Applied Materials, Inc.
) is set to report first quarter 2013 results on Feb 13. Last
quarter it posted a 100% positive surprise. Let's see how things
are shaping up for this announcement.
Growth Factors This Past Quarter
Though Applied's fourth quarter revenues were down year over
year, the results exceeded management guidance owing to
better-than-expected performance at the SSG segment. We believe
) Ultrabook partners and
) Windows 8 adopters may have also helped demand.
The fourth quarter was very weak for Applied in terms of
margin growth. Despite the company seeing some improvement in
demand, the heavy expenditure incurred on the launch of new
products and higher input costs impacted margins.
Though there is potential in the solar energy market over the
long term, the company's solar division has taken longer than
expected to reach profitability. The company posted weak results
in the last quarter due to a sluggish macro environment. Given
lower overall semiconductor equipment spending levels and lack of
momentum in the solar energy market, we do not see much
improvement in the company's results in the near term.
The Zacks Consensus Estimate for the first quarter stands at 3
cents while that for fiscal 2013 stands at 54 cents.
Applied has beaten estimates in all of the last four quarters,
with a trailing four-quarter average positive surprise of 42.90%.
However, the stock has seen downward estimate revisions in the
past 30 and 60 days.
The Zacks Consensus Estimate has remained unchanged for the
first quarter as well as for 2013 over the last 60 days. But the
Zacks Consensus Estimate has gone down by almost 70% and 27.0%,
respectively for the first quarter and fiscal 2013 over the last
The downward pressure on estimates signals a weak first
quarter despite a 100.0% positive surprise in the last quarter.
Moreover, the stock carries a Zacks Rank #3 (Hold).
We caution against stocks with a Zacks Rank #4 and #5 (Sell
rated stocks) going into the earnings announcement, especially
when the company is seeing negative estimate revisions
Other Stocks to Consider
Our model states that astock needs to have both a positive
earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1, #2 or #3 to beat earnings estimates. You
could, therefore, consider other stocks instead like:
), with an ESP of +15.79% and a Zacks Rank #2 (Buy).
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