Applied Materials (AMAT) Q4 Earnings & Sales Beat, Rise Y/Y
Applied Materials Inc. AMAT reported fourth-quarter fiscal 2022 non-GAAP earnings of $2.03 per share, surpassing the Zacks Consensus Estimate by 18.02%. Further, the figure improved 5% from the year-ago fiscal quarter’s reported figure.
Net sales of $6.75 billion climbed 10% from the year-ago fiscal quarter’s level and surpassed the Zacks Consensus Estimate of $6.38 billion.
Top-line growth was driven by the strong performance of the Semiconductor Systems and Applied Global Services segments.
AMAT witnessed solid growth in geographies, namely the United States, Europe, Taiwan and Southeast Asia, which was another positive.
However, Applied Materials continued to witness sluggishness in its Display segment. Also, it faced a weakening momentum in China.
Moreover, its declining sales in China persisted during fiscal 2023 due to new export restrictions.
Nevertheless, AMAT is currently witnessing improvements in supply chain with its growing efforts to mitigate the associated constraints. This remains a major positive. Further, Applied Materials’ strength in Foundry/Logic remains a tailwind.
Shares of AMAT inched up 3.2% in after-hours trading, primarily attributable to the better-than-expected guidance for first-quarter fiscal 2023 net sales based on easing supply-chain woes.
On a year-to-date basis, Applied Materials has lost 32.4% compared with the industry’s decline of 29.4%.
Applied Materials, Inc. Price, Consensus and EPS Surprise
Applied Materials, Inc. price-consensus-eps-surprise-chart | Applied Materials, Inc. Quote
Segments in Detail
Semiconductor Systems generated sales worth $5.04 billion (which contributed 75% to its net sales), reflecting a 17% increase from the year-ago fiscal quarter’s reading. Strong orders on increasing customer spending in next-generation technologies contributed well.
Applied Global Services reported sales of $1.42 billion (21% of net sales), up 4% from the prior-year fiscal quarter’s reported number. Growing installed base systems, service intensity and subscription agreements contributed well.
Sales from Display and Adjacent Markets were $251 million (4% of net sales), down 40% from the year-ago fiscal quarter’s reported level.
Revenues by Geography
The United States, Europe, Japan, Korea, Taiwan, Southeast Asia and China generated sales of $830 million, $375 million, $606 million, $1.08 billion, $2.07 billion, $451 million and $1.3 billion each, contributing 12%, 5%, 9%, 16%, 31%, 7% and 20% to net sales, respectively.
Sales in the United States, Europe, Korea, Taiwan and Southeast Asia increased 23.3%, 13.3%, 7.8%, 66.8% and 120%, respectively, from the respective year-ago fiscal quarter’s readings. Sales in Japan and China fell 1.1% and 35%, respectively, from the year-ago quarter’s corresponding levels.
Operating Results
The non-GAAP gross margin was 46%, contracting 220 basis points (bps) from the year-ago fiscal quarter’s tally.
Operating expenses were $1.1 billion, up 18.9% from the year-ago fiscal quarter’s level. As a percentage of sales, the figure expanded 120 bps from the year-earlier fiscal quarter’s level to 16.4%.
The non-GAAP operating margin of 29.8% for the reported quarter contracted 330 bps from the prior-year fiscal period’s actuals.
Balance Sheet & Cash Flow
As of Oct 30, 2022, cash and cash equivalent balance, and short-term investments were $2.6 billion compared with $3.5 billion as of Jul 31, 2022.
Inventories were $5.9 billion in fourth-quarter fiscal 2022 compared with $5.5 billion in third-quarter fiscal 2022. Accounts receivables increased to $6.1 billion in the reported quarter from $4.9 billion in the previous fiscal quarter.
Long-term debt was $5.457 billion at the end of the reported quarter compared with $5.456 billion at the end of the previous fiscal quarter.
Applied Materials generated a cash flow of $857 million, down from $1.5 billion in the prior fiscal quarter.
AMAT returned $1.72 billion to its shareholders, of which share repurchases were worth $1.5 billion, while dividend payments amounted to $223 million.
Guidance
For first-quarter fiscal 2023, Applied Materials expects net sales of $6.7 billion (+/-$400 million). The Zacks Consensus Estimate for the same is pegged at $6.38 billion.
AMAT anticipates Semiconductor Systems, AGS and Display revenues to be $5.15 billion, $1.33 billion and $170 million, respectively.
Management expects non-GAAP earnings per share of $1.93 (+/-0.18). The Zacks Consensus Estimate for the same is pegged at $1.91.
Applied Materials expects a non-GAAP gross margin of 46.1% and non-GAAP operating expenses of $1.16 billion. It projects a non-GAAP tax rate of 13%.
Zacks Rank & Stocks to Consider
Currently, Applied Materials carries a Zacks Rank #4 (Sell).
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Asure Software ASUR, Agilent Technologies A and AMETEK AME. While Asure Software sports a Zacks Rank #1 (Strong Buy), Agilent Technologies and AMETEK carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Asure Software has lost 10.9% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.
Agilent Technologies has lost 7.8% in the year-to-date period. The long-term earnings growth rate for A is currently projected at 10%.
AMETEK has lost 5.7% in the year-to-date period. The long-term earnings growth rate for AME is currently projected at 9.7%.
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