Applied Materials Inc.
AMAT
reported fourth-quarter fiscal 2021 non-GAAP earnings of $1.94 per share, which came in line with the Zacks Consensus Estimate. The bottom line improved 2.1% and 55% on a sequential and year-over-year basis, respectively.
Net sales of $6.12 billion climbed 31% from the year-ago period’s levels but declined 1.2% from the previous quarter’s reading. The figure also missed the Zacks Consensus Estimate of $6.33 billion.
Strong performance by the Semiconductor Systems and Applied Global Services segments drove year-over-year top-line growth. Solid demand for semiconductors acted as a tailwind.
The company witnessed a solid momentum in key geographies, namely the United States, Europe, Korea, Taiwan, Southeast Asia and China, which was another positive.
However, sluggish Display revenues were a concern. Also, supply-chain constraints were major headwinds.
Nevertheless, management remains optimistic about 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 $4.31 billion of sales (which contributed 70.3% to its net sales), reflecting a year-over-year increase of 40%. This outperformance was driven by solid demand across foundry/logic and memory. Further, strong customer momentum for integrated solutions remained a positive.
Applied Global Services reported sales of $1.37 billion (22.4% of net sales), which rose 24% from the prior-year quarter’s level. Strong backlog in subscriptions and a growing 200-millimeter business contributed well.
Sales from Display and Adjacent Markets were $417 million (6.8% of net sales), down 14% from the year-ago level.
Revenues by Geography
The United States, Europe, Japan, Korea, Taiwan, Southeast Asia and China generated sales of $673 million, $331 million, $613 million, $1.004 billion, $1.24 billion, $205 million and $2.06 billion each, contributing 11%, 5%, 10%, 17%, 20%, 3% and 34% to net sales, respectively.
On a year-over-year basis, sales in the United States, Europe, Korea, Taiwan, Southeast Asia and China increased 50.2%, 60.7%, 39.6%, 42.2%, 27.3% and 30.5%, respectively. Sales in Japan fell 13.2% from the year-ago quarter’s reading.
Operating Results
Non-GAAP gross margin was 48.2%, expanding 250 basis points (bps) from the year-ago quarter’s level.
Operating expenses were $931 million, up 9.9% from the year-ago quarter’s level. As a percentage of sales, the figure contracted 290 bps year over year to 15.2%.
Non-GAAP operating margin of 33.1% for the reported quarter expanded 480 bps from the prior-year period’s level.
Balance Sheet & Cash Flow
As of Oct 31, 2021, cash and cash equivalents balance, and short-term investments were $5.5 billion compared with $6.5 billion as of Aug 1, 2021.
Inventories were $4.31 billion in the fiscal fourth quarter compared with $4.12 billion in the fiscal third quarter. Accounts receivables increased to $4.9 billion in the reported quarter from $3.8 billion in the previous quarter.
Long-term debt was $5.452 billion at the end of the reported quarter compared with $5.451 billion at the end of the previous quarter.
Applied Materials generated a cash flow of $1.15 billion, down from $1.7 billion in the prior quarter.
AMAT returned $1.72 billion to its shareholders, of which it repurchased shares worth $1.5 billion and made a dividend payment of $216 million.
Guidance
For first-quarter fiscal 2022, Applied Materials expects net sales of $6.16 billion (+/-$250 million). The Zacks Consensus Estimate for the same is pegged at $6.43 billion.
Applied Materials anticipates Semiconductor Systems and AGS revenues to be $4.46 billion and $1.33 billion each, suggesting a rise of 25% and 15%, respectively, from the corresponding year-ago reported figures. AMAT projects Display revenues at $350 million.
Management expects non-GAAP earnings per share to be $1.78-$1.92. The Zacks Consensus Estimate for the same is pegged at $1.96 per share.
Further, Applied Materials expects non-GAAP gross margin to be 47.4%.
Zacks Rank & Stocks to Consider
Currently, Applied Materials carries a Zacks Rank #3 (Hold).
Investors interested in the broader technology sector can consider some better-ranked stocks like
ON Semiconductor
ON
,
Advanced Micro Devices
AMD
and
Mimecast
MIME
. While ON Semiconductor sports a Zacks Rank #1 (Strong Buy), Advanced Micro Devices and Mimecast carry a Zacks Rank #2 (Buy), presently. You can see the complete list of today’s Zacks #1 Rank stocks here.
ON Semiconductor has gained 93.9% on a year-to-date basis. The long-term earnings growth rate for the stock is currently projected at 53.9%.
Advanced Micro Devices has soared 69% on a year-to-date basis. The long-term earnings growth rate is currently projected at 46.2%.
Mimecast has surged 47.2% on a year-to-date basis. The long-term earnings growth rate is currently predicted at 35%.
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