Applied Materials Delivers Strong Growth; Doubles Dividend

Applied Materials, Inc. (NASDAQ: AMAT – $51.99) the world’s largest supplier of tools for chipmakers, reported a rise in first-quarter revenue, driven by higher demand for flat panel displays and chips used in electronic items. Total revenue of $4.20 billion was up 28% year-over-year and better than the analyst consensus of $4.11 billion. Adjusted earnings came in at $1.06 per share, up 58% from last year’s $0.67 and ahead of expectations of $0.98. The Santa Clara, California company increased its adjusted gross margin by 1.3 points to 46.7 percent and bettered cash flow from operations by 85% from last year to $1.47 billion. In addition, the Board of Directors has approved a doubling of the quarterly cash dividend to $0.20 per share, payable on June 14, 2018 to shareholders of record as of May 24, 2018. The new annualized payout will yield 1.5% at current levels. The Board also approved a new $6 billion share repurchase authorization; incremental to $2.8 billion remaining in the previously approved authorization.

       For the second quarter, the company expects sales in the range of $4.35 to $4.55 billion and adjusted earnings in the range of $1.10 to $1.18 per share, vs. the Street view of $4.22 billion in sales and earnings of $1.01 per share. Attracted by the company’s earnings growth, investors have driven the stock price up nearly 48% over the past twelve months. Despite the rise, appreciation potential out to 2020-2022 is above average in my view and shares can be maintained in a well-diversified aggressive account.

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