It has been about a month since the last earnings report for MKS Instruments (MKSI Quick QuoteMKSI - Free Report) . Shares have added about 16.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is MKS Instruments due for a pullback? 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 Top Estimates, Revenues Up

MKS Instruments reported adjusted earnings of $1.17 per share in fourth-quarter 2023, beating the Zacks Consensus Estimate by 31.46% and declining 41.5% year over year.

Revenues of $893 million beat the consensus mark by 5.74% and declined 17.7% year over year.

Products revenues (87.9% of total revenues) were $785 million, down 18.7% year over year. Services revenues (12.1% of total revenues) fell 10% year over year to $108 million.

Quarterly Update

Revenues from the semiconductor market (40.5% of total revenues) declined 28% year over year to $362 million. Top-line growth was affected by persistent supply chain constraints and a challenging macroeconomic environment.

Electronics & Packaging revenues (25.3% of total revenues) were $226 million, lower than $266 million reported in the year-ago quarter.

Specialty Industrial revenues (34.2% of total revenues) dropped 3.5% year over year to $305 million.

Operating Detail

In the fourth quarter, the adjusted gross margin expanded 10 basis points (bps) on a year-over-year basis to 46%.

Research & development and sales, general & administrative expenses, as a percentage of revenues, surged 110 bps and 240 bps on a year-over-year basis, respectively.

MKS Instruments reported a non-GAAP operating income of $182 million, down 29.2% year over year. The adjusted operating margin contracted 330 bps on a year-over-year basis to 20.4%.

Adjusted EBITDA fell 26.6% year over year to $218 million. Adjusted EBITDA margin contracted 30 bps on a year-over-year basis to 24.4%.

Balance Sheet

As of Dec 31, 2023, MKS Instruments had cash and cash equivalents of $875 million compared with $909 million as of Dec 31, 2022.

Cash flow from operations was $180 million in the fourth quarter compared with the third-quarter 2023 figure of $160 million.

Free cash flow was $146 million compared with $142 million reported in the previous quarter.

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

Guidance

MKSI expects first-quarter 2024 revenues of $840 million (+/- $40 million).

The company expects an Adjusted EBITDA of $182 million (+/- 22 million).

On a non-GAAP basis, MKSI expects earnings of 72 cents (+/- 25 cents) per share.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -23.2% due to these changes.

VGM Scores

At this time, MKS Instruments has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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 D. 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 this revision indicates a downward shift. It's no surprise MKS Instruments has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.