Shares of Santa Clara, California-based Applied Materials, Inc. (NASDAQ: AMAT – $43.12) moved higher by about 4% in after-hours trading in an otherwise dismal day on Wall Street. The company, which celebrates its fiftieth anniversary later this year, increased third quarter adjusted gross margin by 2.9 points to 46.6%; grew adjusted operating margin by 5.9 points to 28.7%; and increased earnings per share on an adjusted basis by 72% to $0.86 – two cents above Street expectations. The manufacturer of equipment, services and software to the semiconductor and display industries, grew net sales by 33% to $3.74 billion year-over-year. Analysts had been anticipating revenue of $3.68 billion. The company also said it generated a record $1.37 billion in cash from operations, which represented 36% of revenue, and returned $482 million to shareholders through stock repurchases and cash dividends. “With revenue and profits at all-time highs, Applied has tremendous momentum and a very positive outlook for the future,” said CEO Gary Dickerson. “Our markets are growing with a broader set of demand drivers, and the breadth of Applied’s technology enables us to play a larger and more valuable role advancing the innovation road map in semiconductor and display.”
Executives also raised guidance for the fourth quarter of fiscal 2017, and now expects net sales to be in the range of $3.85 billion to $4.0 billion; the midpoint of which would be an increase of about 19% from a year ago. Adjusted diluted earnings is expected to be in the range of $0.86 to $0.94 per share, well above the consensus of $0.82, and the midpoint of the range would be an increase of approximately 36% compared to last year’s fourth period. The growth of this cyclical company may run out of steam over the longer-term, but for now, the shares remain a solid holding for the venturesome. Also, the strong balance sheet and ample cash flow indicate future share buybacks and dividend hikes may be on the horizon.