Novellus Systems hit with downgrade

Advest Inc. cut semiconductor-equipment maker Novellus Systems Inc. (Nasdaq: NVLS) from a "buy" recommendation to a "market perform" rating late Monday primarily on valuation.

Its shares closed up 7/8 to 54 3/16 ahead of the downgrade.

It's not that Novellus Systems or any other chip-equipment maker is hurting. Most chip stocks are hovering at or near 52-weeks highs and PC and telecommunications companies are buying microprocessors at a record clip.

But Novellus Systems shares have been on a phenomenal run in the past year, surging from a 52-week low of 14 15/16 in April to a post-split high of 57 7/16 in January. The stock split 2-for-1 in January.

In its fourth quarter, it topped analysts' estimates by a penny a share, earning $32.9 million, or 27 cents a share, on sales of $191 million.

In the year-ago quarter, it pocketed $8.1 million, or 8 cents a share, on sales of $106 million.

For the year, Novellus said net income rose 45 percent to $76.6 million, or 64 a cents a share, from $52.8 million, or 50 cents a share, a year ago. Sales for the year rose 14.3 percent to a record $592.7 million from $518.8 million.

The company's backlog at Dec. 31 more than tripled to $329.5 million from the $108.5 million it reported at the end of 1998.

First Call consensus expects it to earn 38 cents a share in the first quarter.

Twenty of the 21 analysts following the stock maintain either a "buy" or "strong buy" recommendation.

Among other chip-equipment stocks, Applied Materials (AMAT) shot up 8 1/4 to 153 5/8; KLA-Tencor Corp. (KLAC) edged up 2 1/4 to 68 3/16 and Lam Research Corp. (LRCX) finished up 1 15/16 to 139.