A month has gone by since the last earnings report for MKS Instruments (MKSI Quick QuoteMKSI - Free Report) . Shares have lost about 1.2% 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 drivers.

MKS Instruments Q2 Earnings Top Estimates, Revenues Up

MKS Instruments reported second-quarter 2023 adjusted earnings of $1.32 per share, beating the Zacks Consensus Estimate by 18.92% but plunging 49% year over year.

Revenues of $1 billion beat the consensus mark by 2.81% and increased 31.1% year over year.

Products revenues (88.2% of total revenues) of $885 million beat the consensus mark by 2.73% and increased 33.3% year over year.

Services revenues (11.8% of total revenues) of $118 million beat the consensus mark by 4.3% and increased 16.8% year over year.

Quarterly Update

Revenues from the semiconductor market (43.9% of total revenues) fell 14.6% year over year to $440 million. The metric beat the Zacks Consensus Estimate by 9.59%.

Electronics & Packaging revenues (22.4% of total revenues) were $225 million, up from $49 million reported in the year-ago quarter. The metric missed the consensus mark by 7.92%.

Specialty Industrial revenues (33.7% of total revenues) of $338 million beat the consensus mark by 2.8% and surged 68.2% year over year.

Operating Details

In the second quarter, the adjusted gross margin expanded 270 basis points (bps) on a year-over-year basis to 46.9%.

Adjusted EBITDA increased 22.1% year over year to $254 million. However, the adjusted EBITDA margin contracted 190 bps on a year-over-year basis to 25.3%.

Research & development and sales, general & administrative expenses, as a percentage of revenues, surged 50 bps and 390 bps on a year-over-year basis, respectively.

MKS Instruments reported a non-GAAP operating income of $227 million, up 23.4% year over year. The adjusted operating margin contracted 140 bps on a year-over-year basis to 22.6%.

Balance Sheet

As of Jun 30, 2023, MKS Instruments had cash and cash equivalents of $757 million compared with $880 million as of Mar 31, 2023.

Cash outflow by operations was $59 million in the second quarter compared with first-quarter 2023 cash inflow of $37 million.

Free cash outflow was $77 million compared with $20 million inflow reported in the previous quarter.

In the second quarter, the company paid a cash dividend of $15 million or 22 cents per share.

Guidance

For third-quarter 2023, MKSI expects total revenues of $930 million (+/- $50 million). Adjusted EBITDA is expected at $210 million (+/- $26 million).

Non-GAAP earnings are expected to be in the range of $1.27-$0.69 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 18.15% due to these changes.

VGM Scores

At this time, MKS Instruments has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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 these revisions looks promising. Notably, MKS Instruments has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.