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MKS Instruments' (MKSI) Q1 Earnings Top, Revenues Rise Y/Y

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MKS Instruments (MKSI - Free Report) reported first-quarter 2020 adjusted earnings of $1.54 per share, which beat the Zacks Consensus Estimate by 24.2% and also increased 28.3% year over year.

Revenues of $535.7 million surpassed the consensus mark by 4.8% and also improved 15.6% year over year, driven by buoyant demand for the semiconductor market.

Products revenues (86.1% of total revenues) were $461.2 million, up 8.1% from the year-ago quarter. Services revenues (13.9%) inched up 1.8% year over year to $74.5 million.

Quarterly Update

Revenues from the semiconductor market (58.4% of total revenues) jumped 41.9% year over year to $312.6 million owing to increased demand.

Revenues from advanced markets (41.6% of total revenues) were $223.1 million, down 8.3% from the year-ago quarter. The top line was negatively impacted by university and research lab closures due to the coronavirus (COVID-19).
 

MKS Instruments, Inc. Price, Consensus and EPS Surprise

MKS Instruments, Inc. Price, Consensus and EPS Surprise

MKS Instruments, Inc. price-consensus-eps-surprise-chart | MKS Instruments, Inc. Quote

 

Segmentwise, Vacuum and Analysis (59.6% of total revenues) revenues surged 36.2% year over year to $319.3 million.

Equipment & Solutions segment revenues (9.5% of total revenues) were $51 million, up 44.9% year over year.

Light and Motion division revenues (30.9% of total revenues), however, decreased 14.7% year over year to $165.4 million.

Operating Details

In the first quarter, MKS Instruments’ adjusted gross margin contracted 190 basis points (bps) on a year-over-year basis to 44.7%.

Adjusted EBITDA increased 20.2% year over year to $129.7 million. Adjusted EBITDA margin expanded 90 bps on a year-over-year basis to 24.2%.

Research & development and sales, general & administrative expenses, as a percentage of revenues, declined 110 bps and 150 bps on a year-to-date basis, respectively.

MKS Instruments reported non-GAAP operating income of $110 million, up 19.4% year over year. Adjusted operating margin expanded 70 bps on a year-over-year basis to 20.5%.

Balance Sheet & Cash Flow

As of Mar 31, 2020, MKS Instruments had cash and short-term investments of $503 million compared with $524 million as of Dec 31, 2019.

Secured term-loan principal outstanding as of Mar 31, 2020 was $840 million. The company also had $100 million of incremental borrowing capacity under an asset-based line of credit, subject to certain borrowing base requirements.

MKS Instruments paid out dividends worth $11 million during the reported quarter.

Q2 Guidance

For the second quarter of 2020, MKS Instruments anticipates revenues between $450 million and $520 million. Management stated that order rates will remain strong in the second quarter. However, lockdowns around the world due to the coronavirus are expected to impact second-quarter revenues.

The Zacks Consensus Estimate for revenues is currently pegged at $507 million, indicating growth of 7% from the figure reported in the year-ago quarter.

Non-GAAP earnings are expected between 90 cents and $1.38 per share.

The consensus mark for earnings is currently pegged at $1.28 per share, suggesting an increase of 17.4% from the figure reported in the year-ago quarter.

Zacks Rank & Stocks to Consider

Currently, MKS Instruments has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Pixelworks (PXLW - Free Report) , Fortive (FTV - Free Report) and Shopify (SHOP - Free Report) . While Pixelworks sports a Zacks Rank #1 (Strong Buy), both Fortive and Shopify carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Both Pixelworks and Fortive are scheduled to report earnings on Apr 30. Shopify is set to release quarterly results on May 6.

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