Bull of the Day: Axcelis Technologies (ACLS)

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The semiconductor sector has been hot as of late, and these companies are producing more efficient and powerful products. But at many times, these companies outsource some of their parts for production. That is where our Zacks Bull of the Day comes in, Axcelis Technologies ( ACLS ).

This Zacks Rank #1 (Strong Buy) company is a leading producer of ion implantation equipment used in the fabrication of semiconductors. The company also produces dry strip, photostabilization and rapid thermal processing equipment, which is used in semiconductor manufacturing primarily before and after the ion implantation process. In addition, the company provides extensive aftermarket service and support, including spare parts, equipment upgrades, maintenance services and customer training.

Recent Earnings Results

On February 1st, management posted Q4 earnings results where they beat the Zacks consensus earnings estimate, and came in just shy of the Zacks consensus revenue estimate. The company saw sequential gains in revenues +5.6%, operating profit +63.9%, net income +81.2%, and cash, and cash equivalents +7.2%.

Further, the company saw gross margins improve by 220 basis points to a near record level of 37.3%. Management is targeting gross margins of 40% by Q4 17, and they are currently ahead of that goal, one year out. The company has been focused on efficiency and product optimization mix to achieve the 40% gross margin target.

Management's Take

According to Mary Puma, President and CEO, " 2016 was a strong year for the Purion platform as our customer base expanded significantly, and we successfully introduced several new product extensions. We expect 2017 to be the start of a solid up cycle for the industry, with robust implant CAPEX spending, providing Axcelis with substantial opportunities for continued growth ."

" I am pleased with our financial performance in 2016. We increased gross margins to 37.3%, up from 33.7% in 2015," said Chief Financial Officer and Executive Vice President Kevin Brewer. "We expect to realize further improvements in gross margin in 2017 with continued focus on supply chain optimization, value engineering and lean programs ."

Price and Earnings Consensus Graph

As you can see in the graph below, ACLS's stock price has been soaring since the middle part of 2016, and their 2017 estimates are rising along with the stock price.

Axcelis Technologies, Inc. Price and Consensus

Axcelis Technologies, Inc. Price and Consensus | Axcelis Technologies, Inc. Quote

The second graph shows ACLS's performance against the tech heavy NASDAQ Index over the past year.

Increasing Earnings Estimates

Over the past 30 days ACLS's earnings estimates have risen for Q1 17, FY 17, and FY 18; Q1 17 improved from $0.19 to $0.22, FY 17 jumped up from $0.75 to $0.96, and FY 18 rose from $1.59 to $1.71.

Bottom Line

Management's focus on structural gains, such as efficiency and product optimization, has led to significant improvements in gross margins, and net income. While they are ahead of schedule, management continues to look for ways to improve their overall performance. The company is seeing tailwinds from robust China demand, and a recovery in Europe.

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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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