Fairchild Semi (NYSE:FCS), ON Semi (Nasdaq:ONNN), Intl Rectifier (NYSE:IRF) Still Attractive to FBR

Saying they remain constructive on the overall discretes sector, with a focus on Fairchild Semi (NYSE:FCS), ON Semi (Nasdaq:ONNN) and Intl Rectifier (NYSE:IRF), FBR doesn't see the inventory narrative as having as big as impact on the three as some believe.

FBR says, "We remain constructive on shares of FCS and the entire discretes sector as industry consolidation and improving mix initiatives should continue to benefit FCS, ON Semi (Nasdaq:ONNN), Intl Rectifier (NYSE:IRF), and others in coming years. While industry ship-ahead risks exist for all, including discrete and power management suppliers, we think valuations are still reasonably attractive versus normalized levels, and that any coming inventory correction will be very short lived as absolute inventory levels remain reasonably lean. For Fairchild specifically, we believe the firm’s mix-up story is happening and that the firm will achieve structurally higher margins in coming quarters and years given key customer exposure and improving product offering initiatives. Additionally, shares remain attractively priced, with prospects for meaningfully improved earnings power in 2012 and 2013. Finally, we think management could institute a share repurchase plan and/or a dividend plan in coming quarters, with the outside possibility that another chip firm or a private equity firm could make a bid for FCS given its very high free cash flow yield."

FBR Capital reiterates an "Outperform" rating on Fairchild Semi (FCS), which was trading at $16.05, down $0.68, or 4.06 percent, as of 1:29 PM EST. ON Semi was trading at $11.02, losing $0.20, or 1.78 percent. Intl Rectifier was at $30.04, down $0.75, or 2.44 percent.