MKS Instruments MKSI is one of the fastest growing technology companies in North America, per Deloitte. The company recently secured the 495th rank on Deloitte’s Technology Fast 500 list and was the seventh largest public company in terms of revenues.
Following the news, MKS shares jumped 8% to close at $61.57 on Dec 26. Year to date, the company has lost 34.9% compared with the industry’s decline of 31.4%.
However, we expect the stock to rebound in 2019, given its continued strength in advanced markets, strong contribution from acquisitions like Newport and efficient cost structure. Moreover, the pending buyout of Electro Scientific Industries ESIO is a key catalyst.
What Awaits MKS Instruments in 2019?
MKS Instruments’ is expected to gain from strong growth opportunities in semiconductor, industrial technologies, life & health sciences, and research & defense markets. Management expects its advanced markets to grow two times faster than the overall market, owing to exposure to fast growing end-markets like materials and electronic component processing.
MKS Instruments’ expanding portfolio is a key catalyst. The company is a leading provider of solutions related to Vaccum components, Opto-Mechanics, Laser Measurement, Laser Optics and others.
MKS Instruments, Inc. Revenue (TTM)
MKS Instruments, Inc. Revenue (TTM) | MKS Instruments, Inc. Quote
Moreover, MKS Instruments has a dominant position in the semiconductor market, including lithography & inspection, deposition etch & clean, and packaging & inspection. The company is expected to benefit from growing demand for new process technologies like Microwave and RF power. Further, rapid evolution of industrial microprocessing technology presents significant growth opportunity for the company.
Additionally, the acquisition of ESI will expand MKS Instruments’ addressable market by $2.2 billion. The deal will strengthen MKS Instruments’ footprint in advanced PCB processing, semi manufacturing and component manufacturing.
MKS Instruments’ revenues are expected to see a CAGR of 25% between 2013 and 2018. Over the same time frame, non-GAAP earnings are expected to see a CAGR of 54%, reflecting the benefits of efficient cost management.
Moreover, free cash flow has jumped 406% over the 2013-2017 time frame, reflecting significant cash generation ability.
Notably, MKS Instruments delivered average positive earnings surprise of 5.8% in the trailing four quarters. The Zacks Consensus Estimate for its 2018 and 2019 earnings has remained steady at $7.78 and $7.99, respectively, over the past 60 days.
Zacks Rank & Stocks to Consider
MKS Instruments currently has a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader Computer & Technology sector include MACOM Technology MTSI and Marvell Technology Group MRVL. While MACOM has a Zacks Rank #2 (Buy), Marvell flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Expected long-term earnings growth for MACOM and Marvell is 18.5% and 9.4%, respectively.
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