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Market Overview

Novellus Earnings Preview: An Early Peek at Tech Earnings


Novellus Systems (NASDAQ: NVLS) will be reporting its second-quarter 2011 results Monday, July 11, after the closing bell. While Novellus is not usually a sector mover, investors will be looking for early signs of what to expect from tech sector earnings.

Analysts are looking for Novellus to report per-share earnings of $0.76, which is up from $0.67 per share in the same period of last year. The consensus earnings estimate is unchanged in the past 60 days. Analysts also expect to see revenues of $352.3 million, an increase of 9.6% from a year ago.

Note that Novellus earnings have grown in each of the past five quarters, topping consensus estimates each time. And analysts so far are looking for full-year EPS to be 15.4% higher than a year ago and revenues to come in 11.1% higher.

The Company

Novellus Systems develops, manufactures, sells and supports equipment used in the fabrication of integrated circuits. The San Jose, California-based company operates in two segments: the Semiconductor Group and the Industrial Applications Group. It markets its products primarily in Europe, the United States and Asia.

During the three months that ended in June, Novellus offered cautious guidance for the second quarter and announced a senior note offering. Novellus also was the subject of takeover rumors.


The long-term earnings per share growth forecast is 13.0% and the return on equity is 20.9%. Novellus has a P/E ratio of 10.2 and a PEG ratio is 0.8. Analysts have a mean price target on the stock of $37.71 per share; shares ended the week at $35.97.

The share price is more than 16% higher than six months ago. During that time, the stock has outperformed competitor Applied Materials (NASDAQ: AMAT) and the semiconductor equipment industry average, as well as the broader markets.

Action Items:

Bullish: Traders optimistic about the semiconductors industry also might want to consider the following trades:

  • PowerShares Dynamic Semiconductors Portfolio (NYSE: PSI)
  • SPDR S&P Semiconductor ETF (NYSE: XSD)
  • ProShares Ultra Semiconductors (NYSE: USD)

Bearish: Traders pessimistic about the semiconductors industry may want to consider these alternate positions:

  • ProShares UltraShort Semiconductors (NYSE: SSG)
  • Direxion Daily Semiconductor Bear 3x Shares (NYSE: SOXS)

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.


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