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What's in Store for Applied Materials (AMAT) in Q2 Earnings?

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Applied Materials, Inc. (AMAT - Free Report) is set to report second-quarter fiscal 2021 results on May 20.

For the fiscal second quarter, the company expects net sales of $5.39 billion(+/-$200 million). Furthermore, the Zacks Consensus Estimate for revenues is pegged at $5.39 billion, suggesting growth of 36.3% from the year-ago reported figure.

Further, the company projects non-GAAP earnings of $1.44-$1.56 per share for the quarter under review. The Zacks Consensus Estimate for earnings is pegged at $1.50, indicating growth of 68.5% from the year-ago reported figure.

The company surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same once, the earnings surprise being 6.42%, on average.

Applied Materials, Inc. Price and EPS Surprise

Applied Materials, Inc. Price and EPS Surprise

Applied Materials, Inc. price-eps-surprise | Applied Materials, Inc. Quote

Factors to Consider

Applied Materials’ portfolio strength, expanding position in memory and increasing new design wins are expected to have driven the fiscal second-quarter performance.

Further, more clients are expected to have upgraded their equipment,owing to the increasing deployment of 5G in key markets. This, in turn, is expected to have aided the company’s top line in the quarter to be reported.

Furthermore, growth opportunities across specialty nodes and new node ramps across foundry, logic, NAND and DRAM are expected to have benefited the company in the to-be-reported quarter. Moreover, inventory reductions across memory and demand elasticity in NAND are anticipated to have acted as tailwinds.

Also, the company is expected to have witnessed solid customer momentum across automotive and advanced packaging, owing to rising foundry logic spending.

All of the factors are expected to have driven sales in the Semiconductor Systems Group segment in the to-be-reported quarter. For second-quarter fiscal 2021, the Zacks Consensus Estimate for sales for this segment is pegged at $3.9 billion, suggesting growth of 50.1% from the prior-year quarter’s reported figure.

Additionally, the growing adoption of IoT, AI and Big Data is expected to have contributed to the fiscal second-quarter performance. Moreover, growing investments in new playbook are likely to have been encouraging.

Notably, Applied Materials introduced a playbook for process control in the fiscal second quarter. The new playbook is powered by Big Data and AI, which aids semiconductor manufacturers in accelerating node development and earning more profits over the life of a node. The move is expected to have helped the company in gaining traction among semiconductor manufacturers in the quarter under discussion.

Apart from these, Applied Materials’ growing research and development activities, and innovative next-generation products are anticipated to have aided the performance of its Display and Adjacent Markets segment in the quarter under review.

For second-quarter fiscal 2021, the Zacks Consensus Estimate for display sales is pegged at $370 million, indicating year-over-year growth of 1.4%.

Coming to the Applied Global Services (“AGS”) segment, the company’s new systems added to its installed base are likely to have driven momentum across the subscription part of AGS in the quarter under review.

For second-quarter fiscal 2021, the consensus mark for AGS sales is pegged at $1.14 billion, suggesting year-over-year growth of 12.1%

However, uncertainties related to the COVID-19 pandemic are likely to have been headwinds for the company in the to-be-reported quarter.

What Our Model Says

Our proven model does not conclusively predictan earnings beat for Applied Materials 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Applied Materials has an Earnings ESP of 0.00% and a Zacks Rank #3.

Stocks to Consider

Here are some stocks to consider as our model shows that these have the right combination of elements to beat on earnings this season.

Digital Turbine (APPS - Free Report) has an Earnings ESP of +6.98% and it sports a Zacks Rank of 1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pure Storage (PSTG - Free Report) currently has an Earnings ESP of +10.81% and a Zacks Rank of 2.

NVIDIA (NVDA - Free Report) has an Earnings ESP of +2.51% and a Zacks Rank #2 at present.

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