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Category: Stock Market and Applied Materials
Date: 15 November 2019 Stock Price: $62.87 We take a look at the 4th quarter earnings release of their 2019 fiscal year of materials engineering firm, Applied Materials
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About Applied Materials
Applied Materials, Inc. (Nasdaq: AMAT) is the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations make possible the technology shaping the future.
We provide a comprehensive portfolio of semiconductor and display services designed to help customers meet their manufacturing challenges. From startup to fab expansion, from pilot lines to mass production, we have a service plan to ensure your tools and fab are operating at peak performance.
We provide a comprehensive portfolio of semiconductor and display services designed to help customers meet their manufacturing challenges. From startup to fab expansion, from pilot lines to mass production, we have a service plan to ensure your tools and fab are operating at peak performance.
Overview of Applied Materials' 4th quarter 2019 earnings report
The data below refers to the latest quarter unless specified otherwise:
- Total revenue: $3.754 billion (down from $3.759 billion from the same quarter of the previous year)
- Revenues decreased by -0.3% over the last 12 months
- Cost of revenues: $2.120 billion (down from $2.102 billion for the same quarter of the previous year)
- Cost of revenues decreased by -12.75% over the last 12 months
- Net income: $698 million (down from $757 million for the same quarter of the previous year)
- Diluted earnings per share: $0.75 (down from $0.77 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 930 million (down from 984 million for the same quarter of the previous year)
- Cash and cash equivalents: $3.129 billion
- Cash and cash equivalents per share: $3.36
- Cash and cash equivalents makes up 5.35% of Applied Materials' market capital
- Cash and cash equivalents makes up 16.4% of Applied Materials' total assets
- Accounts receivable: $2.532 billion
- Accounts receivable makes up 13.3% of AMAT's total assets
- Inventories: $3.434 billion
- Inventories makes up 18.1% of Applied Materials' total assets
- Shareholders equity in Applied Materials: $8.214 billion
- Shareholders equity per Applied Materials' share: $8.83
- Applied Materials' is trading at 7.1 times its shareholders equity. The number is relatively high as most firms trade at between 2 and 4 times their stockholders equity per share. However this is not nearly as high as Nvidia's.
- Cash generated from operations: $826 million
- Cash generated from operations per share: $0.88
Applied Materials' management commentary on the results and earnings guidance
SANTA CLARA, Calif., Nov. 14, 2019 — Applied Materials, Inc. (NASDAQ:AMAT) today reported results for its fourth quarter and fiscal year ended Oct. 27, 2019.
Fourth Quarter Results
Applied generated revenue of $3.75 billion. On a GAAP basis, the company recorded gross margin of 43.5 percent, operating income of $864 million or 23.0 percent of net sales, and earnings per share (EPS) of $0.75. On a non-GAAP adjusted basis, the company reported gross margin of 43.8 percent, operating income of $888 million or 23.7 percent of net sales, and EPS of $0.80. The company returned $694 million to shareholders including $500 million in share repurchases and dividends of $194 million
Fourth Quarter Results
Applied generated revenue of $3.75 billion. On a GAAP basis, the company recorded gross margin of 43.5 percent, operating income of $864 million or 23.0 percent of net sales, and earnings per share (EPS) of $0.75. On a non-GAAP adjusted basis, the company reported gross margin of 43.8 percent, operating income of $888 million or 23.7 percent of net sales, and EPS of $0.80. The company returned $694 million to shareholders including $500 million in share repurchases and dividends of $194 million
“Applied Materials’ fourth quarter results reflect a healthy uptick in demand for semiconductor equipment, combined with strong execution across the company,” said Gary Dickerson, president and CEO. “The semiconductor industry is increasingly adopting a new playbook for improving chip performance, power, area and cost, and we are investing in unique solutions to enable our customers’ success in the AI-Big Data era.”
Business Outlook
In the first quarter of fiscal 2020, Applied expects net sales to be approximately $4.10 billion, plus or minus $150 million. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.87 to $0.95. This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and includes net income tax benefit related to intra-entity intangible asset transfers of $0.03 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.
Business Outlook
In the first quarter of fiscal 2020, Applied expects net sales to be approximately $4.10 billion, plus or minus $150 million. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.87 to $0.95. This outlook for non-GAAP adjusted diluted EPS excludes known charges related to completed acquisitions of $0.01 per share and includes net income tax benefit related to intra-entity intangible asset transfers of $0.03 per share, but does not reflect any items that are unknown at this time, such as any additional charges related to acquisitions or other non-operational or unusual items, as well as other tax related items, which we are not able to predict without unreasonable efforts due to their inherent uncertainty.
Applied Materials (NASDAQ: AMAT) stock price history
The image below, obtained from Google, shows the stock price history of Applied Materials (NASDAQ: AMAT) for the last 5 years. And its been a excellent 5 years for stockholders of AMAT. 5 years ago the stock was trading around $22.50 and today its trading at $62.87. That's an impressive 179% return provided by Applied Materials stock over the last 5 years. The stock of AMAT is also currently trading a new 52 week high of $62.87 and is far away from its 52 week low, which is a clear indication that short term momentum and sentiment of the stock of Applied Materials is very positive.
Recent coverage of Applied Materials (NASDAQ:AMAT)
The extract below shows recent coverage of Applied Materials as obtained from TheStreet.com
Applied Materials (AMAT - Get Report) shares surged higher in pre-market trading Friday after the semiconductor equipment maker forecast solid near-term sales after stronger-than-expected quarterly results that suggest a near-term chip sector rebound. Applied Materials said adjusted earnings for the three months ending on October 27, the group's fiscal fourth quarter, came in at 80 cents per share, down 5.9% from the same period last year but four cents ahead of the Street consensus forecast. Group revenues fell 6.4% to $3.75 billion but again topped analysts' forecasts of a $3.68 billion tally.
With an eye towards a near-term rebound in semiconductor markets, the chip sector equipment maker said its sees current quarter revenues in the region of $4.1 billion and adjusted earnings in the range of 87 cents to 95 cents per share, both estimates coming in ahead of Refinitv forecasts and echoing the bullish sentiment expressed by its European rival, ASML NV (ASML - Get Report) last month.
Read the full article here
Applied Materials (AMAT - Get Report) shares surged higher in pre-market trading Friday after the semiconductor equipment maker forecast solid near-term sales after stronger-than-expected quarterly results that suggest a near-term chip sector rebound. Applied Materials said adjusted earnings for the three months ending on October 27, the group's fiscal fourth quarter, came in at 80 cents per share, down 5.9% from the same period last year but four cents ahead of the Street consensus forecast. Group revenues fell 6.4% to $3.75 billion but again topped analysts' forecasts of a $3.68 billion tally.
With an eye towards a near-term rebound in semiconductor markets, the chip sector equipment maker said its sees current quarter revenues in the region of $4.1 billion and adjusted earnings in the range of 87 cents to 95 cents per share, both estimates coming in ahead of Refinitv forecasts and echoing the bullish sentiment expressed by its European rival, ASML NV (ASML - Get Report) last month.
Read the full article here
Applied Materials (NASDAQ: AMAT) latest stock valuation
So based on the earnings report of Applied Materials (NASDAQ: AMAT) and their fiscal outlook provided for the first quarter of their 2020 fiscal year, what do we value Applied Materials (AMAT) stock at? Based on the earnings reported and the fiscal guidance provided our valuation model provides a target (full value) price for Applied Materials at $61.20 a stock (up relatively strongly from our 3rd quarter 2019 earnings report valuation of Applied Materials).
We therefore feel that the stock is fully valued and a good price long term fundamental or value investors should look to enter the stock at is at least 10% below our target (full value) price which in this case is $61.20. We therefore believe a good entry point into Applied Materials stock would be around $55.10 or below.
We expect the stock of Applied Materials to trade in a narrow range around its current price in coming weeks and months
We therefore feel that the stock is fully valued and a good price long term fundamental or value investors should look to enter the stock at is at least 10% below our target (full value) price which in this case is $61.20. We therefore believe a good entry point into Applied Materials stock would be around $55.10 or below.
We expect the stock of Applied Materials to trade in a narrow range around its current price in coming weeks and months
Next earnings release of Applied Materials
It is expected that Applied Materials will release their 1st quarter 2020 earnings report in mid February 2020