Why Applied Materials Earnings Beat Was Not Enough

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When Applied Materials Inc. (NASDAQ: AMAT) released its fiscal third-quarter financial results after the markets closed on Thursday, the company said that it had $1.20 in earnings per share (EPS) and $4.47 billion in revenue. That compared to consensus estimates of $1.16 in EPS on revenue of $4.44 billion, as well as the $0.86 per share and $3.74 billion reported in the year-ago period.

In terms of its segments, the company reported as follows:

  • Semiconductor Systems revenues increased 8.5% year over year to $2.75 billion, with an operating income of $930 million.
  • Applied Global Services revenues increased 21.4% to $954 million, with an operating income of $281 million.
  • Display and Adjacent Markets revenues increased 80.7% to $741 million, with an operating income of $218 million.

Looking ahead to the fiscal fourth quarter, the company expects to see EPS in the range of $0.92 to $1.00 and revenue between $3.85 billion and $4.15 billion. Consensus estimates call for $1.16 in EPS and $4.44 billion in revenue.

Gary Dickerson, president and CEO, commented:

While we have seen some near-term adjustments in customer spending, fiscal 2018 is on track to be another record-setting year for Applied Materials and we expect each of our major businesses to deliver strong double-digit growth. Our future outlook remains positive as the A.I.-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.

Shares of Applied Materials were last seen down about 8% at $43.55 on Friday, with a consensus analyst price target of $65.91 and a 52-week trading range of $42.62 to $62.40.