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Applied Materials Beats Estimates; Guidance Disappoints

Shares of chip and display maker Applied Materials, Inc. (NASDAQ: AMAT – $43.41) are tumbling despite a beat on the top and bottom line as it issued weaker-than-expected guidance for the fiscal fourth quarter. AMAT reported fiscal third-quarter net income of $1.17 billion compared with $925 million in the year-ago period. Adjusted for items related to acquisitions and taxes, among other things, earnings were $1.20 a share vs. $0.86 last year and three cents better than Street views. Revenue rose 19% to $4.47 billion from $3.74 billion in the year-ago period, thanks to record sales in the company’s Global Services and Display segment. Analysts had estimated adjusted revenue of $4.43 billion. For the fiscal fourth quarter, analysts expect adjusted earnings of $1.17 a share on sales of $4.46 billion. The Santa Clara-based company, however, said it sees adjusted earnings $0.92 cents to $1.00 a share and sales of $3.85 billion to $4.15 billion.

       Management has seen some near-term adjustments in customer spending, but fiscal 2018 is on track to be another record-setting year for Applied Materials and the company expects each of their major businesses to deliver strong double-digit growth. CEO Gary Dickerson added: “Our future outlook remains positive as the Artificial Intelligence and Big Data era requires new breakthroughs in technology, from materials to systems, providing Applied with a great opportunity to play a larger and more valuable role in the ecosystem.” With the revised outlook for the remainder of the year, AMAT should still earn $4.43 per share and the stock is reasonably priced at current levels yielding 1.7% on a growing dividend.

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