Aggressive · Stocks to Consider and Updates

Applied Materials Results Beat Consensus; Brightens Outlook

AMAT  Santa Clara, California-based Applied Materials, Inc. (NASDAQ: AMAT – $18.73), a global leader in materials engineering solutions for the semiconductor, display and solar industries, reported results for its first quarter ended January 31, 2016, with adjusted gross margin of 42.4%, operating margin of 17.8%, and net income of $302 million or $0.26 per share. First quarter orders were $2.28 billion, down 6% sequentially and flat year over year. Net sales were $2.26 billion, down 5% sequentially and down 4% from a year ago. Analysts had forecast $2.24 billion in revenue and earnings equal to $0.25 per share. The company’s display business was a bright spot, thanks to strong demand for equipment from makers of organic light-emitting diode screens. Orders in the business jumped 71% in the first quarter. 

       Applied Materials gave an upbeat profit outlook for its current quarterr that edged above Wall Street expectations, despite flat orders. For its fiscal second quarter ending in April, AMAT forecast adjusted share earnings of $0.30 to $0.34 vs. consensus of $0. 27. Pointing to strong growth prospects in China, the company forecast revenues to grow 5% to 10% sequentially to about $2.39 – $2.51 billion, straddling the $2.43 billion consensus. I believe the stock offers meaningful price appreciation potential three to five years out, supplemented by a decent dividend yield of 2.3%. All in all, this equity is well worth holding for aggressive investors with a longer-term horizon.


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