Good Valuation on National Semi

National Semiconductor Corporation (NSM - Analyst Report) is an original equipment manufacturer of analog and mixed signal integrated circuits. May quarter results beat consensus expectations on the top and bottom-line. Forward guidance is for flat to 3% revenue growth in the first quarter.

New higher-margin products continue to grow in the mix, although lower sales levels could increase idle capacity and squeeze margins. Valuation remains attractive in our opinion and as a result we are reiterating our Buy rating on NSM shares.

Revenue for the fourth quarter was $462.0 million, up 1.9% sequentially and up 1.3% year-over-year. Gross margin of 65.9% in National's fourth quarter was up from the 64.3% gross margin achieved in the third quarter. The sequential improvement was driven by strong manufacturing performance and cost efficiencies as well as improved product mix of higher-value analog products. The firm reported net income of $83 million, or 34 cents per share. Thus, we set a six- month target price of $25.

Read the full analyst report on NSM