Manufacturing technology expert MKS Instruments (NASDAQ: MKSI) reported third-quarter results after the closing bell on Wednesday. The maker of measuring devices, control systems, and process monitoring tools for a wide variety of advanced manufacturing equipment performed far above expectations. MKD Instruments crushed analyst expectations in the third quarter, sending share prices sharply higher.
Here's a quick look at MKS Instruments' solid results amid a difficult market environment.
MKS Instruments' third-quarter results by the numbers
|Metric||Q3 2019||Q3 2018||Change|
|Revenue||$463 million||$487 million||(4.9%)|
|GAAP net income||$47.4 million||$93.3 million||(49%)|
|Adjusted earnings per share (diluted)||$1.12||$1.88||(40%)|
What's new with MKS Instruments?
- The reported results, while lower than their year-ago counterparts, left the analyst consensus far behind. Wall Street analysts had been expecting adjusted earnings near $0.87 per share on revenues in the neighborhood of $443 million.
- Sales in the semiconductor division fell 14% year over year, landing at $223 million. The advanced markets segment saw revenues rise 5% to $239 million. These year-over-year comparisons include the acquisition of Electro Scientific Industries. This deal closed in February and added $7 million to the semiconductor segment's third-quarter sales alongside $42 million of advanced market revenues.
- Not counting the Electro Scientific buyout, organic revenues fell 15% year over year in the semiconductor market and dropped 13% lower in advanced markets.
- On the bottom line, the top end of the guidance range stopped at $1.02 per share with a midpoint hovering near the analyst view. MKS Instruments' gross margins, operating expenses, and interest payments all fell near the midpoint of management's guidance in the second-quarter earnings call. This solid earnings surprise simply stemmed from fiscal discipline and top-line sales at the very top of the given guidance range.
Pearls of wisdom from the executive suite
The company is finding ways to make do despite bumpy and unpredictable market conditions.
"Although our Advanced Markets remain constrained due to global macro-economic and trade uncertainty, we remain very excited about our product and market offerings into 2020 and beyond," said CEO Gerald Colella in a prepared statement.
In other words, MKS Instruments is feeling the pinch from Chinese-American trade tensions and tariffs. Three months ago, Colella explained his modest guidance targets with softening demand for consumer devices, tariffs, and the American import ban on products by major client Huawei. All of these headwinds are still in play.
MKS Instruments set its fourth-quarter revenue guidance at roughly $470 million. At the midpoint of that projected sales level, adjusted earnings should land near $1.02 per share. Both projections are in line with current analyst expectations. The targets, which include significant contributions from the Electro Scientific buyout, can be compared to adjusted earnings of $1.54 per share on $461 million in revenues for the fourth quarter of 2018.
Investors had been expecting a far weaker performance from MKS Instruments. After a 14% jump in after-hours trading, the stock is trading at a reasonable 22 times trailing earnings. Share prices have more than doubled in three years and tripled in half a decade. Despite far from ideal market conditions, MKS Instruments is on a roll.
10 stocks we like better than MKS Instruments
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and MKS Instruments wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 1, 2019