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Applied Materials Delivers Record Results; Guides in Line with Estimates

Compared to the second quarter of last year, Applied Materials, Inc. (NASDAQ: AMAT – $53.96) grew net sales by 29%. The world’s largest supplier of chip-making equipment said net sales rose to a record $4.57 billion from $3.55 billion and above the $4.47 billion anticipated by analysts. Applied benefited from chipmakers spending heavily to meet rising demand for memory from smartphone makers and other electronic devices. The company increased adjusted gross margin over the same period last year by 0.4 points to 46.7%; grew operating income by 40% to $1.38 billion; and increased earnings per share by 54% to $1.22, which was eight cents above consensus estimates. All three of the company’s operating segments contributed to the results: Semiconductor Systems, Applied Global Services and Display.

       For the third quarter, Santa Clara, California’s Applied Materials is projecting adjusted net income in a range of $1.13 to $1.21 per share on between $4.33 billion to $4.53 billion in revenue. Analysts are expecting earnings of $1.16 per share on revenue of $4.53 billion. Near-term prospects continue to look bright. The company expects its Display revenue to grow more than 30% this year, on top of nearly 60% growth last year, led by the introduction of Gen 10.5 substrates for television manufacturing and organic LED displays for mobile devices. The Semiconductor and Global Services businesses are also likely to grow around 20% in 2018. Full-year earnings should easily top the Wall Street $4.50 per share estimate, providing for a reasonable 12 times earnings at current levels. Appreciation potential out to 2021-2023 looks to be above average and the shares provide investors a 1.45% annual yield, thanks to a recently increased payout.

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