Applied Materials Inc. ( AMAT – Free Report) reported robust results for the second quarter of 2018, with both the top and bottom lines outperforming Zacks consensus estimates.
Pro forma earnings per share (EPS) of $ 1.22 outperformed the consensus mark by 9 cents, above the $ 1.10-1.18 per share range. Income increased 15% sequentially and 55% year-on-year.
Revenues of $ 4.57 billion surpassed the consensus mark by $ 115 million, exceeding the band of $ 4.35-4.55 billion, up 8.6% sequentially and 28 year-on-year, 8th%. Sales growth was supported by higher demand in most regions.
Despite the strong second-quarter results, the company's share price fell 4.48% due to the unexpectedly weak third-quarter guidance. Over the last 1
The innovation-oriented innovation strategy was the most important growth driver. The company continues to make technological advances in semiconductors and flat panel displays. 3D NAND, DRAM and patterning have led to significant market share gains.
Applied Materials has well-differentiated products and high market shares in foundry and logic. The storage market share is also significantly improved. Management expects robust double-digit growth in semiconductor, display and service business in 2018.
Applied Materials remains strongly positioned in China, where it continues to see robust growth in semiconductors and displays. Growing investments by Chinese domestic manufacturers were the main catalysts.
Remarkably, the company has achieved significant growth in semiconductor expansion, particularly in the display area. Mobile OLEDs and big screen TVs open up new market opportunities for Applied Materials.
Applied Materials sees significant opportunities through emerging trends in semiconductor and display fronts such as artificial intelligence, big data, cloud infrastructure, Internet of Things (IoT), virtual reality, and smart vehicles.
We believe Applied Materials will be able to grow sustainably and profitably, with a strong pipeline of enabling technologies supported by growing opportunities on the semiconductor, service and display fronts.
Let's delve into the numbers.
Sales by Segment
The Semiconductor Systems Group (SSG) contributed 65.7% to sales, an increase of 5.3% over the previous quarter and 24.8% over the previous year equivalent. 19659003] Applied Global Services (AGS) was the second largest supplier, with a 20.7% share of sales. Segment sales increased sequentially by 7.2% and by 30.2% year-on-year.
The Display segment grew 31.9% compared to the first quarter, up 53.5% from a year ago and contributed 13.1% to sales] Geography sales
Korea contributed 27% % to sales, China 25%, Taiwan 16%, Japan 11%, United States 9%, Europe 7% and Southeast Asia 5%.
Sequentially, Taiwan was the weakest, at 3.8%. All other regions improved sequentially.
Similarly, only Taiwan fell 15.8% year-on-year. All other regions showed improvements.
The pro forma gross margin was 46.7%, sequentially flat, but up 40 bps over the same quarter last year.
Applied Materials operating expenses increased 5% sequentially and 14% year-over-year to $ 724 million. The operating margin of 30.2% increased sequentially by 60 basis points and by 240 basis points year-on-year.
On a pro forma basis, Applied Materials achieved net income of $ 1.27 billion, or $ 1.22, compared with $ 861 million (79 cents per share) ) a year ago
Our pro forma calculation excludes restructuring, acquisition, impairment and other charges as well as tax adjustments in the quarter under review.
GAAP-based The Company Generated Net Income of $ 1.13 Billion ($ 1.09 Per Share) Compared to $ 824 Million (76 Cents Per Share) a Year ago
End of the Second Quarter Inventories increased from $ 3.13 billion in the previous quarter to $ 3.49 billion. Trade receivables increased from $ 2.18 billion in the previous quarter to $ 2.67 billion. Cash and cash equivalents were $ 5.35 billion compared to $ 6.8 billion in the previous quarter.
The company generated $ 611 million from operating activities. The company spent $ 121 million on capex and returned $ 2.5 billion and $ 105 million through share repurchases and cash dividends, respectively.
Applied Materials issued guidelines for the third quarter of fiscal 2018, expected to be between $ 4.33 billion and $ 4.53 billion, an increase of 18 percent compared to the previous year. The Zacks Consensus Estimate is estimated at $ 4.50 billion.
Non-GAAP earnings per share are expected to be between $ 1.13 and $ 1.21 per share, an increase of 36 percent over the year-ago quarter. The Zacks Consensus Estimate is set at $ 1.14 per share.
Zacks Rank and Stocks to Consider
Applied Materials wears a Zacks Rank # 3 (Hold). Some better-rated stocks in the technology sector are Littelfuse, Inc. ( LFUS – Free Report), with a Zacks Rank # 1 (Strong Buy), while SMC Corporation ( SMCAY – Free Report) and Amazon. com, Inc. ( AMZN – Free Report), both wore a Zacks Rank # 2 (buy). For the full list of Zack's # 1 rank stocks today, see
Littelfuse, SMC, and Amazon's long-term growth rates are estimated at 12%, 13.7%, and 30.2%, respectively.
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