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Applied Materials (AMAT) Beats on Q4 Earnings and Revenues
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Applied Materials Inc. (AMAT - Free Report) reported robust fiscal fourth-quarter 2018 results, with both the top and bottom lines surpassing the Zacks Consensus Estimate.
The company’s pro-forma earnings per share (EPS) of 97 cents beat the consensus mark by a penny and came in within the guided range of 92 cents to $1.00 per share. Earnings were up 4.3% year over year.
Revenues of $4.01 billion surpassed the Zacks Consensus Estimate of $4 billion and were within the guided range of $3.85-$4.15 billion, decreasing 10.2% sequentially but increasing 1.1% year over year.
Despite strong fiscal fourth-quarter results, its share price declined 8% due to weaker-than-expected revenue guidance for the fiscal first quarter. Also, shares have lost 37.4% on a year-to-date basis compared with the industry’s decline of 14.3%.
Management expects the industry spending on manufacturing equipment to be lower in 2019 compared with 2018, citing a pullback on spending on memory chips and macroeconomic conditions.
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 a major growth catalyst.
Notably, the company gained considerable success in expanding beyond semiconductors, particularly in display. Mobile OLEDs and large screen televisions are opening new market opportunities for Applied Materials.
The company 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.
Let’s delve deeper into the numbers.
Revenues by Segment
The Semiconductor Systems Group (SSG) contributed 57.5% to the total revenues, reflecting a decrease of 16% sequentially and 5% year over year.
Applied Global Services (AGS) was the second-largest contributor with 25% revenue share. Segment revenues increased 2.4% sequentially and 17.6% from the prior-year quarter.
The Display segment was down 5.3% sequentially but up 3.7% from the year-ago level, contributing 17.5% to the total revenues.
Revenues by Geography
China contributed 33%, Japan 18%, Taiwan 15%, Korea 13%, United States 9%, Europe 6% and Southeast Asia 5% to the total revenues.
United States, Korea, Taiwan and China declined on a sequential as well as year-over-year basis. Southeast Asia increased sequentially but declined from the year-ago quarter.
Operating Results
Pro-forma gross margin was 45.5%, down 70 basis points (bps) from the year-ago quarter.
Applied Materials’ operating expenses of $764 million increased 10.9% from the year-ago quarter.
Operating margin of 26.6% decreased 260 bps sequentially and 210 bps year over year.
Balance Sheet
At the end of fiscal fourth quarter, inventories increased to $3.72 billion from $3.68 billion in the last reported quarter. Accounts receivables decreased to $2.57 billion from $2.88 billion in the fiscal third quarter. Cash and cash equivalent balance was $4.03 billion compared with $3.98 billion in the last reported quarter.
The company returned $751 million and $195 million through stock repurchases and cash dividends, respectively.
Guidance
Applied Materials provided guidance for the first quarter of fiscal 2019. Revenues are expected between $3.56 billion and $3.86 billion, down 12% year over year. The Zacks Consensus Estimate for the same is pegged at $3.99 billion.
Non-GAAP EPS is expected in the range of 75-83 cents, down 25% year over year. The corresponding Zacks Consensus Estimate is pegged at $0.95 per share.
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
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Applied Materials (AMAT) Beats on Q4 Earnings and Revenues
Applied Materials Inc. (AMAT - Free Report) reported robust fiscal fourth-quarter 2018 results, with both the top and bottom lines surpassing the Zacks Consensus Estimate.
The company’s pro-forma earnings per share (EPS) of 97 cents beat the consensus mark by a penny and came in within the guided range of 92 cents to $1.00 per share. Earnings were up 4.3% year over year.
Revenues of $4.01 billion surpassed the Zacks Consensus Estimate of $4 billion and were within the guided range of $3.85-$4.15 billion, decreasing 10.2% sequentially but increasing 1.1% year over year.
Despite strong fiscal fourth-quarter results, its share price declined 8% due to weaker-than-expected revenue guidance for the fiscal first quarter. Also, shares have lost 37.4% on a year-to-date basis compared with the industry’s decline of 14.3%.
Management expects the industry spending on manufacturing equipment to be lower in 2019 compared with 2018, citing a pullback on spending on memory chips and macroeconomic conditions.
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 a major growth catalyst.
Notably, the company gained considerable success in expanding beyond semiconductors, particularly in display. Mobile OLEDs and large screen televisions are opening new market opportunities for Applied Materials.
The company 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.
Let’s delve deeper into the numbers.
Revenues by Segment
The Semiconductor Systems Group (SSG) contributed 57.5% to the total revenues, reflecting a decrease of 16% sequentially and 5% year over year.
Applied Global Services (AGS) was the second-largest contributor with 25% revenue share. Segment revenues increased 2.4% sequentially and 17.6% from the prior-year quarter.
The Display segment was down 5.3% sequentially but up 3.7% from the year-ago level, contributing 17.5% to the total revenues.
Revenues by Geography
China contributed 33%, Japan 18%, Taiwan 15%, Korea 13%, United States 9%, Europe 6% and Southeast Asia 5% to the total revenues.
United States, Korea, Taiwan and China declined on a sequential as well as year-over-year basis. Southeast Asia increased sequentially but declined from the year-ago quarter.
Operating Results
Pro-forma gross margin was 45.5%, down 70 basis points (bps) from the year-ago quarter.
Applied Materials’ operating expenses of $764 million increased 10.9% from the year-ago quarter.
Operating margin of 26.6% decreased 260 bps sequentially and 210 bps year over year.
Balance Sheet
At the end of fiscal fourth quarter, inventories increased to $3.72 billion from $3.68 billion in the last reported quarter. Accounts receivables decreased to $2.57 billion from $2.88 billion in the fiscal third quarter. Cash and cash equivalent balance was $4.03 billion compared with $3.98 billion in the last reported quarter.
The company returned $751 million and $195 million through stock repurchases and cash dividends, respectively.
Guidance
Applied Materials provided guidance for the first quarter of fiscal 2019. Revenues are expected between $3.56 billion and $3.86 billion, down 12% year over year. The Zacks Consensus Estimate for the same is pegged at $3.99 billion.
Non-GAAP EPS is expected in the range of 75-83 cents, down 25% year over year. The corresponding Zacks Consensus Estimate is pegged at $0.95 per share.
Zacks Rank and Stocks to Consider
Currently, Applied Materials carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader technology sector are boohoo group plc (BHOOY - Free Report) , QuinStreet, Inc. (QNST - Free Report) and AMETEK, Inc. (AME - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rate for boohoo group, QuinStreet and AMETEK is currently pegged at 25%, 25% and 11.18%, respectively.
Applied Materials, Inc. Price, Consensus and EPS Surprise
Applied Materials, Inc. Price, Consensus and EPS Surprise | Applied Materials, Inc. Quote
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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