Mixed Earnings Bag From Applied Materials

Thomson Reuters had the consensus estimates at $0.27 in earnings per share (EPS) and $2.33 billion in revenue.

What may stand out is the orders. First-quarter orders were $2.27 billion, up 1% sequentially but down 1% year over year. On an adjusted basis, the company reported gross margin of 42.3%, operating income of $447 million and net income of $338 million. Gross margin was 40.7%.

Applied Material gave guidance for the second quarter as net sales to be in the range of flat to up a couple of percentage points from the previous quarter, and non-GAAP earnings per share in a range of $0.26 to $0.30 (excluding known charges related to completed acquisitions of $0.03 per share). Thomson Reuters has earnings estimates of $0.32 per share.

This semiconductor giant has long been the powerhouse name in chip capital equipment, and it is a top pick for 2015 at Stifel. The company has been ramping up its efforts to be a bigger player in the NAND sector for equipment. Earnings were thought by many investors to be more about the merger than the actual report. CEO Gary Dickerson said on the matter: “With focus and execution, we are gaining momentum toward our long-term strategic goals, and this progress will be accelerated by our planned merger with Tokyo Electron.” The long and short of the matter is that the conference call is likely where merger info-hungry investors are going to have to get more details.

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Unfortunately, Applied’s backlog declined by 5% to $2.78 billion. That backlog included negative adjustments of $53 million tied to currencies.

Cowen had recently maintained a Buy rating and set the price target for Applied Materials at $26.00, implying upside of 7% from Tuesday’s close at $24.28. B. Riley also recently reiterated a Neutral rating with a $24.50 price target.

Applied Materials shares closed down two cents at $24.26, and the after-hours reaction was initially down almost 1% to $24.05. The stock has a consensus analyst price target of $27.18 and a 52-week trading range of $17.73 to $25.71.