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Fairchild just beats Street with Q2 earnings, but posts weak Q3 outlook

Published: 16:12 14 Jul 2011 BST

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Fairchild Semiconductor (NYSE:FCS) announced Thursday a 6.4% hike in its second quarter net income, beating analyst estimates, but said it expects weak sales growth and declining margins in the third quarter on higher costs.

The San Jose, California-based company said it expects third quarter sales to grow in the range of flat to 3% from a year earlier, with gross margins down between 25 and 75 basis points, as the impact of better product mix is offset by higher input costs, it said.

Analysts were estimating a 6.4% rise to $441 million for the third quarter.

For the three months ending June 26, the chipmaker said it earned $44.9 million, or $0.34 per share, compared to $43.8 million, or $0.34 per share, in the year-ago period.

Adjusted for restructuring, certain write-off fees and accelerated depreciation on assets related to its 2009 closure of two fabrication facilities, Fairchild's earnings were $0.41 per share, compared $0.40 per share, in the year-ago period.

Revenues rose to $433.2 million, up 6% from a year earlier. Analysts estimated earnings of 40 cents for the latest quarter, on revenue of $430.3 million.

"We delivered solid sales growth at the high end of our guidance for the second quarter," said president and CEO, Mark Thompson.

"We continue to see good demand for our high voltage solutions from the industrial, automotive and appliance end markets."

Gross margins improved over 200 basis points, to 37.1% in the second quarter. Adjusted gross margins were 37.2%.

"Margins benefited from higher utilization and a customs duty settlement which offset higher input costs, unfavorable currency exchange and [fabrication facility] start-up costs," said CFO Mark Frey.

Fairchild's stock on the New York Stock Exchange rose more than 3% to trade at $16.64 as of 10:58 am EDT on Thursday morning.

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