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For the fiscal third quarter, AMAT expects net sales of $6.65 billion (+/-$400 million). The Zacks Consensus Estimate for revenues is pegged at $6.67 billion, suggesting a rise of 3.8% from the year-ago quarter’s reading.
Applied Materials projects non-GAAP earnings of $1.83-$2.19 per share. The Zacks Consensus Estimate for earnings is pinned at $2.01 per share, indicating growth of 5.8% from the year-ago quarter’s reported figure. The figure has been unchanged over the past 30 days.
Image Source: Zacks Investment Research
AMAT has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 6.09%. Its earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 8.78%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Applied Materials this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Applied Materials’ technology leadership in leading-edge logic, compute memory or high-performance DRAM, stacking technology and advanced packaging is expected to have helped it capitalize on the growing proliferation of Artificial Intelligence (AI), which is the main reason behind the rebound in the semiconductor industry this year.
Increasing demand for sophisticated chips required to power AI-centric data centers is expected to have aided the performance of the company’s Semiconductor Systems segment in the fiscal third quarter.
Its strong capabilities in logic and solid position in DRAM patterning are likely to have acted as boons. Its patterning systems and technologies, which are designed to address the shrinking pattern dimension challenges and the growing complexity in vertical stacking, are likely to have benefited the segment.
AMAT’s manufacturing equipment, which helps improve the performance, power, yield and costs of semiconductor devices that serve the IoT, communications, automotive, power and sensors markets, is likely to have contributed well to top-line growth of the segment.
However, the escalating tensions between the United States and China do not bode well for semiconductor companies. These are likely to have hindered top-line growth of the segment. Changes in the spending patterns of key customers and supply-chain constraints are likely to have been other headwinds.
For third-quarter fiscal 2024, the company’s sales projection for Semiconductor Systems is pegged at $4.80 billion. The Zacks Consensus Estimate for the same is pinned at $4.812 billion, indicating growth of 2.9% from the year-ago quarter’s actual.
Applied Materials’ growing 200-millimeter business and solid momentum among long-term service agreements are likely to have driven sales growth in its Applied Global Services (“AGS”) segment in the quarter under review. Strengthening of the subscription business is likely to have been another tailwind.
For third-quarter fiscal 2024, Applied Materials’ projection for AGS sales is pegged at $1.57 billion. The Zacks Consensus Estimate for the same is pegged at $1.571 billion, indicating growth of 7.3% from the year-ago quarter’s reported figure.
In addition, the improving Display and Adjacent Markets segment is expected to have continued driving top-line growth in the to-be-reported quarter.
For third-quarter fiscal 2024, the company anticipates Display sales of $245 million. The Zacks Consensus Estimate is pegged at the same level, indicating growth of 4.3% from the year-ago quarter’s actual.
Price Performance & Valuation
Applied Materials’ shares have gained 19.1% on a year-to-date basis, outperforming the industry, the Zacks Computer & Technology sector and the S&P 500 index’s rally of 12.8%, 14.8% and 12.2%, respectively.
AMAT has also outperformed its peers — Lam Research (LRCX - Free Report) and ACM Research (ACMR - Free Report) . While LRCX has gained 3.5%, ACMR has lost 3.3% year to date.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Now, let us look at the value that Applied Materials offers to its investors at current levels.
Currently, AMAT is trading at a discount with a forward 12-month P/E of 21.06X compared with the industry’s 25.39X, reflecting a solid investment opportunity at present.
Investment Thesis
Applied Materials is facing significant challenges from macroeconomic uncertainties, high inflation, broad-based inventory corrections, and supply-chain disruptions. Tightening export rules imposed by the United States on China remain major concerns in the semiconductor industry.
Nevertheless, the company’s business continues to be on a growth trajectory with significant design wins. It is well-poised to capitalize on the technology-inflection-led growing demand for next-generation chips on the back of its product innovations, and leadership in leading-edge logic, compute memory, high bandwidth memory and advanced packaging. Given the fact that AI has become mainstream in several industries and sectors, the company’s strategic pivot toward the technology is a major positive.
These factors are expected to benefit Applied Materials’ near and long-term prospects.
Conclusion
Given the fundamental strength and upswing in the estimates of segmental revenues, growth-seeking investors should consider the AMAT stock as a strong contender in their portfolios ahead of its third-quarter fiscal 2024 earnings results.
Image: Shutterstock
Applied Materials (AMAT) to Post Q3 Earnings: Should You Buy or Hold?
Applied Materials (AMAT - Free Report) is scheduled to report third-quarter fiscal 2024 results on Aug 15.
For the fiscal third quarter, AMAT expects net sales of $6.65 billion (+/-$400 million). The Zacks Consensus Estimate for revenues is pegged at $6.67 billion, suggesting a rise of 3.8% from the year-ago quarter’s reading.
Applied Materials projects non-GAAP earnings of $1.83-$2.19 per share. The Zacks Consensus Estimate for earnings is pinned at $2.01 per share, indicating growth of 5.8% from the year-ago quarter’s reported figure. The figure has been unchanged over the past 30 days.
Image Source: Zacks Investment Research
AMAT has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 6.09%. Its earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 8.78%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Applied Materials this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
AMAT has an Earnings ESP of 0.00% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors to Focus Ahead of Q2 Earnings
Applied Materials’ technology leadership in leading-edge logic, compute memory or high-performance DRAM, stacking technology and advanced packaging is expected to have helped it capitalize on the growing proliferation of Artificial Intelligence (AI), which is the main reason behind the rebound in the semiconductor industry this year.
Increasing demand for sophisticated chips required to power AI-centric data centers is expected to have aided the performance of the company’s Semiconductor Systems segment in the fiscal third quarter.
Its strong capabilities in logic and solid position in DRAM patterning are likely to have acted as boons. Its patterning systems and technologies, which are designed to address the shrinking pattern dimension challenges and the growing complexity in vertical stacking, are likely to have benefited the segment.
AMAT’s manufacturing equipment, which helps improve the performance, power, yield and costs of semiconductor devices that serve the IoT, communications, automotive, power and sensors markets, is likely to have contributed well to top-line growth of the segment.
However, the escalating tensions between the United States and China do not bode well for semiconductor companies. These are likely to have hindered top-line growth of the segment. Changes in the spending patterns of key customers and supply-chain constraints are likely to have been other headwinds.
For third-quarter fiscal 2024, the company’s sales projection for Semiconductor Systems is pegged at $4.80 billion. The Zacks Consensus Estimate for the same is pinned at $4.812 billion, indicating growth of 2.9% from the year-ago quarter’s actual.
Applied Materials’ growing 200-millimeter business and solid momentum among long-term service agreements are likely to have driven sales growth in its Applied Global Services (“AGS”) segment in the quarter under review. Strengthening of the subscription business is likely to have been another tailwind.
For third-quarter fiscal 2024, Applied Materials’ projection for AGS sales is pegged at $1.57 billion. The Zacks Consensus Estimate for the same is pegged at $1.571 billion, indicating growth of 7.3% from the year-ago quarter’s reported figure.
In addition, the improving Display and Adjacent Markets segment is expected to have continued driving top-line growth in the to-be-reported quarter.
For third-quarter fiscal 2024, the company anticipates Display sales of $245 million. The Zacks Consensus Estimate is pegged at the same level, indicating growth of 4.3% from the year-ago quarter’s actual.
Price Performance & Valuation
Applied Materials’ shares have gained 19.1% on a year-to-date basis, outperforming the industry, the Zacks Computer & Technology sector and the S&P 500 index’s rally of 12.8%, 14.8% and 12.2%, respectively.
AMAT has also outperformed its peers — Lam Research (LRCX - Free Report) and ACM Research (ACMR - Free Report) . While LRCX has gained 3.5%, ACMR has lost 3.3% year to date.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Now, let us look at the value that Applied Materials offers to its investors at current levels.
Currently, AMAT is trading at a discount with a forward 12-month P/E of 21.06X compared with the industry’s 25.39X, reflecting a solid investment opportunity at present.
Investment Thesis
Applied Materials is facing significant challenges from macroeconomic uncertainties, high inflation, broad-based inventory corrections, and supply-chain disruptions. Tightening export rules imposed by the United States on China remain major concerns in the semiconductor industry.
Nevertheless, the company’s business continues to be on a growth trajectory with significant design wins. It is well-poised to capitalize on the technology-inflection-led growing demand for next-generation chips on the back of its product innovations, and leadership in leading-edge logic, compute memory, high bandwidth memory and advanced packaging. Given the fact that AI has become mainstream in several industries and sectors, the company’s strategic pivot toward the technology is a major positive.
These factors are expected to benefit Applied Materials’ near and long-term prospects.
Conclusion
Given the fundamental strength and upswing in the estimates of segmental revenues, growth-seeking investors should consider the AMAT stock as a strong contender in their portfolios ahead of its third-quarter fiscal 2024 earnings results.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.