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Applied Materials (AMAT) Beats on Q3 Earnings and Revenues
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Applied Materials Inc. (AMAT - Free Report) reported robust third-quarter fiscal 2017 results, with both top and bottom line surpassing our estimates.
The company’s pro forma earnings per share (EPS) of 86 cents beat the Zacks Consensus Estimate by 3 cents and came in toward the higher end of the guided range.
This quarter Applied Materials’ revenues and earnings were at an all-time high. Inflection-focused innovation strategy was the primary growth driver.
Applied Materials continues to witness technological advancements in semiconductor and display areas. The ramp up of 3D NAND has led to significant market share gains.
The company has well-differentiated products and high market share, and is efficiently delivering key enabling technology to logic and foundry customers. The company continues to expect strong products and services demand in the near future driven by continuous adoption of new technologies by semiconductor and display customers. It also sees significant opportunities in the patterning market.
Applied Materials remains strongly positioned in China where it continues to witness robust growth in semiconductor and display. Growing investments from Chinese domestic manufacturers have been the main catalysts.
Notably, the company has gained considerable success in expanding beyond semiconductors, particularly in display. New display technologies like OLED are opening new market opportunities for Applied Materials.
Applied Materials sees significant opportunities from emerging trends on the semiconductor and display fronts such as artificial intelligence, big data, cloud infrastructure, Internet of Things (IoT), virtual reality and smart vehicles.
We believe that Applied Materials is in a great position to grow sustainably and profitably based on its strong pipeline of enabling technologies, supported by expanding opportunities on the semiconductor, service and display fronts.
Following the strong fiscal first-quarter results, the company’s share price increased 2.77%. However, the company's shares have increased 37.9% year to date, slightly underperforming the industry’s gain of 38.1%.
Let’s delve deeper into the numbers.
Revenues
Applied Materials reported revenues of $3.74 billion, increasing 5.6% sequentially and a massive 32.7% year over year. Revenues beat the Zacks Consensus Estimate by a slight margin and were at the high end of the guided range of $3.60-$3.75. The revenue growth was backed by higher demand in most of the regions.
Revenues by Segment
The Silicon Systems Group (SSG) contributed 68% of revenues, reflecting an increase of 5.3% sequentially and 41.8% year over year.
The second-largest contributor was Applied Global Services (AGS) with 21% revenue share. Segment revenues increased 8.6% sequentially and 19.6% year over year.
The Display segment was up 4.9% from the last quarter and 31.0% from the year-ago level, contributing 11% to revenues.
Revenues by Geography
Korea contributed 34% to revenues, China 21%, Taiwan 16%, Japan 12% and U.S. 10%. Europe contributed 5%, while Southeast Asia contributed 2%.
On a sequential basis, Taiwan, the U.S. and Southeast Asia were the weakest, declining 29.7%, 6.3% and 4.6%, respectively, on a sequential basis. All the other regions improved sequentially.
On a year-over-year basis also, Taiwan and Southeast Asia decreased 18.1% and 65.7%, respectively. All the other regions increased.
Margins
Applied Materials generated pro forma gross margin of 46.6%, up 290 basis points (bps) from the year-ago quarter.
Applied Materials’ adjusted operating expenses of $677 million increased 13.6% from the year-ago quarter. Operating margin of 28.7% increased 590 bps year over year.
Net Profit
On a pro-forma basis, Applied Materials reported net income of $931.4 million, or 86 cents per share compared with $861 million or 79 cents in the prior quarter. In the year-ago quarter, Applied Materials had reported net income of $546.5 million or 50 cents per share.
Our pro-forma calculation excludes restructuring, acquisition-related, impairment and other charges as well as tax adjustments in the reported quarter.
On a fully diluted GAAP basis, the company registered net profit of $925 million (85 cents per share) compared with $824 million (76 cents per share) in the previous quarter and $505 million (46 cents per share) a year ago.
Balance Sheet
At the end of fiscal third quarter, inventories increased to $2.88 billion from $2.61 billion in the previous quarter. Accounts receivables increased to $2.26 billion from $2.38 billion in the prior quarter.
Cash and short-term investments balance was $5.28 billion compared with $4.94 billion in the prior quarter. Goodwill was 17.6% of the total assets.
The company generated $1.37 billion in cash from operations. The company spent $80 million on capex and returned $482 million through stock repurchases and cash dividends to shareholders.
Guidance
Applied Materials also provided guidance for the fourth quarter of fiscal 2017. Revenues are expected between $3.85 and $4.0 billion, better than the Zacks Consensus Estimate of $3.66 billion. Non-GAAP EPS is expected to come in the range of 86-94 cents, a lot higher than the consensus mark of 81 cents.
Applied Materials, Inc. Price, Consensus and EPS Surprise
Lam Research delivered a positive earnings surprise of 4.44%, on average, in the trailing four quarters.
ASML Holding N.V. delivered a positive earnings surprise of 9.42%, on average, in the trailing four quarters.
Fortive Corporation delivered a positive earnings surprise of 5.80%, on average, in the trailing four quarters.
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Applied Materials (AMAT) Beats on Q3 Earnings and Revenues
Applied Materials Inc. (AMAT - Free Report) reported robust third-quarter fiscal 2017 results, with both top and bottom line surpassing our estimates.
The company’s pro forma earnings per share (EPS) of 86 cents beat the Zacks Consensus Estimate by 3 cents and came in toward the higher end of the guided range.
This quarter Applied Materials’ revenues and earnings were at an all-time high. Inflection-focused innovation strategy was the primary growth driver.
Applied Materials continues to witness technological advancements in semiconductor and display areas. The ramp up of 3D NAND has led to significant market share gains.
The company has well-differentiated products and high market share, and is efficiently delivering key enabling technology to logic and foundry customers. The company continues to expect strong products and services demand in the near future driven by continuous adoption of new technologies by semiconductor and display customers. It also sees significant opportunities in the patterning market.
Applied Materials remains strongly positioned in China where it continues to witness robust growth in semiconductor and display. Growing investments from Chinese domestic manufacturers have been the main catalysts.
Notably, the company has gained considerable success in expanding beyond semiconductors, particularly in display. New display technologies like OLED are opening new market opportunities for Applied Materials.
Applied Materials sees significant opportunities from emerging trends on the semiconductor and display fronts such as artificial intelligence, big data, cloud infrastructure, Internet of Things (IoT), virtual reality and smart vehicles.
We believe that Applied Materials is in a great position to grow sustainably and profitably based on its strong pipeline of enabling technologies, supported by expanding opportunities on the semiconductor, service and display fronts.
Following the strong fiscal first-quarter results, the company’s share price increased 2.77%. However, the company's shares have increased 37.9% year to date, slightly underperforming the industry’s gain of 38.1%.
Let’s delve deeper into the numbers.
Revenues
Applied Materials reported revenues of $3.74 billion, increasing 5.6% sequentially and a massive 32.7% year over year. Revenues beat the Zacks Consensus Estimate by a slight margin and were at the high end of the guided range of $3.60-$3.75. The revenue growth was backed by higher demand in most of the regions.
Revenues by Segment
The Silicon Systems Group (SSG) contributed 68% of revenues, reflecting an increase of 5.3% sequentially and 41.8% year over year.
The second-largest contributor was Applied Global Services (AGS) with 21% revenue share. Segment revenues increased 8.6% sequentially and 19.6% year over year.
The Display segment was up 4.9% from the last quarter and 31.0% from the year-ago level, contributing 11% to revenues.
Revenues by Geography
Korea contributed 34% to revenues, China 21%, Taiwan 16%, Japan 12% and U.S. 10%. Europe contributed 5%, while Southeast Asia contributed 2%.
On a sequential basis, Taiwan, the U.S. and Southeast Asia were the weakest, declining 29.7%, 6.3% and 4.6%, respectively, on a sequential basis. All the other regions improved sequentially.
On a year-over-year basis also, Taiwan and Southeast Asia decreased 18.1% and 65.7%, respectively. All the other regions increased.
Margins
Applied Materials generated pro forma gross margin of 46.6%, up 290 basis points (bps) from the year-ago quarter.
Applied Materials’ adjusted operating expenses of $677 million increased 13.6% from the year-ago quarter. Operating margin of 28.7% increased 590 bps year over year.
Net Profit
On a pro-forma basis, Applied Materials reported net income of $931.4 million, or 86 cents per share compared with $861 million or 79 cents in the prior quarter. In the year-ago quarter, Applied Materials had reported net income of $546.5 million or 50 cents per share.
Our pro-forma calculation excludes restructuring, acquisition-related, impairment and other charges as well as tax adjustments in the reported quarter.
On a fully diluted GAAP basis, the company registered net profit of $925 million (85 cents per share) compared with $824 million (76 cents per share) in the previous quarter and $505 million (46 cents per share) a year ago.
Balance Sheet
At the end of fiscal third quarter, inventories increased to $2.88 billion from $2.61 billion in the previous quarter. Accounts receivables increased to $2.26 billion from $2.38 billion in the prior quarter.
Cash and short-term investments balance was $5.28 billion compared with $4.94 billion in the prior quarter. Goodwill was 17.6% of the total assets.
The company generated $1.37 billion in cash from operations. The company spent $80 million on capex and returned $482 million through stock repurchases and cash dividends to shareholders.
Guidance
Applied Materials also provided guidance for the fourth quarter of fiscal 2017. Revenues are expected between $3.85 and $4.0 billion, better than the Zacks Consensus Estimate of $3.66 billion. Non-GAAP EPS is expected to come in the range of 86-94 cents, a lot higher than the consensus mark of 81 cents.
Applied Materials, Inc. Price, Consensus and EPS Surprise
Applied Materials, Inc. Price, Consensus and EPS Surprise | Applied Materials, Inc. Quote
Zacks Rank and Stocks to Consider
Currently, Applied Materials Group has a Zacks Rank #2 (Buy). A few better-ranked stocks in the same space are Lam Research Corporation (LRCX - Free Report) , carrying a Zacks Rank #1 (Strong Buy), and ASML Holding N.V. (ASML - Free Report) and Fortive Corporation (FTV - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Lam Research delivered a positive earnings surprise of 4.44%, on average, in the trailing four quarters.
ASML Holding N.V. delivered a positive earnings surprise of 9.42%, on average, in the trailing four quarters.
Fortive Corporation delivered a positive earnings surprise of 5.80%, on average, in the trailing four quarters.
4 Surprising Tech Stocks to Keep an Eye on
Tech stocks have been a major force behind the market’s record highs, but picking the best ones to buy can be tough. There’s a simple way to invest in the success of the entire sector. Zacks has just released a Special Report revealing one thing tech companies literally cannot function without. More importantly, it reveals 4 top stocks set to skyrocket on increasing demand for these devices. I encourage you to get the report now – before the next wave of innovations really takes off.
See Stocks Now>>