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Adams Harkness upgrades integrated circuit manufacturer Standard Microsystems (SMSC
) to buy.
Analyst Jonathan Dorsheimer says the company is benefiting from improving fundamentals in each business unit. However, the stock is trading at discount to its peer group and thinks it is undervalued.
He says his view is supported by the company's preannouncement of 13 cents to 16 cents first-quarter earnings per share on $68 million to $69 million in revenue. He cites strength in the Computing Group and the Consumer Electronics & Infotainment Groups.
Dorsheimer says while the Industrial Group may exhibit lower growth characteristics vs. the other two divisions, there's a prospect of high margins and less volatile end markets. He raises his 46 cents fiscal 2006 (ending Februrary) earnings per share estimate to 70 cents and 71 cents fiscal 2007 to 95 cents.