Semiconductor equipment maker Applied Materials, Inc. (NASDAQ: AMAT – $19.91) said second quarter orders were $3.45 billion, up 52% from the first period and 37% percent year over year. The orders were the highest in fifteen years. Backlog of new orders increased to $4.17 billion. Net sales of $2.45 billion were up 9% from the first quarter ended January and flat from a year ago. The revenue results were near the high-end of management’s guidance and slightly better than the $2.4 billion expected by the Street. AMAT’s services unit – the business that services its chip manufacturing machines – also reported sales above analyst predictions. The company recorded adjusted earnings of $0.34 per share vs. $0.29 last year and two cents above consensus. The company generated $481 million in cash from operations during the second quarter and was able to pay dividends to investors of $113 million and used $900 million to repurchase 45 million shares of stock. In the third quarter of fiscal 2016, ending in July, Applied expects net sales to be up 14% to 18% from the second quarter and adjusted earnings to be in the range of $0.46 to $0.50, well above analysts’ estimates of $0.36. The shares were up about 3.5% in after-hours trading, following the report.
Applied Materials stock, in my opinion, offers above-average price appreciation potential over the coming three to five years, as well as dividend increases and additional share buybacks. Overall, the business fundamentals remain positive, albeit cyclical, and aggressive investors can maintain positions.