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Applied Materials (AMAT) Beats on Q3 Earnings and Revenues
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Applied Materials Inc. (AMAT - Free Report) reported robust fiscal third-quarter 2018 results, with both the top and bottom lines surpassing the Zacks Consensus Estimate.
The company’s pro-forma earnings per share (EPS) of $1.20beat the consensus mark by 4 cents and came in at the higher end of the guided range of $1.13-$1.21 per share. Earnings were up 40% year over year.
Revenues of $4.47 billion were above the Zacks Consensus Estimate of$4.44 billion and were within the guided range of $4.33-$4.53 billion, decreasing 2.2% sequentially but increasing 19.3% year over year. The revenue growth was backed by higher demand in most of the regions compared with the year-ago quarter.
Despite strong fiscal third-quarter results, the company’s share price declined 4.6% due to weaker-than-expected revenue guidance for the fiscal fourth quarter. Also, shares have increased 7.1% in the past 12 months, underperforming the industry’s rally of 19.8%.
Inflection-focused innovation strategy was the primary growth driver. The company continues to witness technological advancements in semiconductor and flat-panel display areas. 3D NAND, DRAM and patterning led to significant market share gains.
Applied Materials remains strongly positioned in China, where it continues to witness robust growth in semiconductor and display. Growing investments from Chinese domestic manufacturers have been a major growth catalyst.
Notably, the company gained considerable success in expanding beyond semiconductors, particularly in display. Mobile OLEDs and large screen televisions are opening new market opportunities for Applied Materials.
The company sees significant opportunities from emerging trends on the semiconductor and display fronts such as artificial intelligence, big data, cloud infrastructure, Internet of Things (IoT), virtual reality and smart vehicles.
We believe that Applied Materials is in a great position to grow sustainably and profitably, based on its strong pipeline of enabling technologies, supported by expanding opportunities on the semiconductor, service and display fronts.
Let’s delve deeper into the numbers.
Revenues by Segment
The Semiconductor Systems Group (SSG) contributed 60.2% of the revenues, reflecting a decrease of 8.4% sequentially but an increase of 8.5% year over year.
Applied Global Services (AGS) was the second-largest contributor with 20.9% revenue share. Segment revenues increased 1.2% sequentially and 21.4% from the prior-year quarter.
The Display segment was up 23.5% sequentially and 80.7% from the year-ago level, contributing 16.2% to the revenues.
Revenues by Geography
China contributed 39% to the revenues, Japan 16%, Taiwan 14%, Korea 13%, United States 9%, Europe 5% and Southeast Asia 4%.
On a sequential basis, most of the regions declined, except the United States, Japan and China.
However, on a year-over-year basis, only Korea registered a declineof 53.5%. All the other regions showed improvement.
Operating Results
Pro-forma gross margin was 46.4%, down 30 basis points (bps) sequentially and 20 bps from the year-ago quarter.
Applied Materials’ operating expenses of $770million increased 7% sequentially and 14% from the year-ago quarter.
Operating margin of 29.2% decreased 100 bps sequentially but increased 50 bps year over year.
Balance Sheet
At the end of fiscal third quarter, inventories increased to $3.68 billion from $3.49 billion in the last reported quarter. Accounts receivables increased to $2.88 billion from $2.67 billion in the fiscal second quarter. Cash and cash equivalent balance was $3.98 billion compared with $5.35 billion in the last reported quarter.
The company generated $633 million in cash from operations. The company spent $133 million on capex, and returned $1.25 billion and $199 million through stock repurchases and cash dividends, respectively.
Guidance
Applied Materials provided guidance for the fourth quarter of fiscal 2018. Revenues are expected between $3.85 billion and $4.15 billion, flat year over year. The Zacks Consensus Estimate is pegged at $4.45 billion.
Non-GAAP EPS is expected in the range of 92 cents to $1.00 per share, up 3% from the year-ago quarter. The Zacks Consensus Estimate is pegged at $1.15 per share.
For fiscal 2018, management expects revenues within $17.1-$17.4 billion, up 19% year over year. The Zacks Consensus Estimate is pegged at $17.6 billion. Non-GAAP EPS is expected in the range of $4.41-$4.49 per share, up 37% from the year-ago quarter. The Zacks Consensus Estimate is pegged at $4.59 per share.
Applied Materials, Inc. Price, Consensus and EPS Surprise
Long-term earnings growth for Expedia, Infineon Technologies and Rambus is currently projected to be 16.1%, 7.5% and 10%, respectively.
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Image: Bigstock
Applied Materials (AMAT) Beats on Q3 Earnings and Revenues
Applied Materials Inc. (AMAT - Free Report) reported robust fiscal third-quarter 2018 results, with both the top and bottom lines surpassing the Zacks Consensus Estimate.
The company’s pro-forma earnings per share (EPS) of $1.20beat the consensus mark by 4 cents and came in at the higher end of the guided range of $1.13-$1.21 per share. Earnings were up 40% year over year.
Revenues of $4.47 billion were above the Zacks Consensus Estimate of$4.44 billion and were within the guided range of $4.33-$4.53 billion, decreasing 2.2% sequentially but increasing 19.3% year over year. The revenue growth was backed by higher demand in most of the regions compared with the year-ago quarter.
Despite strong fiscal third-quarter results, the company’s share price declined 4.6% due to weaker-than-expected revenue guidance for the fiscal fourth quarter. Also, shares have increased 7.1% in the past 12 months, underperforming the industry’s rally of 19.8%.
Inflection-focused innovation strategy was the primary growth driver. The company continues to witness technological advancements in semiconductor and flat-panel display areas. 3D NAND, DRAM and patterning led to significant market share gains.
Applied Materials remains strongly positioned in China, where it continues to witness robust growth in semiconductor and display. Growing investments from Chinese domestic manufacturers have been a major growth catalyst.
Notably, the company gained considerable success in expanding beyond semiconductors, particularly in display. Mobile OLEDs and large screen televisions are opening new market opportunities for Applied Materials.
The company sees significant opportunities from emerging trends on the semiconductor and display fronts such as artificial intelligence, big data, cloud infrastructure, Internet of Things (IoT), virtual reality and smart vehicles.
We believe that Applied Materials is in a great position to grow sustainably and profitably, based on its strong pipeline of enabling technologies, supported by expanding opportunities on the semiconductor, service and display fronts.
Let’s delve deeper into the numbers.
Revenues by Segment
The Semiconductor Systems Group (SSG) contributed 60.2% of the revenues, reflecting a decrease of 8.4% sequentially but an increase of 8.5% year over year.
Applied Global Services (AGS) was the second-largest contributor with 20.9% revenue share. Segment revenues increased 1.2% sequentially and 21.4% from the prior-year quarter.
The Display segment was up 23.5% sequentially and 80.7% from the year-ago level, contributing 16.2% to the revenues.
Revenues by Geography
China contributed 39% to the revenues, Japan 16%, Taiwan 14%, Korea 13%, United States 9%, Europe 5% and Southeast Asia 4%.
On a sequential basis, most of the regions declined, except the United States, Japan and China.
However, on a year-over-year basis, only Korea registered a declineof 53.5%. All the other regions showed improvement.
Operating Results
Pro-forma gross margin was 46.4%, down 30 basis points (bps) sequentially and 20 bps from the year-ago quarter.
Applied Materials’ operating expenses of $770million increased 7% sequentially and 14% from the year-ago quarter.
Operating margin of 29.2% decreased 100 bps sequentially but increased 50 bps year over year.
Balance Sheet
At the end of fiscal third quarter, inventories increased to $3.68 billion from $3.49 billion in the last reported quarter. Accounts receivables increased to $2.88 billion from $2.67 billion in the fiscal second quarter. Cash and cash equivalent balance was $3.98 billion compared with $5.35 billion in the last reported quarter.
The company generated $633 million in cash from operations. The company spent $133 million on capex, and returned $1.25 billion and $199 million through stock repurchases and cash dividends, respectively.
Guidance
Applied Materials provided guidance for the fourth quarter of fiscal 2018. Revenues are expected between $3.85 billion and $4.15 billion, flat year over year. The Zacks Consensus Estimate is pegged at $4.45 billion.
Non-GAAP EPS is expected in the range of 92 cents to $1.00 per share, up 3% from the year-ago quarter. The Zacks Consensus Estimate is pegged at $1.15 per share.
For fiscal 2018, management expects revenues within $17.1-$17.4 billion, up 19% year over year. The Zacks Consensus Estimate is pegged at $17.6 billion. Non-GAAP EPS is expected in the range of $4.41-$4.49 per share, up 37% from the year-ago quarter. The Zacks Consensus Estimate is pegged at $4.59 per share.
Applied Materials, Inc. Price, Consensus and EPS Surprise
Applied Materials, Inc. Price, Consensus and EPS Surprise | Applied Materials, Inc. Quote
Zacks Rank and Stocks to Consider
Currently, Applied Materials carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the technology sector are Expedia Group, Inc. (EXPE - Free Report) , Infineon Technologies AG (IFNNY - Free Report) and Rambus Inc. (RMBS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth for Expedia, Infineon Technologies and Rambus is currently projected to be 16.1%, 7.5% and 10%, respectively.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>