Are Analysts Too Optimistic on Applied Materials After Earnings?

When Applied Materials Inc. (NASDAQ: AMAT | AMAT Price Prediction) reported its most recent quarterly results after the markets closed on Thursday, the firm said that it had $1.25 in earnings per share (EPS) and $4.69 billion in revenue. That compared with consensus estimates of $1.17 in EPS and $4.6 billion in revenue, as well as the $0.80 per share and $3.75 billion posted in the fiscal fourth quarter of last year.

During the most recent quarter, net revenues reached a record level increasing 25% year over year. The company noted a gross margin of 45.7%, up from 43.8% in the same period of last year.

In terms of its segments, the company reported as follows:

• Semiconductor Systems net sales increased 33.4% year over year to $3.07 billion, with an operating income of $1.06 billion.
• Applied Global Services net sales increased 13.2% to $1.11 billion, with an operating income of $320 million.
• Display and Adjacent Markets net sales increased 6.1% to $485 million, with an operating income of $95 million.

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The company generated $1.32 billion in cash from operations and returned $250 million to shareholders, including $200 million in dividends and $50 million in share repurchases. At the end of the quarter, cash, cash equivalents and short-term investments totaled $5.35 billion, compared with $3.13 billion at the end of the previous year.

Looking ahead to the fiscal first quarter, the company expects to see EPS in the range of $1.20 to $1.32 and net sales of $4.95 billion, plus or minus $200 million. Analysts are calling for $1.11 in EPS and $4.52 billion in revenue.

Here’s what analysts had to say after the fact:

• D.A. Davidson reiterated a Neutral rating and raised its price target to $78 from $70.
• JPMorgan reiterated it as Overweight and raised its price target to $88 from $84.
• Craig Hallum reiterated a Buy rating and raised its price target to $87 from $83.
• B. Riley reiterated a Buy rating and raised its price target from $82 to $85.
• Wells Fargo reiterated it as Overweight and raised its price target to $85 from $80.
• Deutsche Bank reiterated its Buy rating and raised its price target to $80 from $75.
• Mizuho reiterated a Buy rating and raised its price target from $77 to $82.
• RBC reiterated an Outperform rating and raised its price target to $82 from $75.
• Barclays reiterated an Equal Weight rating and raised its price target to $74 from $70.
• Credit Suisse reiterated it as Outperform and raised its price target to $100 from $85.

Applied Materials stock traded up nearly 4% at $72.50 early Friday, in a 52-week range of $36.64 to $75.93. The consensus price target is $75.93.

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