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Applied Materials Posts Strong Results; Ups Guidance

Semiconductor equipment and display manufacturer Applied Materials, Inc. (NASDAQ: AMAT – $62.23) posted fourth quarter revenue of $3.8 billion, which came in toward the high end of management’s expected range and was about 2% ahead of the consensus estimate. Revenue was off 7% year-over-year, but up 5% sequentially, driven by solid demand in the Foundry & Logic segment. Earnings per share reached $0.80, four cents better than estimates. Management noted that the third-quarter trends of inventory reductions in memory chips, rising demand for NAND chips and strong demand for foundry and logic equipment strengthened into the fourth period. For the 2020 fiscal first quarter, the company now expects revenue of roughly $4.1 billion and earnings of $0.87 to $0.95 per share. Guidance was well ahead of most Street revenue and earnings estimates of $3.70 billion and $0.86 per share.

       For the full year, management is looking for sustained strength in the Foundry & Logic segment and an increase in memory investments, with NAND recovering ahead of DRAM. In the Display business, revenue is likely to be flat versus 2019, as weakness in the TV market will be offset by stronger demand from handsets. Shares are higher by over 9% in today’s trading and are not cheap at current levels. However, long-term holdings are still warranted in aggressive accounts.

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