Applied Materials, Inc. (AMAT - Free Report) is set to report fiscal fourth-quarter 2018 results on Nov 15. In the last reported quarter, it delivered a positive earnings surprise of 3.45%.
The company’s surprise history has been pretty impressive. It beat estimates in each of the trailing four quarters, with average positive earnings surprise of 5.72%.
Notably, on a year-to-date basis, Applied Materials’ shares have lost 32.9% in comparison with the industry’s decline of 12.4%.
Let’s see how things are shaping up for this announcement.
Strong Demand for Services
The company is efficiently delivering key enabling technology to logic and foundry customers, given well-differentiated products along with high market share. Service is an important part of Applied Materials’ portfolio that grew significantly in the last reported quarter. The Applied Global Services (AGS) segment increased 1.2% sequentially and 21.4% year over year. The segment is expected to perform well in the quarter to be reported, driven by improved device and yield performance.
The Zacks Consensus Estimate for AGS for the fourth quarter is pegged at $956 million. The same for Semiconductor Systems Group (SSG) is pegged at $2.3 billion for the to-be-reported quarter.
Strength in Display to Drive Revenues
The company has gained considerable success in expanding beyond semiconductors, particularly in display. New display technologies such as OLED are opening new market opportunities for Applied Materials. The available market opportunity is now more than 10 times than that of the traditional LCD. In the last reported quarter, the Display segment was up 23.5% sequentially and 80.7% from the year-ago level. The segment is expected to be driven by significant opportunities coming from investments in areas such as artificial intelligence, big data, cloud infrastructure, Internet of Things (IoT), virtual reality and smart vehicles.
The Zacks Consensus Estimate for the Display segment for the quarter to be reported is pegged at $690 million.
What Our Model Suggests
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if these have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Applied Materials currently has a Zacks Rank #4 and an Earnings ESP of 0.00%, making surprise prediction difficult.
Stocks to Consider
We see a likely earnings beat for each of the following companies.
NetApp, Inc. (NTAP - Free Report) has an Earnings ESP of +0.83% and a Zacks Rank #1.
Semtech Corporation (SMTC - Free Report) has an Earnings ESP of +1.64% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
VMware, Inc. (VMW - Free Report) has an Earnings ESP of +0.55% and a Zacks Rank #3.
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