Looking for a stock that’s trading close to its 52-week low with opportunities for improvement? If yes, then take a look at Fairchild Semiconductor Intl Inc (NYSE:FCS). The company missed earnings estimates in its recently reported first quarter, but management’s commentary over the conference call suggests that things could improve as the year progresses.
Better days ahead
Fairchild’s business is steadily gathering momentum and this reflected on its top line performance in the previous quarter. It posted revenue of $343.2 million, ahead of the $340.9 million consensus estimate. In addition, the company guided for revenue in the range of $355 million to $375 million, which is easily ahead of the $359 million consensus estimate at the mid-point.
Such optimism is driven by strength in almost all of Fairchild Semiconductor Intl Inc (NYSE:FCS)’s businesses, be it industrial, automotive, or mobile. The company is witnessing strong bookings across all these segments, which account for three-fourths of its revenue. Fairchild’s industrial and appliance business was pretty weak last year. But sales of industrial and appliance products, along with automotive, grew 26% on a sequential basis.
A slew of catalysts
The industrial business is finally picking up speed after enduring inventory corrections last year, and Fairchild’s design wins in this sector should help revenue climb further. This segment accounts for 36% of Fairchild’s top line, and the company remains positive about its prospects going forward. Sales of Fairchild’s power modules grew 8% in the previous quarter on a sequential basis and this growth should continue as the company has a strong backlog in place.
As far as the automotive business is concerned, it’s not surprising that Fairchild Semiconductor Intl Inc (NYSE:FCS) is expecting better times ahead. The automotive market has been on a roll this year, as sales of new vehicles clocked 1.45 million in March, the highest in the last six years. The underlying strength of the automotive market helped Fairchild grow sales in this segment 26%. Increased adoption of Fairchild’s cutting-edge powertrain solutions has led to more design wins for the company, and we should see their positive effects in the coming quarters.
Coming to the mobile segment, which accounts for 27% of total revenue, things seems even better. The company was able to grow sales in this segment in the first quarter despite seasonality. It’s well-known that Fairchild is dependent on Apple Inc. (NASDAQ:AAPL) and Samsung for its mobile revenue, and this is certainly a good advantage to have.
Management remarked that it has landed design wins in new smartphones and tablets, including Chinese OEMs, and this helped it beat seasonality despite the weakness of its “leading customer.” Such diversification in the mobile business protects Fairchild Semiconductor Intl Inc (NYSE:FCS) from the changing fortunes of OEMs, apart from helping it find spots inside the best that the mobile device market has to offer.
For instance, the company had supplied Apple with five chips for the newest iPads, including the mini. Now, as Apple prepares to launch the next iterations of these devices, Fairchild should continue to see better performance from its mobile segment.