This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Novellus Undone by Merrill Downgrade

Updated from 9:33 a.m. EDT

Novellus (NVLS) said Monday morning that second-quarter earnings rose fivefold from a year ago, thanks to margin improvement leveraged to robust semiconductor-equipment demand that Wall Street worries is peaking. Management also forecast a robust financial outlook for the quarter under way, and sought to allay investor fears about what many fear is a looming slowdown in the chip industry.

But the stock was recently down $1.76 or 5.7% to $29.29, as the semiconductor equipment space was the subject of negative research Monday by Merrill Lynch. The brokerage firm downgraded Intel (INTC - Get Report) to neutral from buy and the semiconductor equipment space to neutral from overweight. Other stocks falling included Applied Materials (AMAT - Get Report), ASML (ASML - Get Report) and KLA-Tencor (KLAC - Get Report). The Philadelphia Stock Exchange Semiconductor Index was recently down 3.3%.

Monday morning the San Jose, Calif., company said it earned $37.8 million, or 25 cents a share, in the three months to June 26, up from $7.4 million, or 5 cents a share, last year. The latest quarter included an acquisition-related charge, excluding which the company earned $43.9 million, or 29 cents a share. Second-quarter sales were $338.2 million, up 41.5% from last year.

Excluding the charge, analysts surveyed by Thomson First Call had been forecasting earnings of 26 cents a share on sales of $331.3 million in the latest quarter.

Novellus forecast revenue of $408 million to $418 million for the quarter now under way, which includes $20 million to $25 million of sales from its recent acquisition of Peter Wolters, a private German manufacturer of machine tools. Earnings should range from 37 to 39 cents a share, the company said. The consensus estimate was for revenue of $361 million with 31 cents in EPS.

At ThinkEquity Partners, analyst Suresh Balaraman said the likely cause of Novellus' selloff was growing jitters over Tuesday's quarterly report from lead chipmaker Intel, exacerbated by Merrill Lynch's downgrade. "I think Intel is carrying the day and putting a pall on the whole group," he said. "But results from Novellus were very good. The margins were nice, better than what most have expected." (Balaraman has an accumulate rating on the stock; his firm hasn't done banking for it.)

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AMAT $22.83 0.00%
ASML $101.86 0.00%
KLAC $59.00 0.00%
INTC $32.00 0.00%
AAPL $123.25 0.00%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs