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What's in Store for Applied Materials' (AMAT) Q2 Earnings?

Zacks Equity Research

Applied Materials, Inc. AMAT is set to report fiscal second-quarter 2020 results on May 14. In the last reported quarter, it delivered a positive earnings surprise of 6.5%.

Applied Materials’ surprise history has been pretty impressive. The company surpassed earnings estimates in each of the trailing four quarters, with the average being 6.8%.

For the fiscal second quarter, the Zacks Consensus Estimate for earnings has remained stable at 92 cents per share over the past 30 days. The figure indicates an increase of 31.4% from the year-ago quarter.

The consensus mark for revenues is pegged at $4.25 billion, implying an increase of 20% from the year-ago reported figure.

Applied Materials Inc Price and EPS Surprise


Applied Materials Inc Price and EPS Surprise

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

Performance in the Last Reported Quarter

In first-quarter fiscal 2020, earnings of 98 cents per share surpassed the Zacks Consensus Estimate by 6 cents. The figure improved 22.5% sequentially and 21% year over year.

Net sales of $4.16 billion surpassed the Zacks Consensus Estimate of $4.12 billion. In addition, the figure improved 10.9% from the prior quarter and 10.9% from the year-ago period.

Let’s see how things have shaped up for this announcement.

The company’s fiscal second-quarter sales might have been affected by the global coronavirus-driven economic crisis. It has faced disruptions in manufacturing operations, which may have further impacted top-line growth. However, the company restarted operations across China as infections from the virus have receded in the country.

Despite macro weakness and 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 fiscal second-quarter performance.

The global rollout of 5G mobile technology led to higher demand for semiconductor equipment, which is expected to have aided its top-line growth.

Also, the company is expected to have benefited from continued expansion of the big data age, and the growth of AI and other new computing technologies, which are likely to reflect on the upcoming results.

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

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

What Our Model Says

Our proven model does not conclusively predict 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. That is not the case here as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Applied Materials has a Zacks Rank #3.

Stocks That Warrant a Look

Here are a few stocks worth considering, as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

NVIDIA Corporation NVDA has an Earnings ESP of +0.15% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shopify Inc. SHOP has an Earnings ESP of +40.25% and a Zacks Rank #2.

Inphi Corporation IPHI has an Earnings ESP of +4.82% and is a Zacks #2 Ranked stock.

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