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Applied Materials Beats Forecasts; Growth Prospects Slow

Santa Clara, Californian-based Applied Materials, Inc. (NASDAQ: AMAT – $46.29) a leading supplier of equipment and software for the semiconductor manufacturing industry, said new products under development would deliver growth in the future, after reporting a drop in year-on-year adjusted earnings and sales that was smaller than the market had expected. Net sales fell by 14% to $3.56 billion during the third quarter from $4.16 billion a year ago, but were still slightly ahead of the $3.52 billion average estimate by analysts. Revenue from the company’s largest business, Semiconductor Systems, which supplies gears for chip makers, fell 11.8% to $2.27 billion. It, however, came in above estimates of $2.17 billion. Revenue from the Applied Global Services unit fell slightly, but Display and Adjacent Markets segment revenue fell to $339 million from last year’s $616 million. Adjusted net income also slumped, declining to $0.74 per share from $1.04, but still beat the $0.70 per share consensus.

       Looking ahead, the company cautioned that recovery in the memory chip market is unlikely before 2020. For the final three months of fiscal 2019, the firm expects net sales between $3.54 billion and $3.84 billion, in line with the $3.68 billion market forecast. Earnings per share are set to come in the range of $0.72 and $0.80, which is also in line with the $0.76 per share Street’s view. Traders were looking for more, however, sending the shares lower in today’s trading by over 2%. Full-year 2019 earnings should top $3.00 and Wall Street is looking for $3.50 per share in the next fiscal year. Long-term investors willing to assume the risk seen in the highly volatile semiconductor space may want to maintain positions. The shares yield 1.8%.


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