Applied Materials, Inc.
) is scheduled to announce its fiscal second-quarter 2012 results
on May 17, 2012. We witness only one downward movement in analyst
estimates in the build-up to the release.
Applied'sfirst quarter 2012 pro forma earnings were above the
Zacks Consensus Estimate due to higher revenue and
Revenue growth was weak in the Applied Global Services (AGS)
segment, while all other business segments did better than
expected. The softening at 200mm was the main reason for the
decline in theAGS segment, and Applied expects this to continue
through the first half of 2012.
Orders in the quarter were up 25.9% sequentially due to order
improvement in the SSG and Display segments. The higher demand for
TVs and mobile devices in SSG and Display were the main reasons for
the increase. Gross margins also improved sequentially to 40.7%
mainly on account of the richer mix of SSG.
Second Quarter Guidance
Applied now projects second quarter revenue to be up 5-15%
sequentially, with SSG (including Varian) increasing 15-25%
sequentially,AGSto be up 5-10%, Display being flat to down 25% and
EES to be down more than 40%. The non-GAAP EPS is expected to come
in at 20-28 cents a share. For the second quarter, the Zacks
Consensus Estimate is pegged at 24 cents, below the guided
(Detailed earnings results can be viewed in this blog:
Applied Guides Above Expectations
Agreement of Analysts
Out of the 17 analysts providing estimates for the second
quarter, none made any revisions in the last 30 days. For fiscal
2012, only 1 analyst made a downward revision over the same 30-day
A few analysts expect a decent second quarter with revenue and
earnings in line with guidance of $2.4 billion and $0.24,
respectively. They believe that pressure in both Display and Solar
will be partially offset by growth in Silicon and a modest
improvement in Service, helping results to match the guidance.
Also, a few analysts expect revenue to come in modestly above
the mid-point of guidance, consistent with its peers including
Novellus Systems, Inc.
Additionally, the analysts believe Applied is benefiting from
continued strength in the foundry market, as many of the key
players have maintained or increased their levels of spending. In
Taiwan Semiconductor Manufacturing Co. Ltd.
) has increased its capex guidance by more than 30% for 2012 at its
1Q12 earnings call.
With TSMC likely employing multiple patterning at its 28nm ramp,
the analysts believe Applied's CMP tools will be in high demand,
given the additional steps and layers required in the chip
manufacturing process. According to Gartner, Applied is the market
leader in CMP equipment, with approximately 67% of the total market
Magnitude of Estimate Revisions
In the past 30 days, there was no change to the Zacks Consensus
Estimate for the second quarter and fiscal 2012.
Over the 90-day period, the Zacks Consensus Estimate increased 7
cents to 24 cents for the second quarter and 13 cents to 94 cents
for fiscal 2012.
The recent strength in semi-cap orders and shipments could be
the reason for the increase in estimates.
We expect a decent second quarter due to higher overall
semiconductor equipment spending levels. Though we believe there is
potential in the solar energy market over the long term, we remain
cautious about the company's efforts since management has already
missed several targets to bring its solar division to
Nevertheless, we remain positive on Applied's strong position in
the semiconductor market, the solar business in China, a vast
portfolio and strategic relationships. The semiconductor business
appears to be improving, both on account of strengthening end
markets and the Varian acquisition.
Applied, which competes with other large equipment makers, such
as KLA-Tencor, Lam Research and Novellus Systems, holds a Zacks #3
Rank that translates into a short-term Hold rating.
APPLD MATLS INC (AMAT): Free Stock Analysis
KLA-TENCOR CORP (KLAC): Free Stock Analysis
LAM RESEARCH (LRCX): Free Stock Analysis Report
NOVELLUS SYS (NVLS): Free Stock Analysis Report
TAIWAN SEMI-ADR (TSM): Free Stock Analysis
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