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Category: CMC Materials (CCMP)
Date: 12 November 2020 Stock price of CMC Materials: $169.04 We take a look at the 4th quarter 2020 earnings report of CMC materials, a leading global supplier of consumable materials to semiconductor manufacturers and pipeline companies. The group reported revenue of $274.2 million and net income of $36.8 million.
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I am proud of our performance, delivering another year of record revenue and profitability despite the challenging and unprecedented environment caused by the COVID-19 pandemic, which demonstrates our strong execution and robust businesses. We are most grateful for the overall well-being of our employees, and I would like to thank our global teams for their dedication to driving our record results - David Li, President and CEO of CMC Materials "
More About CMC Materials
CMC Materials, Inc., headquartered in Aurora, Illinois, is a leading global supplier of consumable materials to semiconductor manufacturers and pipeline companies. The company’s products play a critical role in the production of advanced semiconductor devices, helping to enable the manufacture of smaller, faster and more complex devices by its customers. CMC Materials, Inc. is also a leading provider of performance materials to pipeline operators. The company's mission is to create value by delivering high-performing and innovative solutions that solve its customers’ challenges. The company has approximately 2,100 employees globally
Overview of CMC Materials 4th quarter and full fiscal year earnings
Fourth Quarter
Full Fiscal Year 2020
Key Financial Information for the Fourth Quarter
Electronic Materials – Revenue was $222.8 million for the quarter, 2.5% higher than revenue in the same quarter last year. Higher revenue in CMP slurries and electronic chemicals more than offset lower revenue in CMP pads. Adjusted EBITDA was $71.4 million, or 32.0% of revenue.
Performance Materials – Revenue was $51.4 million for the quarter, 16.0% lower than revenue in the same quarter last year, driven primarily by a pandemic-related decline in demand for pipeline performance products. Higher revenue in the wood treatment and QED businesses partially offset this impact. Adjusted EBITDA was $22.4 million, or 43.6% of revenue.
- Revenue of $274.2 Million, 1.6% Lower than Last Year Primarily Due to Decline in Pipeline Performance Products Revenue Due to COVID-19 Impact
- Diluted Earnings Per Share (EPS) of $1.25; Adjusted Diluted EPS1 of $1.96, 16.0% Higher than Last Year
Full Fiscal Year 2020
- Record Revenue of $1,116.3 Million, 7.6% Higher than Last Year Primarily Due to KMG Acquisition; Revenue Increased 1.5% Compared to Full Fiscal Year 2019 Pro Forma Revenue Primarily Due to Growth in CMP Slurries and Higher Wood Treatment Revenue
- Record Diluted EPS of $4.83, 257.8% Higher than Last Year; Record Adjusted Diluted EPS1 of $7.47, 11.0% Higher than Last Year
Key Financial Information for the Fourth Quarter
- Revenue was $274.2 million, 1.6% lower than the revenue reported in the same quarter last year. Revenue was down 0.2% compared to the prior quarter primarily due to lower revenue in CMP pads and pipeline performance products, which more than offset higher revenue in CMP slurries and electronic chemicals.
- Net income was $36.9 million compared to a loss of $20.2 million last year. Adjusted net income was $58.0 million, 16.1% higher compared to adjusted net income in the prior year. Adjusted net income benefited from lower operating expenses, lower interest expense and lower taxes compared to the same quarter last year.
- Diluted EPS was $1.25. Adjusted diluted EPS was $1.96, 16.0% higher than adjusted diluted EPS in the same quarter last year.
- Adjusted EBITDA was $84.0 million, down 1.5% compared to last year. Adjusted EBITDA margin for the quarter was 30.6%, comparable to adjusted EBITDA margin of 30.6% in the same quarter last year.
Electronic Materials – Revenue was $222.8 million for the quarter, 2.5% higher than revenue in the same quarter last year. Higher revenue in CMP slurries and electronic chemicals more than offset lower revenue in CMP pads. Adjusted EBITDA was $71.4 million, or 32.0% of revenue.
Performance Materials – Revenue was $51.4 million for the quarter, 16.0% lower than revenue in the same quarter last year, driven primarily by a pandemic-related decline in demand for pipeline performance products. Higher revenue in the wood treatment and QED businesses partially offset this impact. Adjusted EBITDA was $22.4 million, or 43.6% of revenue.
CMC Materials management commentary on their 4th quarter earnings
AURORA, Ill., Nov. 11, 2020 (GLOBE NEWSWIRE) -- CMC Materials, Inc.2 (Nasdaq: CCMP), a leading global supplier of consumable materials to semiconductor manufacturers and pipeline companies, today reported financial results for its fourth quarter and full fiscal year 2020, which ended September 30, 2020.
Key Highlights
Total revenue decreased 1.6% in the fourth quarter compared to the same quarter last year as stronger demand in CMP slurries and electronic chemicals as well as higher wood treatment revenue were offset by lower revenue in pipeline performance products and CMP pads. Net income for the quarter was $36.9 million compared to a loss of $20.2 million in the prior year primarily due to the impairment charge the company took for its strategic decision to exit the wood treatment business in the prior year. Adjusted EBITDA was $84.0 million, down 1.5% compared with the prior year. Full year revenue was a record and increased 7.6% compared to the last year primarily due to a full year of revenue from the company's acquisition of KMG Chemicals, Inc. in November of 2018, growth in CMP slurries and higher wood treatment revenue. During the year the company generated $287.3 million in cash flow from operations, and had $257.4 million of cash on hand and $921.4 million in total debt as of the end of the fiscal year.
“I am proud of our performance, delivering another year of record revenue and profitability despite the challenging and unprecedented environment caused by the COVID-19 pandemic, which demonstrates our strong execution and robust businesses. We are most grateful for the overall well-being of our employees, and I would like to thank our global teams for their dedication to driving our record results,” said David Li, President and CEO of CMC Materials. “In fiscal 2021, we expect to see continued strong demand from our semiconductor customers driven by advanced node transitions to support new technologies including 5G, as well as improving fundamentals and demand from our pipeline customers. We also started the year with the rebranding of our company to CMC Materials, which we believe embodies our focus on delivering innovative, high value, specialty materials to our customers globally.”
Key Highlights
Total revenue decreased 1.6% in the fourth quarter compared to the same quarter last year as stronger demand in CMP slurries and electronic chemicals as well as higher wood treatment revenue were offset by lower revenue in pipeline performance products and CMP pads. Net income for the quarter was $36.9 million compared to a loss of $20.2 million in the prior year primarily due to the impairment charge the company took for its strategic decision to exit the wood treatment business in the prior year. Adjusted EBITDA was $84.0 million, down 1.5% compared with the prior year. Full year revenue was a record and increased 7.6% compared to the last year primarily due to a full year of revenue from the company's acquisition of KMG Chemicals, Inc. in November of 2018, growth in CMP slurries and higher wood treatment revenue. During the year the company generated $287.3 million in cash flow from operations, and had $257.4 million of cash on hand and $921.4 million in total debt as of the end of the fiscal year.
“I am proud of our performance, delivering another year of record revenue and profitability despite the challenging and unprecedented environment caused by the COVID-19 pandemic, which demonstrates our strong execution and robust businesses. We are most grateful for the overall well-being of our employees, and I would like to thank our global teams for their dedication to driving our record results,” said David Li, President and CEO of CMC Materials. “In fiscal 2021, we expect to see continued strong demand from our semiconductor customers driven by advanced node transitions to support new technologies including 5G, as well as improving fundamentals and demand from our pipeline customers. We also started the year with the rebranding of our company to CMC Materials, which we believe embodies our focus on delivering innovative, high value, specialty materials to our customers globally.”
Guidance for the First Quarter and Full Fiscal Year 2021
With continued uncertainty as to the ongoing macroeconomic environment and the impact of the COVID-19 pandemic on the industries in which the company participates, the company currently expects revenue in the first quarter of fiscal 2021 to be approximately flat to up low single digits compared to the company’s revenue in the fourth quarter. Sequentially, Electronic Materials revenue is expected to be approximately flat to up low single digits and Performance Materials revenue is expected to be approximately flat.
The company currently expects full fiscal year 2021 adjusted EBITDA to be between $358 million and $385 million.
With continued uncertainty as to the ongoing macroeconomic environment and the impact of the COVID-19 pandemic on the industries in which the company participates, the company currently expects revenue in the first quarter of fiscal 2021 to be approximately flat to up low single digits compared to the company’s revenue in the fourth quarter. Sequentially, Electronic Materials revenue is expected to be approximately flat to up low single digits and Performance Materials revenue is expected to be approximately flat.
The company currently expects full fiscal year 2021 adjusted EBITDA to be between $358 million and $385 million.
CMC Materials (CCMP) stock price history over the last 5 years
The image below, obtained from Google, shows the stock price history of CMC Materials over the last 5 years. Its been a very good time for CMC Materials. 5 years ago the stock was trading at around $42 and it its currently trading at $169.04 That's a very strong 302% return provided to CCMP stockholders over the last 5 years.
The stock of CMC Materials (CCMP) is trading at a lot closer to its 52 week high than it is to its 52 week low which is an indication that the short term sentiment and momentum of CCMP's stock is very positive at this point in time.
The stock of CMC Materials (CCMP) is trading at a lot closer to its 52 week high than it is to its 52 week low which is an indication that the short term sentiment and momentum of CCMP's stock is very positive at this point in time.
Stock valuation of CMC Materials (CCMP)
So what is CMC Materials (CCMP) stock worth based on the release of their latest earnings report and the fiscal guidance provided for their 2020 fiscal year? Based on the earnings reported and the guidance provided our valuation model provides a target price (full value price) for CMC Materials at $122.80 a stock. We therefore believe that the stock is overvalued.
We usually suggest long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $122.80. A good entry point into CMC Materials would therefore be at $110.50 or below. Since the stock of CMC Materials is trading at well above our suggested entry point into the group's stock we rate the stock of CMC Materials as a sell
We usually suggest long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $122.80. A good entry point into CMC Materials would therefore be at $110.50 or below. Since the stock of CMC Materials is trading at well above our suggested entry point into the group's stock we rate the stock of CMC Materials as a sell
Next earnings release of CMC Materials
It is expected that CMC Materials will release their 1st quarter 2021 earnings report in early February 2021
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