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MKS Instruments (MKSI) Q2 Earnings Top Estimates, Revenues Up

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MKS Instruments (MKSI - Free Report) reported second-quarter 2020 adjusted earnings of $1.62 per share, which beat the Zacks Consensus Estimate by 39.7% and also jumped 48.6% year over year.

Revenues of $544.3 million surpassed the consensus mark by 11.4% and also improved 14.8% year over year, driven by buoyant demand for the company’s solutions in the semiconductor market.

Products revenues (86.9% of total revenues) were $473 million, up 17.9% from the year-ago quarter. Services revenues (13.1%) declined 2.1% year over year to $71.3 million.

Quarterly Update

Revenues from the semiconductor market (59.1% of total revenues) jumped 50.2% year over year to $321.5 million owing to increased demand, particularly for Power Solutions business.

Revenues from advanced markets (40.9% of total revenues) were $222.8 million, down 14.3% from the year-ago quarter. The top line was negatively impacted by lower revenues from certain industrial applications, partially offset by strong growth in PCB drilling applications.

MKS Instruments, Inc. Price, Consensus and EPS Surprise


MKS Instruments, Inc. Price, Consensus and EPS Surprise

MKS Instruments, Inc. price-consensus-eps-surprise-chart | MKS Instruments, Inc. Quote

Segment-wise, Vacuum and Analysis (57.8% of total revenues) revenues surged 33.5% year over year to $314.5 million.

Equipment & Solutions segment revenues (11.7% of total revenues) were $63.8 million, up 14.2% year over year.

However, Light and Motion division revenues (30.5% of total revenues) decreased 9.1% year over year to $166 million.

Operating Details

In the second quarter, MKS Instruments’ adjusted gross margin expanded 30 basis points (bps) on a year-over-year basis to 45.3%.

Adjusted EBITDA increased 28.8% year over year to $133.2 million. Adjusted EBITDA margin expanded 270 bps on a year-over-year basis to 24.5%.

Research & development and sales, general & administrative expenses, as a percentage of revenues, declined 100 bps and 170 bps on a year-to-date basis, respectively.

MKS Instruments reported non-GAAP operating income of $117.7 million, up 33.1% year over year. Adjusted operating margin expanded 300 bps on a year-over-year basis to 21.6%.

Balance Sheet

As of Jun 30, 2020, MKS Instruments had cash and short-term investments of $607 million compared with $503 million as of Mar 31, 2020.

Secured term-loan principal outstanding as of Jun 30, 2020 was $838 million. The company also had $100 million of incremental borrowing capacity under an asset-based line of credit, subject to certain borrowing base requirements.

Cash flow from operations surged 79.4% year over year to $139 million. Free cash flow jumped 85.1% year over year to $118.1 million.

MKS Instruments paid out dividends worth $11 million during the reported quarter.

Q3 Guidance

For the third quarter of 2020, MKS Instruments anticipates revenues between $535 million and $585 million. The Zacks Consensus Estimate for revenues is currently pegged at $485.1 million, indicating growth of 5% from the figure reported in the year-ago quarter.

Non-GAAP earnings are expected between $1.55 per share and $1.95 per share.

The consensus mark for earnings is currently pegged at $1.20 per share, suggesting an increase of 7.1% from the figure reported in the year-ago quarter.

Zacks Rank & Other Stocks to Consider

Currently, MKS Instruments has a Zacks Rank #2 (Buy). A few other top-ranked stocks in the broader technology sector are Dropbox (DBX - Free Report) , Everbridge (EVBG - Free Report) and Asure Software (ASUR - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Both Dropbox and Everbridge are scheduled to report earnings on Aug 6. Asure Software is set to release quarterly results on Aug 10.

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