Applied Materials, Inc.
) is scheduled to announce its fiscal third-quarter 2012 results
today after the bell. We see some downward movement in analyst
estimates in the build-up to the release.
Applied's second quarter 2012 pro forma earnings were above the
Zacks Consensus Estimate due to higher revenue and
lower-than-expected operating expenses.
Revenue for the quarter was up sequentially, driven by strength in
the silicon business. The Display business also rebounded, with
revenues coming in much higher than management's expectations.
However, revenue growth was weak in the Energy and Environmental
Systems (EES) segment due to excess capacity at customers.
Orders in the quarter were up 37.7% sequentially as orders improved
across all segments. Gross margins also improved sequentially to
42.1%, mainly on account of the richer mix of SSG.
Detailed earnings results can be viewed in the blog titled
Few Surprises in Applied's Q2
Third Quarter Guidance
Applied now projects third quarter revenue to be down 0-10%
sequentially, with Silicon Systems Group (SSG) decreasing 5-10%
sequentially and Applied Global Services (AGS) increasing 0-10%.
Display and EES segment revenues are expected to be in the range of
flat to +/-20%. Non-GAAP EPS is expected to come in at 21-29 cents
The Zacks Consensus Estimate for the third quarter is currently 22
cents, at the lower end of the company's guided range and down 4
cents since the second quarter earnings announcement. The downward
revision was due to the company's announcement at Semicon West that
third-quarter revenue would decline by at least 10%.
Agreement of Analysts
Out of the 15 analysts providing estimates for the third quarter,
none made any revision in the last 30 days. For fiscal 2012, 4 out
of 18 analysts made downward revisions over the same 30-day time
The majority of analysts now expect revenue to decline 10%
sequentially, with the SSG segment revenues declining 15%. However,
the SSG segment is expected to rebound once there is an improvement
in the broader demand environment.
They also expect non-semi (solar, display) segments to remain
weak due to overcapacity in the market and subsidy cutbacks. As a
result, they believe that the current bookings momentum is
unsustainable in the second half of 2012.
APPLD MATLS INC (AMAT): Free Stock Analysis
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To read this article on Zacks.com click here.
Magnitude of Estimate Revisions
In the past 30 days, there was no change in the Zacks Consensus
Estimate for the third quarter, but the estimate for fiscal 2012
was down 4 cents.
Over the 90-day period, the Zacks Consensus Estimate decreased 4
cents to 22 cents for the third quarter and by 14 cents to 80 cents
for fiscal 2012.
We do not expect strong third quarter results, consistent with
management's commentary at Semicon West that sales will decline
sequentially by 10% or more. Though we believe that 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.
Competition from large equipment makers, such as
Lam Research Corp
) are as strong as ever. We believe that Applied's shares are
unlikely to see much appreciation this year and retain a Zacks #5
Rank on the shares, which translates to a short-term Strong Sell