Shares of Applied Materials, Inc. AMAT hit a new 52-week high of $31.95 on Nov 23, eventually closing at $31.88. The company returned 72.8% in the past one-year period and has added approximately 70.8% year to date. Average volume of shares traded over the last three months was roughly 12,536K.
What is Driving Applied Materials?
Applied Materials is one of the world’s biggest suppliers of fabrication equipment to semiconductor, LCD and solar PV cell manufacturers. Strength in sales in mobility platforms, as well as in TV capacity builds, with better utilization of resources and increased WFE spending are the major positives for the company.
The price appreciation can be attributed to Applied Materials’ strong fundamentals and better-than-expected fourth-quarter fiscal 2016 results reported on Nov 17. In response to its strong earnings, the stock has gained 3.7%.
In the fiscal fourth quarter, Applied Materials reported earnings of 66 cents per share, surpassing the Zacks Consensus Estimate by a penny and coming in at the higher end of the guided range. Also, revenues increased 16.9% sequentially and 39.2% year over year to $3.31 billion. In fact, the company’s revenues, orders and earnings were at an all-time high.
The company’s leadership and advanced packaging business stayed strong in the quarter. It continues to see technological advancements in semiconductor and display areas. The ramp up of 3D NAND has led to significant market share gains.
Also, Applied Materials remains strongly positioned in China where it continues to see strong growth in semiconductor orders. Growing investments from Chinese domestic manufacturers have been the main catalysts.
Applied Materials provided a decent guidance for the upcoming fiscal first quarter. Revenues are expected between $3.20 and $3.34 billion. Non-GAAP EPS is expected the in the range of 62 cents to 70 cents.
Also, Applied Materials has an impressive record of returning cash to shareholders through share buybacks and regular dividends payouts. In the third quarter, the company returned $279 million through stock repurchases and cash dividends to shareholders.
Moreover, the company has well-differentiated products and a high market share. Also, it has gained considerable success in expanding beyond semiconductors, particularly in display. New displays technologies like OLED are opening up market opportunities for Applied Materials. The available market opportunity is now more than 10 times that of the traditional LCD.
Additionally, Applied Materials delivered an average positive earnings surprise of nearly 4.54% over the trailing four quarters. The Zacks Rank #1 (Strong Buy) company’s undisputed, strong market position in China, proliferation in display, continued innovation and strong long-term growth potential position it well.
Some other stocks worth considering in the industry are Cognex Corporation CGNX, Itron, Inc. ITRI and Teradyne Inc. TER all with a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cognex Corporation delivered a positive earnings surprise of 24.92% in the trailing four quarters.
Itron, Inc. delivered a positive earnings surprise of 30.55%, on average, in the trailing four quarters.
Teradyne Inc. delivered a positive earnings surprise of 19.26% in the trailing four quarters.
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