MKS Instruments, Inc. (MKSI - Free Report) , in our opinion, is a solid choice for investors seeking exposure in the electronics space.
The stock, with roughly $5.6-billion market capitalization, was upgraded to a Zacks Rank #1 (Strong Buy) on Jun 13. Its investment appeal is further accentuated by a VGM Score of A.
MKS Instruments posted better-than-expected results in three of the last four quarters, while reporting in-line earnings in one, delivering an average positive earnings surprise of 4.11%. Notably, its shares have rallied 52.8% in the past year, outperforming 39.8% growth of the industry. Also, the stock’s yield comfortably surpassed 27.1% increase of the Zacks Computer and Technology sector.
Why the Upgrade?
We are providing a snapshot of how MKS Instruments fared in the first quarter of 2018. Earnings of $2.07 per share surpassed the Zacks Consensus Estimate by 4.02%. Net sales were up 26.8% year over year on the back of healthy performances by the Vacuum & Analysis and Light & Motion segments. Margins also improved in the quarter, with gross margin increasing 40 basis points (bps) year over year and operating margin growing 370 bps.
In the quarters ahead, MKS Instruments is poised to gain from healthy demand from the manufacturers of semiconductor devices and capital equipments. Also, healthy demand from other advanced markets in the semiconductor space as well as industrial markets will be a boon. A solid product portfolio, focused research and development unit, and technical expertise add to the company’s appeal. Notably, the company has more than 1,500 patents worldwide.
In addition to the above positive aspects, MKS Instruments’ sincere efforts for deleveraging its balance sheet and thus reducing interest expenses have been working in its favor. Also, commitment toward rewarding its shareholders through dividend payments has kept shareholders’ interest alive in the stock. Notably, the company announced 11% growth in its quarterly dividend rate in May 2018.
In the second quarter of 2018, MKS Instruments anticipates revenues to be in the $550-$590 million range, with the midpoint way higher than $554 million generated in the first quarter. Likewise, gross margin is projected to be within 47-48% versus 47.4% in the first quarter. Earnings per share are anticipated to grow from $2.07 in the first quarter to $2.09-$2.36 in the second quarter.
In the past 60 days, the company’s earnings estimates for 2018 have been revised upward by four brokerage firms and that of 2019 by three firms. The Zacks Consensus Estimate stands at $8.42 for 2018 and $9.14 for 2019, reflecting an increase of 5.9% and 4.8% from their respective 60-day-ago tallies. The estimates represent year-over-year growth of 41.3% for 2018 and 8.5% for 2019.
Also, the company has an Earnings ESP of +2.02% for 2018 and +1.80% for 2019. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
MKS Instruments, Inc. Price, Consensus and EPS Surprise