Will Investors Reward Applied Materials’ Big Guidance Boost?

Applied Materials Inc. (NASDAQ: AMAT) reported third-quarter fiscal 2016 results after markets closed on Thursday. The semiconductor manufacturing equipment maker posted adjusted diluted earnings per share (EPS) of $0.50 on revenues of $2.82 billion. In the same period a year ago, the company reported adjusted EPS of $0.33 on revenues of $2.49 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.48 and $2.84 billion in revenues.

On a GAAP basis, EPS totaled $0.46, which included $42 million related to acquisitions and represent amortization of purchased intangible assets.

For the fourth quarter of fiscal 2016, the company expects net sales to increase in a range of 15% to 19% sequentially, and non-GAAP adjusted diluted EPS is expected to be in the range of $0.61 to $0.69. The consensus estimates called for fourth-quarter revenues of $2.87 billion and EPS of $0.48.

The company did not offer guidance for the full year. The consensus estimate calls for EPS of $1.54, compared with $1.19 a year ago, and 2016 revenues of $10.39 billion, compared with $9.66 billion in 2015.

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CEO Gary Dickerson said:

With earnings and orders at an all-time high, Applied is performing better than ever and in a great position to sustainably outperform our markets. We are in the early stages of large, multi-year industry inflections that are driving our business today and creating new opportunities for future growth.

Applied Materials’ third quarter was a monster. Record EPS, new orders up 26% year over year to $3.66 billion and backlog up 60% year over year to $4.95 billion. The CEO sounds like he believes this is just the beginning.

Shares were up by about 5% in after-hours trading, at $29.05, after closing at $27.68. Shares closed within reach of a new annual high, and that level seems like a sure thing during Friday’s session. The 52-week range is $14.25 to $27.75. Thomson Reuters had a 12-month analyst price target of $28.55 before the report.

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