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MKS Instruments (MKSI) Down to Hold on Macro Headwinds

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On Sep 27, 2016, Zacks Investment Research downgraded MKS Instruments, Inc. (MKSI - Free Report) to a Zacks Rank #3 (Hold) from a Zacks Rank #1 (Strong Buy). Going by the Zacks model, companies carrying a Zacks Rank #3 have chances of performing in line with the broader market over the next quarters.

Why the Downgrade?

MKS Instruments has been facing a number of headwinds in the international business forum. Appreciation of U.S. currency is weighing over the company’s international revenues and margins. This is because a stronger U.S. dollar raises the competitive power of the smaller rivals operating in low-cost nations.

Moreover, lackluster performance of booming economies such as Brazil, China and Russia has also been hurting the company’s foreign sales. We even believe that rise in political uncertainty due to the Brexit referendum has increased revenue and margin loss risks for MKS Instruments.  

Also, severe threats of business rivalry within the global technology industry might lower the market share of the company in the near term. MKS Instruments incurs heavy innovation investments for boosting its competency within the industry. However, such expenses might turn unproductive, if the newly invented technology becomes obsolete.

We believe that the company can partially offset the impact of the above mentioned headwinds by generating higher sales from the semiconductor and other advanced markets. Also, the latest Newport Corporation buyout in Apr 2016 is likely to fortify the company’s presence in the Life Sciences, Semiconductor, Research and Industrial markets. This considerably expands its addressable market.

The deal is also expected to provide significant cost synergies to the company in the upcoming 18-36 months. MKS Instruments’ Combined Targeted Operating Model is also projected to drive the company’s near-term growth..

Over the last 60 days, the Zacks Consensus Estimate for this Zacks Rank #3 stock remained unchanged for 2016 and 2017.

MKS INSTRUMENTS Price and Consensus

 

MKS INSTRUMENTS Price and Consensus | MKS INSTRUMENTS Quote

Stocks to Consider

Some better-ranked stocks within the industry that warrant a look are listed below:

Advanced Energy Industries, Inc. (AEIS - Free Report) currently sports a Zacks Rank #1 (Strong Buy). The company has a positive average earnings surprise of 12.28% over the last four trailing quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intevac Inc. (IVAC - Free Report) and Nikon Corp. (NINOY - Free Report) carry a Zacks Rank #2 (Buy).

While Intevac generated a positive average earnings surprise of 30% over the last four trailing quarters, Nikon reported a positive average earnings surprise of 48.61% in the trailing four quarters.

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