A month has gone by since the last earnings report for MKS Instruments (MKSI Quick QuoteMKSI - Free Report) . Shares have lost about 14.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.

MKS Instruments Q4 Earnings Beat, Revenues Up Y/Y

MKS Instruments reported fourth-quarter 2022 adjusted earnings of $2 per share, which beat the Zacks Consensus Estimate by 52.67% but declined 33.8% year over year.

Revenues of $1.09 billion beat the consensus mark by 8.86% and increased 42% year over year.

Products revenues (88.9% of total revenues) were $965 million, up 44.5% year over year. Services revenues (11.1% of total revenues) increased 25% to $120 million.

Quarterly Update

Revenues from the semiconductor market (46.4% of total revenues) increased 1.6% year over year to $503 million. Top-line growth was negatively impacted by continued supply chain constraints, as well as newly enacted U.S. export restrictions.

Electronics & Packaging revenues (24.5% of total revenues) were $266 million, significantly higher than $73 million reported in the previous quarter.

Specialty Industrial (29.1% of total revenues) jumped 61.2% year over year to $316 million.

Segment-wise, Vacuum and Analysis (43.8% of total revenues) revenues declined 2.1% year over year to $475 million.

Photonics division revenues (24.9% of total revenues) decreased 3.2% year over year to $270 million.

Materials Solutions segment revenues (31.3% of total revenues) were $340 million in the reported quarter.

Operating Details

In the fourth quarter, the adjusted gross margin contracted 60 basis points (bps) on a year-over-year basis to 45.9%.

Adjusted EBITDA increased 23.7% year over year to $282 million. Adjusted EBITDA margin expanded 620 bps on a year-over-year basis to 26%.

Research & development, and sales, general & administrative expenses, as a percentage of revenues, surged 230 bps and 710 bps on a year-over-year basis, respectively.

MKS Instruments reported a non-GAAP operating income of $257 million, up 24.2% year over year. However, the adjusted operating margin contracted 340 bps on a year-over-year basis to 23.7%.

Balance Sheet

As of Dec 31, 2022, MKS Instruments had cash and cash equivalents of $909 million compared with $884 million as of Sep 30, 2022.

Cash flow from operations was $184 million in the fourth quarter compared with the third-quarter 2022 figure of $199 million.

Free cash flow was $130 million compared with $173 million reported in the previous quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -111.2% due to these changes.

VGM Scores

Currently, MKS Instruments has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions 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.