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Applied Materials (AMAT) Set to Top Estimates in Q2 Earnings

We expect semiconductor company, Applied Materials, Inc.AMAT , to beat expectations in its second-quarter fiscal 2017 results on May 18.

Applied Materials' results surpassed the Zacks Consensus Estimate in each of the preceding four quarters with an average positive surprise of 3.92%.

In the last one year, shares of the company outperformed the Zacks categorized Semiconductor Equipment Wafer Fabrication industry. While the industry gained 74.3%, the stock returned 118.8%.

Why a Likely Positive Surprise?

Our proven model shows that Applied Materials is likely to beat on earnings because it has the right combination of the two key ingredients.

Zacks ESP : The Most Accurate estimate and the Zacks Consensus Estimate stand at 77 and 76, respectively, resulting in an Earnings ESP of +1.32%.This is an indicator of a positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Applied Materials carries a Zacks Rank #2 (Buy).

Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. The Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement,especially when the company is witnessing negative estimate revisions.

The combination of Applied's favorable Zacks Rank and positive Earnings ESP makes us confident of an earnings beat.

What is Driving the Better-Than-Expected Earnings?

Applied Materials is one of the world's largest suppliers of fabrication equipment to semiconductor, LCD and solar PV cell manufacturers. The company's inflection-focused innovation strategy is the main growth driver.

Applied Materials has a solid product line and management has stepped up investments to prepare for the ongoing transition to larger wafer sizes and smaller process nodes. The demand for its products and services is expected to remain strong in the near future driven by continuous adoption of new technologies by semiconductor and display customers. It also sees significant opportunities in the patterning market.

The company remains strongly positioned in China where it continues to see growth in semiconductor orders. Growing investments from Chinese domestic manufacturers will continue to be the main catalysts.

There is scope for share gains on the Display side of the business. New displays technologies like OLED are opening up new market opportunities for Applied Materials. Rapid growth in large-format TVs has opened up opportunities to invest in new Gen 10.5 capacity. Applied Materials is currently tracking seven Gen 10.5 projects.

The Company is in a great position to grow sustainably and profitably based on its strong pipeline of enabling technologies, supported by expanding opportunities on the semiconductor, service and display fronts.

We expect the company to report strong results in the upcoming quarter.

Applied Materials, Inc. Price and EPS Surprise

Applied Materials, Inc. Price and EPS Surprise | Applied Materials, Inc. Quote

Stocks to Consider

You can consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank.

Deere & Company DE , with an Earnings ESP of +4.27% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Wal-Mart Stores, Inc. WMT , with an Earnings ESP of +1.04% and a Zacks Rank #3.

Eagle Materials Inc. EXP , with an Earnings ESP of +1.16% and a Zacks Rank #2.

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Applied Materials, Inc. (AMAT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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