MKS Instruments' (MKSI) Q3 Earnings Beat, Revenues Miss

MKS Instruments MKSI reported third-quarter 2019 adjusted earnings of $1.12 per share, which beat the Zacks Consensus Estimate by a whopping 26 cents but slumped 40.4% year over year.

Revenues of $462.5 million lagged the consensus mark of $471 million and declined 5.1% year over year.

Products revenues (83.5% of total revenues) were $386.2 million, down 9.4% from the year-ago quarter. Services revenues (16.5%) increased 25.3% year over year to $76.3 million.

Quarter Details

Revenues from the semiconductor market (48.2% of total revenues) decreased 14.1% year over year to $222.9 million.

Revenues from advanced markets (51.8% of total revenues) were $239.5 million, up 5.2% from the year-ago quarter.

MKS Instruments, Inc. Price, Consensus and EPS Surprise MKS Instruments, Inc. Price, Consensus and EPS Surprise

MKS Instruments, Inc. price-consensus-eps-surprise-chart | MKS Instruments, Inc. Quote


Segment-wise, Vacuum and Analysis (52% of total revenues) revenues were $240.7 million, down 15.9% year over year.

Light and Motion division revenues (37.3% of total revenues) were $172.6 million, down 14.2% year over year.

Equipment & Solutions segment revenues (12.1% of total revenues) were $55.9 million.

Operating Details

In the third quarter, MKS Instruments’ adjusted gross margin contracted 330 basis points (bps) on a year-over-year basis to 44.3%.

Adjusted EBITDA decreased 31.2% year over year to $98.2 million. Adjusted EBITDA margin was 21.2%, significantly down from 29.3% reported in the year-ago quarter.

Research & development and sales, general & administrative expenses, as a percentage of revenues, expanded 240 bps and 320 bps, respectively.

MKS Instruments reported non-GAAP operating income of $81.3 million, down 37% year over year. Adjusted operating margin was 17.6%, significantly down from 26.5% reported in the year-ago quarter.

Balance Sheet & Cash Flow

As of Sep 30, 2019, MKS Instruments had cash and short-term investments of $475 million compared with $460 million as of Jun 30, 2019.

Term-loan debt outstanding was $895 million after a payment of $50 million made during the third quarter of 2019.

MKS Instruments also paid out dividends worth $10.9 million or 20 cents per diluted share during the reported quarter.

Q4 Guidance

For the fourth quarter of 2019, MKS Instruments anticipates revenues between $445 million and $495 million. The Zacks Consensus Estimate is currently pegged at $451.4 million, indicating a decline of 2% from the figure reported in the year-ago quarter.

Non-GAAP earnings are expected between 85 cents and $1.19 per share. The consensus mark for earnings is currently pegged at 95 cents, suggesting a decline of 38.3% from the figure reported in the year-ago quarter.

Zacks Rank & Other Stocks to Consider

Currently, MKS Instruments sports a Zacks Rank #1 (Strong Buy).

NIC EGOV, Stoneridge SRI and Vonage Holdings VG are similar-ranked stocks in the broader computer and technology sector. You can see the complete list of today’s Zacks #1 Rank stocks here.

While NIC and Stoneridge are set to report quarterly results on Oct 30 and 31, respectively, Vonage Holdings is set to report on Nov 6.

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