Verigy Takes Off

Verigy (VRGY Quote) shares shot up more than 26% Wednesday on strong earnings and an analyst upgrade.

The Singapore-based company, which makes semiconductor test systems, announced after the bell Tuesday that it made $35 million, or 58 cents a share, stripping out an unfavorable change in the German statutory tax rate and other one-time items, in the fiscal fourth quarter.

A year earlier, adjusted earnings came to 52 cents a share. Analysts were looking for EPS of just 50 cents this year, according to Thomson Financial.

The company also projected first-quarter revenue of $195 million to $205 million, which would sit atop the high end of Wall Street's consensus. GAAP earnings should range between 49 cents and 54 cents a share, including stock-option expenses. Analysts, who usually exclude items from their estimates, are looking for 38 cents a share.

Stifel Nicolaus analyst Patrick Ho upped the stock to buy from hold on the heels of all this, commenting in a telephone interview that he thinks Verigy will "absolutely" outperform its rivals, regardless of any upswings or downturns in the semiconductor market.

Ho added that, while the company isn't immune to a contraction, he believes "they'll weather it a lot better than their peers."

He pointed to the company's practice of using a third-party manufacturer to make its test systems, in particular, since this helps steel it against volatility by substantially cutting down on fixed costs.