Novellus Systems (NVLS): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)
Analyst: Richard Tortoriello
Chip-equipment maker Novellus posted third-quarter 2004 earnings per share, before 27 cents in charges, vs. 11 cents -- 4 cents above S&P's estimate. Sales dipped 4.1%. However, bookings rose 9%, and Novellus sees a 5% to 10% rise in the fourth quarter. Japan, Korea, and China are current drivers. Leading-edge chipmaking capacity is tight, and earnings are rising at chipmakers. S&P projects a significant rise in orders for copper and 0.13 micron equipment in 2004, and expect Novellus to benefit from this trend.
S&P predicts earnings per share of 22 cents for 2003, 82 cents for 2004, and cycle-peak earnings per share of $2.00. S&P has raised the target price to $46, from $42, which is 3.4 times the book value, vs. the current peer average of 4.5.
Intel (INTC): Reiterates 5 STARS (strong buy)
Analyst: Thomas Smith
The world's largest chipmaker reported third-quarter earnings per share of 25 cents, vs. 10 cents, above S&P's 22 cents estimate and the Street's 23 cents estimate. Revenues orse 20% year-over-year and 15% quarter-over-quarter on record unit shipments of processors and chipsets. Flash memory remains a lagging segment. Following a positive surprise, S&P is raising the earnings per share estimates to 81 cents, from 75 cents, for 2003, and to $1.10, from $1.00, for 2004. S&P is also raising the 12-month target price to $42 a share from $38, reflecting a price-earnings of 30, based on S&P's $1.40 2005 earnings per share estimate.
Footstar (FTS): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)
Analyst: Yogeesh Wagle
S&P thinks Footstar is making strides toward a return to profit. Third-quarter same-store sales slipped 1.5%, in line with S&P's expectations, but with greater sales of exclusive Nike products and more licensed apparel in the sales mix. Footstar's own Thom McAn line sold well across retailers. S&P thinks the company will benefit from steps to exit, sublet, or convert (into Footaction or Shoe Zone) its Just For Feet under-performers. Shares are trading at 12 times S&P's 2004 64 cents earnings per share estimate, and shares appear undervalued vs. peers and the S&P 500. S&P's 12-month target price is $9, which is 14 times S&P's 2004 estimate, on improving prospects.