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Bull of the Day: Applied Materials (AMAT)

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Applied Materials, Inc. (AMAT - Free Report) just reported its best quarter in its 50-year history. This Zacks Rank #1 (Strong Buy) is expected to see 82% earnings growth this fiscal year.

Applied Materials makes equipment and provides software and services for the semiconductor and display industries.

Another Beat in the Fiscal Third Quarter

On Aug 17, Applied Materials reported its fiscal third quarter results and beat the Zacks Consensus again. It reported earnings of $0.86 versus the consensus of $0.83. It's last earnings miss was all the way back in 2013.

It was a stellar quarter, with record revenue surging 33% to $3.74 billion. Gross margin also rose by 2.9 points to 46.6%.

The company also generated a quarterly record of $1.37 billion in cash from operations, and returned $482 million to shareholders in the form of dividends and share repurchases. The dividend currently yields 0.9%.

Analysts Raise Full Year Estimates Again

Most believed that fiscal 2017 was going to be a banner year, but the question is, can this pace keep up into fiscal 2018?

Applied seems to be indicating that the start to 2018 looks strong.

As a result, the analysts have been raising both fiscal 2017 and now fiscal 2018 estimates as well, although they're being cautiously optimistic about 2018.

7 estimates were raised for fiscal 2017 since the earnings report, pushing the 2017 consensus up to $3.19 versus $3.10 just a week ago. That's a gain of 82%.

But 2018 is starting to perk up as well. 7 estimates were raised in the last week for 2018 as well with that consensus rising to $3.54 from $3.28. That's earnings growth of 11%.

Shares Stall Out

But even with the best quarter in its history, investors weren't satisfied. After a big run up the past few years, the shares are actually down 5% over the last month.

That means Applied Materials is still cheap. It's trading with a forward P/E of just 13.9x.

If you're looking for an experienced semiconductor play that's still a value, Applied Materials is one you should keep on your short list.

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