National Semiconductor Earnings Preview: Fiscal First Quarter 2010

National Semiconductor [[NSM]] is scheduled to report their fiscal first quarter 2010 results after the market closes on Thursday, September 10th. Based on our analysis, we at are expecting NSM to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $301.0 million and EPS of $.09. This would represent a 35% decrease in revenues from last year’s $465.6 million in the same period, but a 7% increase over the previous quarter. The current analyst consensus estimates calls for revenues of $1.52 billion and EPS of $.26. On June 11, the company provided fiscal first quarter guidance of 2 – 9% sequential sales growth or $285 – $305 million.


Despite posting a loss last quarter, National Semiconductor managed to deliver results that exceeded Wall Street’s expectations. Management noted that business conditions were improving and provided optimistic sales guidance. The company saw bookings for new orders increase 30% sequentially last quarter as customers look to replenish dwindling inventories. Even with a marginally higher tax rate this quarter, we still expect NSM to deliver results that exceed the Street’s consensus.


With improving economic conditions, we believe National Semi will provide second quarter guidance of 2 – 8% sequential sales growth. At the midpoint, this would be above the current Street consensus which would be incrementally positive for the stock.


Stock Performance

Since the beginning of 2009, National Semiconductor’s shares have gained over 51% and have outperformed the 25% gain in the Nasdaq. However last year, NSM’s stock fell over 55% and underperformed the 41% drop in Nasdaq.



Shares are now trading at 22x consensus 2011 EPS estimates. This is a premium to the relative valuations of their peer group. We would expect strong quarterly results and upbeat guidance will lift NSM’s stock price in the near term.


Recommendation: Buy with a $17 price target.


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