Applied Materials (AMAT) Shares Rally on Earnings Beat, Outlook

Shares of Applied Materials Inc. were trading up +1.39 or +8.10 percent to $18.56 per share in Friday’s premarket after the company announced better than expected earnings for its first fiscal quarter of 2016 yesterday after the market close. The company also issued better than expected guidance for the second quarter. Applied Materials stock closed at $17.17 per share, up +0.03 or +0.18 percent in Thursday’s regular trading session.

Santa Clara, California based Applied Materials Inc. is the world’s largest manufacturer of equipment used in the making of semiconductors, flat panel displays, solar photovoltaic and other related industries.
Applied Materials develops and commercializes nanomanufacturing technology for producing integrated circuit (semiconductor) chips for electronic devices, flat panel displays for computers, smartphones and televisions, as well as glass coatings for buildings and homes. The company is separated into four main groups: Silicon Systems Group, Applied Global Services, Display, and Energy and Environmental Solutions.

The company reported earnings of $286 million for its first fiscal quarter of 2016 or $0.25 per share versus $348 million or $0.28 per share in the same period one year ago. On an adjusted basis, earnings came to $0.26 per share. Revenue came to $2.26 billion, which was -4.2 percent lower than the same period one year ago. Orders for the quarter came to $2.28 billion, down six percent quarter on quarter and flat year on year. The analyst consensus was for the company to report earnings per share of $0.25 on revenue of $2.24 billion.

President, Chief Executive Officer and Director for Applied Materials, Gary E. Dickerson said in the company’s conference with analysts after the earnings release that, “The outlook for 2016 we think is very strong. And beyond 2016, we also believe that there are great opportunities for growth. We have a strong position in transistor and interconnect as foundry and logic moves to the new technology node, very strong pull for Etch deposition tools also, especially in the memory space, but certainly in patterning and future technology nodes. We're growing service, growing the display business, and we believe that's sustainable growth in those markets.”

Applied generated $207 million in cash from operations in the first quarter, used $625 million in the repurchase of 35 million of its common shares and paid dividends of $115 million. For the company’s second quarter, Applied is expecting adjusted earnings per share of $0.30 to $0.34 with revenue increasing five to ten percent sequentially. Analysts expected the company to issue guidance of $0.26 per share on revenue of $2.28 billion for the second quarter.

Applied Materials stock has recovered significantly since trading below $15 per share as recently as last September. With this morning’s premarket action, the stock is back to where it began the year at $18.67 per share. As the company’s sales continue improving, the stock could make its way back to $25 per share where it was trading in February of 2015.

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Published on Feb 19, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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