Why Solid Growth Isn't Propping Up Applied Materials Stock

When Applied Materials Inc. (NASDAQ: AMAT) reported its most recent quarterly results after the markets closed on Thursday, the firm said that it had $0.89 in earnings per share (EPS) and $3.96 billion in revenue. That compared with consensus estimates of $0.95 in EPS and $4.15 billion in revenue, as well as the $0.70 per share and $3.54 billion posted in the fiscal second quarter of last year.

During the most recent quarter, net revenues had increased 12% year over year. The company noted a gross margin of 44.6%, up from 43.5% in the same period of last year.

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

  • Semiconductor Systems net sales increased 17.5% year over year to $2.57 billion, with an operating income of $798 million.
  • Applied Global Services net sales increased 3.5% to $1.02 billion, with an operating income of $260 million.
  • Display and Adjacent Markets net sales increased 4.9% to $365 million, with an operating income of $78 million.

Applied Materials returned $392 million to shareholders, including $199 million in share repurchases and dividends of $193 million. At the end of the quarter, cash, cash equivalents and short-term investments totaled $5.70 billion, compared with $3.62 billion at the end of the previous year.

Note that Applied Materials did not offer any guidance for the fiscal third quarter. Analysts are calling for $0.93 in EPS and $4.13 billion in revenue.

Gary Dickerson, president and CEO, commented:

As we navigate the challenges created by COVID-19, we have rallied the company around safety, productivity and keeping our customers and the industry moving forward. While the situation remains fluid, based on the visibility we have today, our supply chain is recovering, and underlying demand for our semiconductor equipment and services remains robust.

Applied Materials stock traded down 3% at $52.60 early Friday, in a 52-week range of $36.64 to $69.44. The consensus price target is $65.48.