Yahoo Finance Why Is MKS Instruments (MKSI) Down 13.3% Since Last Earnings Report?
It has been about a month since the last earnings report for MKS Instruments (MKSI). Shares have lost about 13.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MKS Instruments due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
MKS Instruments’ Q2 Earnings Beat, Revenues Miss
MKS Instruments reported second-quarter 2019 adjusted earnings of $1.09 per share, which beat the Zacks Consensus Estimate by a penny but decreased 53.2% year over year.
Revenues of $474.1 million lagged the consensus mark of $487 million and declined 17.3% year over year.
Products revenues (84.6% of total revenues) were $401.3 million, down 21.3% from the year-ago quarter. Services revenues (15.4%) increased 15.3% year over year to $72.8 million.
Quarter Details
Revenues from semiconductor customers (45.1% of total revenue) decreased 36.4% year over year to $214 million.
Revenues from advanced markets (54.9% of total revenue) were $260.1 million, up 9.9% from the year-ago quarter.
The company’s Vacuum and Analysis segment (49.7% of total revenue) reported revenues of $235.7 million, down 36% year over year primarily due to a slowdown in semiconductor capital equipment spending.
Light and Motion division revenues (38.5% of total revenue) were $182.6 million, down 10.9% year over year.
Equipment & solutions segment revenues were $55.9 million.
Operating Details
In the second quarter, MKS Instruments’ adjusted gross margin contracted 290 basis points (bps) on a year-over-year basis to 45%.
Adjusted EBITDA decreased 41.7% to $103.4 million. Adjusted EBITDA margin was 21.8%, significantly down from 30.9% reported in the year-ago quarter.
Research & development and sales, general & administrative expenses, as a percentage of revenues, expanded 250 bps and 430 bps, respectively.
The company reported non-GAAP operating income of $88.4 million, down 45.5% from the year-ago quarter. Adjusted operating margin was 18.6%, significantly down from 28.3% reported in the year-ago quarter.
Balance Sheet
As of Jun 30, 2019, MKS Instruments had cash and cash equivalents of $460 million. Term-loan debt outstanding is $947 million after a payment of $50 million made during the second quarter of 2019.
MKS Instruments also paid a dividend of $10.9 million or 20 cents per diluted share during the reported quarter.
Guidance
For the third quarter of 2019, MKS Instruments anticipates revenues between $415 million and $465 million.
Non-GAAP earnings are expected between 69 cents and $1.02 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -35.65% due to these changes.
VGM Scores
At this time, MKS Instruments has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise MKS Instruments has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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