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MKS Instruments (MKSI) Q1 Earnings Beat, Revenues Up Y/Y

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MKS Instruments (MKSI - Free Report) reported first-quarter 2022 adjusted earnings of $2.71 per share, which beat the Zacks Consensus Estimate by 4.63% and improved 6% year over year.

Revenues of $742 million missed the consensus mark by 1.06% and increased 7% year over year. Global supply chain challenges and lower industry demand for certain products resulted in a decline in revenues.

Products revenues (87.3% of total revenues) were $648 million, up 7.1% year over year. Services revenues (12.7% of total revenues) increased 5.6% year over year to $94 million.

Quarterly Update

Revenues from the semiconductor market (65.8% of total revenues) advanced 19% year over year to $488 million.

Revenues from advanced electronics market (11.1% of total revenues) were $82 million, down 29% year over year. The downside was due to low demand for flexible PCB via drilling equipment in the industry.

Revenues from the speciality industrial market (23.2% of total revenues) increased 2% year over year to $172 million.

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

Operating Details

In the first quarter, adjusted EBITDA increased 6% year over year to $211 million. Adjusted EBITDA margin decreased by 20 bps on a year-over-year basis to 28.4%.

Research & development, as a percentage of revenues, increased by 20 bps year over year. Meanwhile, sales, general & administrative expenses, as a percentage of revenues, declined 140 bps on a year-over-year basis.

MKS Instruments reported non-GAAP operating income of $190 million, up 6.1% year over year. Adjusted operating margin decreased by 20 bps on a year-over-year basis to 25.6%. Rising input cost is one the primary factors responsible for decrease in operating margin.

Balance Sheet

As of Mar 31, 2022, MKS Instruments had cash and short-term investments of $1.1 billion compared with $910 million as of Mar 31, 2021.

As of Mar 31, 2021 secured term loan principal outstanding was $822 million. The company 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 $41 million in the first quarter compared with the fourth quarter 2021’s figure of $194 million. Free cash flow was $22 million compared with $171 million reported in the previous quarter.

MKS Instruments paid out dividends worth $12 million during the reported quarter.

Q2 Guidance

For the second quarter of 2022, MKS Instruments anticipates revenues to be $730 million (+/- $30 million). The Zacks Consensus Estimate for revenues is currently pegged at $749.95 million, indicating growth of 8.08% from the year-ago quarter.

Non-GAAP earnings are expected to be $2.28 per share (+/- 24 cents).

The consensus mark for earnings is currently pegged at $2.59 per share, suggesting an improvement of 1.17% from the prior-year quarter.

Zacks Rank & Stocks to Consider

Currently, MKS Instruments carries a Zacks Rank #3 (Hold).

MKS Instruments shares have underperformed the Zacks Computer & Technology sector in the year-to-date period. While MKSI shares have fallen 33.2%, the sector has declined 23.1%. Here are some better stocks to consider in the broader sector.

Analog Devices (ADI - Free Report) carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ADI shares have fallen 13.1% in the year-to-date period. ADI is expected to report second quarter 2022 earnings on May 18.

Cisco Systems (CSCO - Free Report) carries a Zacks Rank of 2.

Cisco shares have fallen 19.6% in the year-to-date period. Cisco is expected to report third quarter 2022 earnings on May 18.

BWX Technologies (BWXT - Free Report) carries a Zacks Rank of 2.

BWX shares have returned 9.2% in the year-to-date period. BWX is expected to report first quarter 2022 earnings on May 9.