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What's in Store for Applied Materials (AMAT) Q1 Earnings?

Zacks Equity Research

Applied Materials, Inc. AMAT is set to report fiscal first-quarter 2020 results on Feb 12.

The Zacks Consensus Estimate for earnings has remained stable at 92 cents. The figure indicates growth of 13.6% from the year-ago reported figure.

Notably, the consensus mark for revenues is pegged at $4.12 billion, indicating an improvement of 9.8% from the prior-year quarter.

The company has surpassed the Zacks Consensus Estimate in the trailing four quarters, the average positive earnings surprise being 4.89%.

Applied Materials, Inc. Price and EPS Surprise

 

Applied Materials, Inc. Price and EPS Surprise

Applied Materials, Inc. price-eps-surprise | Applied Materials, Inc. Quote

Factors to Consider

Despite weak end-market conditions across semiconductor, display and transaction part of services businesses, Applied Materials’ portfolio strength, growing investments in new playbook, expanding position in memory and increasing new design wins are likely to have driven the fiscal first-quarter performance.

Further, more clients are expected to have upgraded their equipment ahead of the 5G rollout in key markets. This, in turn, is likely to have aided the company’s top line in the quarter to be reported.

Further, growth opportunities across specialty nodes and new nodes ramp across foundry, logic, NAND and DRAM are expected to have benefited the company in the to-be-reported quarter. Moreover, inventory reductions across memory and demand elasticity in NAND are likely to have acted as tailwinds.

Furthermore, the company is likely to have witnessed solid customer momentum across automotive and advanced packaging, owing to rising foundry logic spending.

All these are expected to have driven sales in Semiconductor Systems Group segment in the to-be-reported quarter. For first-quarter fiscal 2020, the company projects sales in this segment at $2.775 billion, suggesting growth of 22.4% from the prior-year quarter. The Zacks Consensus Estimate for semiconductor sales is pegged at $2.774 billion.

Additionally, growing adoption of IoT, AI and Big Data is expected to have contributed to the fiscal first-quarter results.

Apart from these, the company’s growing research and development activities and innovative next generation products are likely to have aided performance of its Display and Adjacent Markets segment in the quarter under review.

However, softness in TV and handset market is likely to have impacted sales of this segment negatively. For first-quarter fiscal 2020, Applied Materials projects display sales at $330 million, indicating year-over-year decline of 34.9%. The Zacks Consensus Estimate for display sales is pegged at $333 million.

Coming to Applied Global Services (AGS) segment, the company’s new systems added to its installed base are likely to have driven momentum across subscription part of AGS in the quarter under review.

For first-quarter fiscal 2020, the company projects AGS sales at $975 million, reflecting year-over-year growth of 1.4%. The consensus market for AGS sales is pegged at $977 million.

What Our Model Says

Our proven model conclusively predicts an earnings beat for Applied Materials this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Applied Materials has an Earnings ESP of +2.89% and a Zacks Rank #1.

Stocks to Consider

Here are some stocks you may consider, as our proven model shows that these too have the right combination of elements to post an earnings beat this quarter.

CEVA, Inc. CEVA has an Earnings ESP of +27.06% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alteryx, Inc. AYX has an Earnings ESP of +6.49% and a Zacks Rank #1.

Booking Holdings Inc. BKNG has an Earnings ESP of +0.59% and a Zacks Rank #3.

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