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What's in Store for ASML Holding's (ASML) Q4 Earnings?

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ASML Holding N.V. (ASML - Free Report) is set to report fourth-quarter 2020 results on Jan 22. In the last reported quarter, it delivered an earnings surprise of 14.7%.

ASML Holding’s surprise history has been really impressive. The company surpassed earnings estimates in all the trailing four quarters, with the average being 5.2%.

For the fourth quarter, the Zacks Consensus Estimate for earnings has remained stable at $2.91 per share over the past 30 days. The figure indicates a decrease of 2.35% from the year-ago quarter.

The consensus mark for revenues is pegged at $4.38 billion, implying a decrease of 2.04% from the year-ago reported figure.

ASML Holding N.V. Price and EPS Surprise

ASML Holding N.V. Price and EPS Surprise

ASML Holding N.V. price-eps-surprise | ASML Holding N.V. Quote

Performance in the Last Reported Quarter

In third-quarter 2020, earnings of $2.96 per share surpassed the Zacks Consensus Estimate by 38 cents. The figure increased 50.3% sequentially.

Net sales of €4.0 billion also improved 19% from the year-ago period.

Let’s see how things have shaped up for this announcement.

The company’s fourth-quarter sales are expected to have benefited from portfolio strength, growing investments, its expanding position in memory and increasing new design wins.

EUV system revenues remained strong in the third quarter. The trend is expected to have continued in the to-be-reported quarter, primarily driven by a stronger memory market — especially DRAM — and persistent strength in logic driven by transitions to 5G as well as AI.

There has been strong demand for advanced nodes in support of the buildup of the digital infrastructure, which includes secular growth drivers such as 5G, AI and high-performance compute. Therefore, logic demand is expected to have remained healthy and driven demand for the company’s products.

Foundry and logic performed well in third-quarter 2020, a trend that most likely continued in the fourth quarter as well, driven by next-generation technology development, capacity additions at leading-edge nodes, increasing competitive dynamics and investment in EUV infrastructure.

Also, memory revenues are expected to have increased in the quarter to be reported driven by healthy demand in data centers, with improving demand for consumer electronics.

Also, the company is expected to have seen a recovery in lithography demand for DRAM.

In addition, the service business is expected to have performed well in the quarter, driven by increasing contribution from EUV service revenues. Management expects significant demand for upgrades as these are utilized to increase capacity and improve imaging as well as overlay performance required on future nodes.

During the quarter, the global rollout of 5G mobile technology led to higher demand for semiconductor equipment, which is expected to have aided its top-line growth.

In addition, the company’s growing research and development activities, as well as innovative next-generation products are likely to have aided top-line growth in the quarter.

However, uncertainties related to the macro environment — including the economic impact of COVID-19 and geopolitical developments — could impact its upcoming results.

For the fourth quarter, management expects revenues within €3.6-€3.8 billion and gross margin to be 50%.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for ASML Holding this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, ASML Holding has a Zacks Rank #2.

Stocks That Warrant a Look

Here are a few stocks worth considering, as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

TE Connectivity Ltd. (TEL - Free Report) has an Earnings ESP of +1.91% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Microchip Technology Incorporated (MCHP - Free Report) has an Earnings ESP of +1.48% and a Zacks Rank #2.

NXP Semiconductors N.V. (NXPI - Free Report) has an Earnings ESP of +1.11% and a Zacks Rank #2.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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