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Semiconductor equipment makers have jumped up IBD’s industry rankings in recent weeks amid acquisitions. The 36-stock group has risen 43 places in the past six weeks to No. 10 out of 197 as of Monday. A quarter of the group’s members have Composite Ratings above 90, indicating that they’re outperforming 90% of all stocks in five IBD metrics, such as sales and earnings growth. Milpitas, Calif.-based KLA-Tencor ( KLAC ) and Brookfield, Conn.-based Photronics ( PLAB ) lead the industry with Composite ratings of 97, just below the best-possible 99. Photronics, which makes photomasks used in semiconductor, microelectronics and flat-panel display manufacturing, has seen a revival in profit growth after a string of declines. Earnings in the latest quarter jumped 257% to 25 cents a share, the third straight quarter of triple-digit increases. Revenue rose 14% to $142 million. The stock is getting support at its 50-day moving average as it works on a flat base with a buy point at 13.05. Its relative strength line is hitting new highs, which is bullish, and its Accumulation/Distribution Rating of A- indicates strong demand for the shares. However, it has a daily average turnover of less than $20 million, making it somewhat thinly traded. The company has benefited from new products and the proliferation of mobile devices. However, Photronics is expected to lose some business after its joint venture with Micron Technologies ( MU ) expires in May, according to a recent New America column . Nevertheless, SunTrust Robinson Humphrey, in a Dec. 21 research note, said it expects Photronics to have more than $200 million in excess cash when the Micron tie-up ends, giving the company “unprecedented flexibility to pursue strategic alternatives,” such as a small acquisition or expansion into China. Meanwhile, KLA-Tencor has reported three straight quarters of accelerating profit growth after a series of declines. On Thursday, the company said profit for the fiscal second quarter that ended in December jumped 53% to $1.04 a share, easily beating Wall Street forecasts. Revenue rose 5% to $710 million. In October, Lam Research ( LRCX ), another industry leader, said it would buy KLA-Tencor for more than $10 billion. The combined company will have a 42% share of the wafer fabrication equipment market. The acquisition is expected to close by midyear. The high cost of developing new products is driving acquisitions in the semiconductor manufacturing industry. Also, research firm Gartner said Jan. 11 that worldwide semiconductor capital spending will likely drop 4.7% this year due to sluggish demand for electronics products amid weak global economic growth, putting added pressure on the industry. Mattson Technology ( MTSN ), another leader in the semiconductor equipment group, said in December that it had agreed to sell itself to Beijing E-Town Dragon Semiconductor Industry Investment Center amid China’s efforts to develop a semiconductor industry. The deal is expected to close in the first quarter of this year. Scalper1 News
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