Applied Materials Inc.
AMAT
reported first-quarter fiscal 2022 non-GAAP earnings of $1.89 per share, beating the Zacks Consensus Estimate by 2.2%. The bottom line improved 36% year over year but declined 2.6% on a sequential basis.
Net sales of $6.27 billion climbed 21% from the year-ago period’s levels and 2.4% from the previous quarter’s number. The figure also surpassed the Zacks Consensus Estimate of $6.17 billion.
A strong performance by the Semiconductor Systems and Applied Global Services segments drove year-over-year top-line growth.
The company witnessed solid growth in geographies, namely the United States, Japan, Taiwan, Southeast Asia and China, which was another positive.
However, sluggish Display revenues were concerning. Supply-chain constraints were some other major headwinds.
Nevertheless, management remains optimistic about the growing demand for semiconductor and wafer fab equipment.
Applied Materials, Inc. Price, Consensus and EPS Surprise
Applied Materials, Inc. price-consensus-eps-surprise-chart
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Applied Materials, Inc. Quote
Segments in Detail
Semiconductor Systems generated $4.6 billion of sales (which contributed 70.3% to its net sales), reflecting a year-over-year increase of 29%. The outperformance was driven by solid demand across foundry and logic. Strong growth in DRAM revenues created tailwinds. The growing customer momentum for integrated solutions was another positive.
Applied Global Services reported sales of $1.32 billion (22.4% of net sales), which rose 14% from the prior-year quarter’s level. Strong backlog in subscriptions and growth in multi-year subscription bookings contributed well.
Sales from Display and Adjacent Markets were $366 million (6.8% of net sales), down 10.9% from the year-ago level.
Revenues by Geography
The United States, Europe, Japan, Korea, Taiwan, Southeast Asia and China generated sales of $847 million, $281 million, $561 million, $1.12 billion, $1.25 billion, $225 million and $1.99 billion, each contributing 14%, 4%, 9%, 18%, 20%, 3% and 32% to net sales, respectively.
On a year-over-year basis, sales in the United States, Japan, Taiwan, Southeast Asia and China increased 146.9%, 22.5%, 4.1%, 18.4% and 43.7%, respectively. Sales in Europe and Korea fell 6% and 13% from the year-ago quarter’s figures.
Operating Results
The non-GAAP gross margin was 47.3%, expanding 140 basis points (bps) from the year-ago quarter’s level.
Operating expenses were $983 million, down 7.8% from the year-ago quarter’s level. As a percentage of sales, the figure contracted 500 bps year over year to 15.7%.
The non-GAAP operating margin of 31.7% for the reported quarter expanded 270 bps from the prior-year period’s level.
Balance Sheet & Cash Flow
As of Jan 30, 2022, cash and cash equivalents balance, and short-term investments were $5.7 billion compared with $5.5 billion as of Oct 31, 2021.
Inventories were $4.5 billion in first-quarter fiscal 2022 compared with $4.3 billion in fourth-quarter fiscal 2021. Accounts receivables increased to $4.4 billion in the reported quarter from $4.9 billion in the previous quarter.
Long-term debt was $5.454 billion at the end of the reported quarter compared with $5.452 billion at the end of the previous quarter.
Applied Materials generated a cash flow of $2.7 billion, down from $1.15 billion in the prior quarter.
AMAT returned $2.02 billion to its shareholders, of which share repurchases were worth $1.8 billion and dividend payments were worth $214 million.
Guidance
For second-quarter fiscal 2022, Applied Materials expects net sales of $6.35 billion (+/-$300 million). The Zacks Consensus Estimate for the same is pegged at $6.45 billion.
The company anticipates Semiconductor Systems, AGS and Display revenues to be $4.6 billion, $1.35 billion and $380 million, respectively.
Management expects non-GAAP earnings per share of $1.75-$2.05. The Zacks Consensus Estimate for the same is pegged at $1.96.
Applied Materials expects a non-GAAP gross margin of 47%.
Zacks Rank & Stocks to Consider
Currently, Applied Materials carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are
Broadcom
AVGO
,
Intuit
INTU
and
Zscaler
ZS
, each presently carrying a Zacks Rank #2. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Broadcom is scheduled to release first-quarter fiscal 2022 results on Mar 3. It has gained 23.6% over a year. The long-term earnings growth rate for AVGO is currently projected at 14.5%.
Intuit is slated to report second-quarter fiscal 2022 results on Feb 24. It has gained 27.2% over a year. The long-term earnings growth rate for INTU is currently projected at 15.7%.
Zscaler is slated to report second-quarter fiscal 2022 results on Feb 24. It has gained 25.7% over a year. The long-term earnings growth rate for ZS is currently projected at 37.1%.
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