Fairchild Semiconductor (FCS) is a global company focused solely on designing, manufacturing and marketing high performance semiconductors for multiple end users. Their components are used in computer, telecommunications, automotive, consumer and industrial applications. Fairchild supplies logic, analog, mixed signal, non-volatile memory as well as discrete power and signal technologies solutions. That's a fancy way of saying they make microchips for all types of things.
Fairchild is a Zacks Rank #1 (Strong Buy). Analysts have been very bullish on Fairchild as of late. Seven analysts have raised their estimates for the current year and six for next year within the last 30 days. This bullish attitude pushed consensus up from 50 cents to 64 cents for the current year and up from 84 cents to 96 cents for next year.
FCS has a great track record of beating earnings recently. Over the last four quarters FCS has beat every quarter by an average of 4 cents. Last quarter's beat came in at 20 cents, 9 cents better than analyst consensus of 11 cents per share.
Industrial and appliance demand were seasonally strong in Q2 2014, part of the reason for the big beat. The other was automotive sector demand which was up 9% quarter-over-quarter and 14% year-over-year. This helped push gross margin up 3 points to 33.4%.
Along with the big beat last quarter, Fairchild bought back 5 million shares or 4% of shares outstanding. The company plans to buyback another $100 million worth of stock over the next two to four quarters. This share buyback is a hidden dividend for investors.
My favorite part about this stock isn't the earnings surprises or the estimate revisions. It's the chart and right now may be the perfect time to load the boat. After hitting a low of $12.25 in late April the stock surged higher, hitting $16.49 in mid-June before pulling back to $14.78 on July 10th.
The stock caught a bid at that level and reached a new 52-week high of $17.30 on July 24th. Over the last several days FCS has pulled back again. If you take the move from the April low to the 52-week high you can draw in Fibonacci retracement levels where the stock is likely to have support. The 38.2% retracement sits at $15.38, a level where the stock found some buyers over the last couple of days.
In addition to finding some support at the 38.2, the stock is also trading right at its 40-day moving average. That means that the overall longer-term uptrend is still tact even while the stock has made a significant pullback. Stochastics have retreated from their previously overbought condition and are now basically neutral.
Here you have all the right ingredients for profits. You have a stock that analysts are very bullish on right now, a great chart, and a stock buyback coming up soon. That's why I have Fairchild Semi as our Bull of the Day.
FAIRCHILD SEMI (FCS): Free Stock Analysis Report (email registration required)