It has been about a month since the last earnings report for MKS Instruments (
MKSI Quick Quote MKSI - Free Report) . Shares have lost about 6.8% 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 Q2 Earnings Top Estimates, Revenues Up
MKS Instruments reported second-quarter 2021 adjusted earnings of $3.02 per share, which beat the Zacks Consensus Estimate by 3.1% and surged 86.4% year over year.
Revenues of $750 million surpassed the consensus mark by 0.7% and increased 37.8% year over year, driven by buoyant demand for the company’s solutions in the semiconductor and advanced market. Products revenues (87.6% of total revenues) were $656.7 million, up 38.8% from the year-ago quarter’s levels. Services revenues (12.4%) increased 30.7% year over year to $93.2 million. Quarterly Update
Revenues from the semiconductor market (57.5% of total revenues) increased 34.1% year over year to $431.1 million owing to robust performance by the Vacuum & Analysis division.
Revenues from advanced markets (42.5% of total revenues) were $318.8 million, up 43.1% 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 revenues (61% of total revenues) surged 45.5% year over year to $457.7 million. Light and Motion division revenues (25.7% of total revenues) increased 16.2% year over year to $193 million. Equipment & Solutions segment revenues (13.2% of total revenues) were $99.3 million, up 55.7% year over year. Operating Details
In the second quarter, adjusted gross margin expanded 210 basis points (bps) on a year-over-year basis to 47.4%.
Adjusted EBITDA increased 72% year over year to $229.1 million. Adjusted EBITDA margin expanded 610 bps on a year-over-year basis to 30.5%. Research & development, and sales, general & administrative expenses, as a percentage of revenues, declined 120 bps and 290 bps on a year-over-year basis, respectively. MKS Instruments reported non-GAAP operating income of $208 million, up 76.7% year over year. Adjusted operating margin expanded 610 bps on a year-over-year basis to 27.7%. Balance Sheet
As of Jun 30, 2021, MKS Instruments had cash and short-term investments of $1.04 billion compared with $909.5 million as of Mar 31, 2021.
Secured term loan principal outstanding as of Jun 30, 2021, was $829 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 was $165.2 million in the second quarter compared with the previous quarter’s figure of $126.9 million. Free cash flow was $148.9 million compared with $100.4 million reported in the previous quarter. MKS Instruments paid out dividends worth $12 million during the reported quarter. Q3 Guidance
For the third quarter of 2021, MKS Instruments anticipates revenues to be $720 million (+/- $30 million). Non-GAAP earnings are expected to be $2.74 per share (+/- 26 cents).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
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. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, MKS Instruments has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.