Novellus' Bottom Line Rebounded In 2006

Novellus Systems NVLS climbed to its highest level in nearly two years last December, then fell into its current base. It now seems to be working on the right side of that consolidation and has moved back above its 10-week moving average.

The San Jose, Calif.-based company makes equipment that patterns layers of film on silicon to create chip circuitry.

After a rough time in terms of earnings in 2005, Novellus' profit growth rebounded in 2006. Its earnings growth accelerated the past two quarters, climbing from 75% to 171% to 215%.

Earnings rose 117% in 2006 after a 20% decline in 2005. Analysts polled by Thomson Financial expect that red-hot rate to slow in 2007. They predict full-year earnings will drop 6%.

Estimates for the current quarter have fallen to 44 cents a share (a 76% rise) from 50 cents in December.

Novellus' sales growth also strengthened in recent quarters, rising from 24% in the second quarter to 32% in the fourth quarter.

After-tax profit margin improved, coming in at 18% in the fourth quarter. That was more than twice as high as a year earlier and the best showing in more than 13 quarters.

At the end of 2006, Novellus' shareholders included 257 mutual funds, 37 banks and 20 insurance companies.

Copyright 2007 Investor's Business Daily, Inc.