Semiconductor test equipment maker LTX-Credence Corporation XCRA, which recently announced a deal to be acquired by Cohu, Inc. COHU, last week reported forecast-beating Q3 results.
The Analyst
Stifel analyst Patrick Ho downgraded LTX-Credence from Buy to Hold, but increased his price target from $13 to $14, with the price target revision done to bring it in line with the take-out price of $13.92 per share.
The Thesis
The LTX-Credence buyout is likely to pass through the U.S. and European regulatory hurdles, and there's unlikely to be a competing bid, Ho said in a note. China MOFCOM approval isn't warranted, the analyst added.
The analyst sees the accretion potential of the deal as more than what's currently estimated, and the complementary fit as suiting both companies very well.
This deal, according to Ho, was long overdue and "one that should benefit Cohu long-term."
He believes many of LTX-Credence's markets are healthy and still growing. Additionally, the company's initiatives such as expansion of its Diamondx platform, contractors and handlers, are driving above-average growth at the company, relative to the industry, according to the analyst.
"We believe these initiatives will complement Cohu's product portfolio and help provide it with above-average growth opportunities as well," Ho said.
Stifel raised its FY18 pro forma EPS estimate, excluding options, from $1.08 to $1.22 and revenue estimate from $469 million to $473 million.
The Price Action
LTX-Credence shares have added about 42 percent year-to-date.
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