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Providing Breakthroughs to Enable Breakthroughs with Semi Equipment

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The latest Zacks Industry Rank Story is about the High Tech of the High Tech.

The 7-company-strong Semiconductor Equipment & Wafer Fabrication industry is red hot. It is currently ranked #45 out of 265 Zacks Industries.  In recent weeks, there have been 14 positive estimate revisions and just 1 negative revision, with the average positive revisions coming in at +22%.

These are not chipmaker companies, per se, but the critical technology suppliers of the quantum breakthroughs behind dynamic semi chip production. In their own way of saying it, they provide the breakthrough that enables the breakthrough.’

In comparison, the huge 36-company strong downstream Semiconductor Chip Industry ranked #20 out of 265, when I looked. It has 16 positive revisions and just 1 negative revision, in recent weeks. The Semi Chip makers averaged positive revisions of +28%.

It’s simple. It’s an integrated value chain story here. The stronger and faster growing downstream Semi Chip company revenue and EPS growth gets, the better key upstream Semi Chip Equipment revenue and EPS growth gets.

The 36 Zacks Ranked Chip companies keep this smaller 7-company backend Semi Equipment industry group busy these days. These types of chip technology businesses --and their shares-- don’t look like they are going to lose momentum any time soon.

Applied Materials (AMAT - Free Report) is based in Santa Clara, CA. They are the Large Cap in this industry. In 2015, the company had sales of $9.7 billion, did R&D worth $1.5 billion and held 1341 patents. It has received Intel’s Preferred Quality Supplier Award for the last 5 consecutive years.

Their website says,

We are the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future.”

The $31 billion market cap company shares price just below $30. The forward PE is 16.81 and PEG ratio is 1.07.  Its estimated 2016 EPS is $1.75 a share.

This stock is a Zacks #2 (BUY) Rank and the Zacks VGM score is A.

Advanced Energy (AEIS - Free Report) is headquartered in Fort Collins, Colorado and was founded in 1981.

Advanced Energy Industries, Inc. is much smaller. They recently participated in the Credit Suisse Small & Mid Cap Conference at the Waldorf Astoria in New York, NY on Sept. 14, 2016. They had 2015 annual sales of $415 million, with net annual income (EBITDA) coming in around $116 million.

The AE team is deployed throughout North America, Europe, and Asia, to provide technical expertise and responsive and agile power solutions for thin-film and industrial manufacturing.

Their high voltage power systems serve high-tech and industrial applications; from X-ray and scientific analysis to intense pulsed light and mass spectrometry. 64% of revenue comes from the semiconductor segment, with 20% from industrial, and 16% from services.

AE thermal products offer precision temperature measurement and control, while AE power control modules provide exceptional quality for heating, melting, bending, forming, or drying in a wide variety of industrial applications.

Key Growth Applications

Semiconductor

Industrial coating

Thin-film renewables (solar and glass)

Data storage

High-brightness LED (HBLED)

Flat panel display and OLED

Analytical instruments

Medical equipment

Aerospace and defense

The $1.7 billion market cap company shares price just below $45. The forward PE is 17.33 and PEG ratio is 1.44.  Diluted 2015 EPS (excluding extraordinary items) amounted to $2.05 a year. Its estimated 2016 EPS is $2.51 a share.

This stock is a Zacks #1 (BUY) Rank and the Zacks VGM score is C. The VGM score is lower here, due to a higher valuation.


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