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A month has gone by since the last earnings report for Applied Materials (AMAT). Shares have lost about 1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Applied Materials due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Applied Materials Beats on Q2 Earnings and Revenues
Applied Materials Inc. reported robust fiscal second-quarter 2019 results, with both the top and bottom lines surpassing the Zacks Consensus Estimate.
The company’s pro-forma earnings per share (EPS) of 70 cents beat the consensus mark by 4 cents and came in within the guided range of 62-70 cents. However, the bottom line was down 42.6% year over year and 13.6% sequentially.
Revenues of $3.54 billion surpassed the Zacks Consensus Estimate of $3.48 billion and were within the guided range of $3.33-$3.63 billion.
However, the top line decreased 5.7% sequentially and 22.7% year over year.
Management expects inventory levels to normalize in the near term, creating a favorable environment for capacity investments in 2020. In foundry logic, management expects spending to be up year over year.
However, management continues to expect overall wafer fab equipment spending in 2019 to be down mid to high-teens.
Also, management expects 2019 display revenues to decline from a year ago as customers push out investments. However, the company is positive about the display market over the long term as it is becoming more technology intensive and increasingly dependent on materials innovation. Moreover, Mobile OLEDs and large screen televisions are opening new market opportunities for Applied Materials.
The company sees significant opportunities from emerging trends on the semiconductor and display fronts such as artificial intelligence, big data, cloud infrastructure, Internet of Things (IoT), virtual reality and smart vehicles.
We believe that Applied Materials is in a great position to grow sustainably and profitably, based on its strong pipeline of enabling technologies, supported by expanding opportunities on the semiconductor, service and display fronts.
Let’s delve deeper into the numbers.
Revenues by Segment
The Semiconductor Systems Group (SSG) contributed 62% to its total revenues, reflecting a decrease of 3.7% sequentially and 24.7% year over year.
Applied Global Services (AGS) was the second-largest contributor with 28% revenue share. The segment’s revenues increased 2.3% sequentially and 4.1% from the prior-year quarter.