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Applied Materials Posts Record Earnings; Boosts Guidance

AMAT  Applied Materials, Inc. (NASDAQ: AMAT – 27.68) delivered adjusted earnings for the third quarter of fiscal 2016 of $0.50 well ahead of last year’s $0.33 and two cents better than analysts’ estimates. The world’s largest supplier of tools used to make semiconductors, reported a 13.3% rise in revenue, buoyed by demand from memory and smartphone chipmakers. Net sales for the period was $2.82 billion, a bit below Street views of $2.84 billion. New orders were $3.66 billion, up 6% from AMAT’s second quarter and up 26% from last year. Backlog of $4.95 billion was up 19% percent sequentially and up 60% year-over-year. The company also said that it generated $981 million in cash from operations during the third quarter.

       For the fourth period, Applied Materials expects adjusted earnings of $0.61 to $0.69 per share on sequential revenue growth of 15% to 19%, which equates to about $3.24 billion and $3.36 billion, well above the consensus for $0.48 on earnings and $2.84 billion on revenues. Fiscal 2017 could see earnings per share of $1.85 vs. a revised estimate of $1.64 this year. The stock moved higher after hours on the earnings news and guidance. Although the recent run up in share price – 65% over the past twelve months – has discounted some  of Applied Materials’ long-term appreciation potential, I still like the underlying fundamentals here as semiconductor and wafer fabrication equipment will be needed to supply the energy for future technologies in the years to come.


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