A month has gone by since the last earnings report for MKS Instruments (MKSI - Free Report) . Shares have lost about 5.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MKS Instruments due for a breakout? 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 drivers.
MKS Instruments’ Q3 Earnings Beat, Revenues Miss
MKS Instruments reported third-quarter 2019 adjusted earnings of $1.12 per share, which beat the Zacks Consensus Estimate by a whopping 26 cents but slumped 40.4% year over year.
Revenues of $462.5 million lagged the consensus mark of $471 million and declined 5.1% year over year.
Products revenues (83.5% of total revenues) were $386.2 million, down 9.4% from the year-ago quarter. Services revenues (16.5%) increased 25.3% year over year to $76.3 million.
Revenues from the semiconductor market (48.2% of total revenues) decreased 14.1% year over year to $222.9 million.
Revenues from advanced markets (51.8% of total revenues) were $239.5 million, up 5.2% from the year-ago quarter.
Segment-wise, Vacuum and Analysis (52% of total revenues) revenues were $240.7 million, down 15.9% year over year.
Light and Motion division revenues (37.3% of total revenues) were $172.6 million, down 14.2% year over year.
Equipment & Solutions segment revenues (12.1% of total revenues) were $55.9 million.
In the third quarter, MKS Instruments’ adjusted gross margin contracted 330 basis points (bps) on a year-over-year basis to 44.3%.
Adjusted EBITDA decreased 31.2% year over year to $98.2 million. Adjusted EBITDA margin was 21.2%, significantly down from 29.3% reported in the year-ago quarter.
Research & development and sales, general & administrative expenses, as a percentage of revenues, expanded 240 bps and 320 bps, respectively.
MKS Instruments reported non-GAAP operating income of $81.3 million, down 37% year over year. Adjusted operating margin was 17.6%, significantly down from 26.5% reported in the year-ago quarter.
Balance Sheet & Cash Flow
As of Sep 30, 2019, MKS Instruments had cash and short-term investments of $475 million compared with $460 million as of Jun 30, 2019.
Term-loan debt outstanding was $895 million after a payment of $50 million made during the third quarter of 2019.
MKS Instruments also paid out dividends worth $10.9 million or 20 cents per diluted share during the reported quarter.
For the fourth quarter of 2019, MKS Instruments anticipates revenues between $445 million and $495 million. Non-GAAP earnings are expected between 85 cents and $1.19 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 12.63% due to these changes.
Currently, MKS Instruments has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise MKS Instruments has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.