting to recover."
Barclays maintains a price target on Linear Tech shares of $35. Linear Tech's stock traded at $32.87 in afternoon trading Wednesday, down slightly from Tuesday's closing price.
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