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Why Is Applied Materials (AMAT) Down 6.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Applied Materials (AMAT - Free Report) . Shares have lost about 6.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Applied Materials due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Applied Materials Beats on Q4 Earnings and Revenues
Applied Materials Inc. 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.
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.
Non-GAAP EPS is expected in the range of 75-83 cents, down 25% year over year.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -16.62% due to these changes.
VGM Scores
At this time, Applied Materials has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Applied Materials has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Applied Materials (AMAT) Down 6.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Applied Materials (AMAT - Free Report) . Shares have lost about 6.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Applied Materials due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Applied Materials Beats on Q4 Earnings and Revenues
Applied Materials Inc. 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.
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.
Non-GAAP EPS is expected in the range of 75-83 cents, down 25% year over year.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -16.62% due to these changes.
VGM Scores
At this time, Applied Materials has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Applied Materials has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.