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Applied Materials (AMAT) Q4 Earnings In Line, Sales Rise Y/Y

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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 and EPS Surprise
Applied Materials, Inc. Price, Consensus and EPS Surprise

Applied Materials, Inc. price-consensus-eps-surprise-chart | 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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