JP Morgan cut Fairchild Semiconductor International (FCS) to neutral from overweight.
Analyst Scott Williamson said that leading indicators such as utilization rates, gross margin, pricing, and earnings per share estimates should peak in the fourth quarter. He noted that with 80% of sales in commodity products, he sees higher risk in a slow environment. He also sees risk to gross margin expansion plans in the first half of 2006 due to high inventories and seasonal demand patterns. He cut his 70 cents 2006 earnings per share estimate to 64 cents, and his $1.56 billion revenue estimate to $1.51 billion. He says that at 24 times his calendar year 2006 earnings per share estimate, Fairchild Semiconductor International is trading at a premium to his analog/mixed-signal universe that currently trades at 22 times, at a premium to higher quality Maxim Integrated Products (MXIM) and Analog Devices (ADI).