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Applied Materials (AMAT): Will It Surprise in Q1 Earnings?

Applied Materials, Inc.AMAT is set to report fiscal first-quarter 2017 results on Feb 15. Last quarter, it posted a positive earnings surprise of 1.54%. Let's see how things are shaping up for this announcement.

Over the past one year, shares of Applied Materials outperformed the Zacks categorized Semiconductor Equipment Wafer Fabrication industry. While the industry gained 72.97%, the stock returned 120.80%.

Factors at Play

Applied Materials reported strong fiscal fourth-quarter results, with both the top and bottom line coming ahead of the Zacks Consensus Estimate. Also, the company's revenues, orders and earnings were at an all-time high.

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 ramp up in FinFET, 3D NAND and new display technology will likely be the catalysts.

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

There is also scope for share gains on the Display side of the business. New display technologies like OLED are opening up new market opportunities for Applied Materials. The available market opportunity is now more than ten times that of traditional LCD.

Developing trends in mobility, connectivity, video and wearable devices are fueling growth in the industry. This, in turn, is expediting advancement in mobile processors, solid-state storage and interactive displays.

The company has focused its structure and talent around key areas of value creation. It plans to align its product portfolio in a way that it generates the best returns for clients.

All these factors will likely lead the company to report decent results in the upcoming quarter. However, increasing competition, high fixed-cost structure and customer concentration remain major concerns.

In the to-be-reported quarter, management expects revenues between $3.20 and $3.34 billion and non-GAAP EPS of 62 to 70 cents.

Earnings Whispers?

Our proven model does not conclusively show that Applied Materials will beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 66 cents. Therefore, the Earnings ESP for the company is 0.00%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Applied Materials carries a Zacks Rank #3 which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Applied Materials, Inc. Price and EPS Surprise

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

Other Stocks to Consider

Applied Materialsis not the only firm looking up this earnings season. We also see a likely earnings beat for each of the following companies:

Applied Optoelectronics AAOI with an Earnings ESP of +15.87% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Seagate Technology plc STX , with an Earnings ESP of +1.92% and Zacks Rank #1.

GoDaddy Inc. GDDY with an Earnings ESP of +12.50% and a Zacks Rank #3.

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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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