National Semiconductor (NSM) is an OEM of analog and mixed signal integrated circuits. February quarter results were short of consensus expectations, as the company saw both order rates and backlog drop off. Forward guidance is for flat to down revenue in Q4. New higher-margin products continue to grow in the mix, although lower sales levels could increase idle capacity and squeeze margins.
The share price continues to decline, making the stock cheaper. Consequently, we are reiterating our Buy rating on NSM shares. The higher utilization rate, production effciencies, higher ASPs and a more favorable product mix almost offfset the impact of much lower revenues in the last quarter.
The fully diluted pro forma earnings per share was $0.40 compared to $0.45 in the previous quarter and $0.31 in the February quarter of last year. The pro forma calculations exclude some restructuring and deferred stock compensation expenses, as well as some discrete tax benefits in the last quarter. On a fully diluted GAAP basis, the company recorded a net profit of $71.2 million ($0.28 per share) compared to $90.6 million ($0.33 per share) in the previous quarter and a net profit of $73.7 million ($0.31 per share) in the prior-year quarter.
Read the analyst note on NSM.
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