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MKS Instruments (MKSI) Down 0.5% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for MKS Instruments (MKSI - Free Report) . Shares have lost about 0.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is MKS Instruments due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

MKS Instruments Q1 Earnings Top Estimates, Revenues Up

MKS Instruments reported first-quarter 2021 adjusted earnings of $2.56 per share, which beat the Zacks Consensus Estimate by 17.9% and surged 66.2% year over year.

Revenues of $693.9 million surpassed the consensus mark by 6.7% and increased 29.5% year over year, driven by buoyant demand for the company’s solutions in the semiconductor market.

Products revenues (87.2% of total revenues) were $605 million, up 31.2% from the year-ago quarter’s levels. Services revenues (12.8%) increased 19.3% year over year to $88.9 million.

Quarterly Update

Revenues from the semiconductor market (59.3% of total revenues) increased 31.7% year over year to $411.6 million owing to higher demand, particularly for the Vacuum & Analysis division.
 
Revenues from advanced markets (40.7% of total revenues) were $282.3 million, up 26.5% from the year-ago quarter’s levels. The upside can be attributed to recovery in demand trends for Advanced Electronics applications.

Segment-wise, Vacuum and Analysis (62.8% of total revenues) revenues surged 36.5% year over year to $435.8 million.

Light and Motion division revenues (26.2% of total revenues) increased 10.1% year over year to $182 million.

Equipment & Solutions segment revenues (11% of total revenues) were $76 million, up 49% year over year.

Operating Details

In the first quarter, MKS Instruments’ adjusted gross margin expanded 170 basis points (bps) on a year-over-year basis to 46.4%.

Adjusted EBITDA increased 53.4% year over year to $198.9 million. Adjusted EBITDA margin expanded 450 bps on a year-over-year basis to 28.7%.

Research & development and sales, general & administrative expenses, as a percentage of revenues, declined 110 bps and 250 bps on a year-over-year basis, respectively.

MKS Instruments reported non-GAAP operating income of $179 million, up 62.7% year over year. Adjusted operating margin expanded 530 bps on a year-over-year basis to 25.8%.

Balance Sheet

As of Mar 31, 2021, MKS Instruments had cash and short-term investments of $909.5 million compared with $836 million as of Dec 31, 2020.

Secured term-loan principal outstanding as of Mar 31, 2021 was $831 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 69.4% year over year to $126.9 million. Free cash flow increased 54.7% year over year to $100.4 million.

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

Q2 Guidance

For the second quarter of 2021, MKS Instruments anticipates revenues to be $740 million (+/- $30 million). The Zacks Consensus Estimate for revenues is currently pegged at $650 million, indicating growth of 21.3% from the figure reported in the year-ago quarter.

Non-GAAP earnings are expected to be $2.92 per share (+/- 26 cents).

The consensus mark for earnings is currently pegged at $2.17 per share, suggesting an increase of 40.9% from the figure reported in the year-ago quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 26.12% due to these changes.

VGM Scores

At this time, MKS Instruments has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise MKS Instruments has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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