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Nov. 15, 2019, 8:05 a.m. EST

Applied Materials says earnings and sales are about to return to growth, sending stock higher

Chip-equipment companies continue to signal a bounceback for the semiconductor industry as stocks lead S&P 500’s 2019 gainers

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By Jeremy C. Owens, MarketWatch


Applied Materials/Digiman Studio
Chip-equipment companies’ stocks have been booming in 2019.

Applied Materials Inc.’s earnings report and outlook Thursday afternoon backed up earlier reports from the chip-equipment sector that pointed to a recovery in the beleaguered semiconductor sector, sending shares higher in late trading.

The chip-equipment company reported fiscal fourth-quarter profit of $698 million, or 75 cents a share, on sales of $3.75 billion, down from $4.01 billion a year ago. After adjusting for some acquisition costs and other factors, Applied Materials reported earnings of 80 cents a share, down from 97 cents a share a year ago. Analysts on average expected adjusted earnings of 76 cents a share on sales of $3.68 billion, according to FactSet.

“Applied Materials’ fourth-quarter results reflect a healthy uptick in demand for semiconductor equipment, combined with strong execution across the company,” Chief Executive Gary Dickerson said in Thursday’s announcement.

While earnings and sales slipped from the year before in the fiscal fourth quarter, Applied Materials suggested that dynamic will change in the current period. The company projected first-quarter adjusted earnings of 87 cents to 95 cents a share on sales of $3.95 billion to $4.25 billion, after posting adjusted earnings of 81 cents a share on sales of $3.75 billion in the first quarter of the just-completed fiscal year. Analysts had expected adjusted earnings of 74 cents a share on sales of $3.71 billion for the fiscal first quarter, according to FactSet.

Applied Materials /zigman2/quotes/209393259/composite AMAT +4.27%  stock closed with a 0.3% decline at $56.96, then jumped more than 4% in late trading immediately following release of the results.

Chip-equipment companies have been showing a strong bounceback in recent months, suggesting that a downturn for the semiconductor sector could be coming to an end and making the stocks popular. Applied Materials shares have gained 74% this year, while KLA Corp. /zigman2/quotes/209248041/composite KLAC +2.93%   has more than doubled and Lam Research Corp. /zigman2/quotes/208077897/composite LRCX +2.38%   has nearly doubled, gaining more than 97%. All three stocks are among the eight biggest percentage gainers in the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.29%  in 2019.

/zigman2/quotes/209393259/composite
US : U.S.: Nasdaq
$ 59.04
+2.42 +4.27%
Volume: 8.84M
Dec. 11, 2019 4:00p
P/E Ratio
20.65
Dividend Yield
1.42%
Market Cap
$54.54 billion
Rev. per Employee
$800,095
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/zigman2/quotes/209248041/composite
US : U.S.: Nasdaq
$ 167.12
+4.75 +2.93%
Volume: 934,073
Dec. 11, 2019 4:15p
P/E Ratio
23.36
Dividend Yield
2.03%
Market Cap
$26.37 billion
Rev. per Employee
$656,821
loading...
/zigman2/quotes/208077897/composite
US : U.S.: Nasdaq
$ 275.40
+6.41 +2.38%
Volume: 1.56M
Dec. 11, 2019 4:00p
P/E Ratio
20.29
Dividend Yield
1.67%
Market Cap
$39.95 billion
Rev. per Employee
$996,856
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,141.63
+9.11 +0.29%
Volume: 1.71B
Dec. 11, 2019 5:01p
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Jeremy Owens is MarketWatch’s technology editor and San Francisco bureau chief. You can follow him on Twitter @jowens510.

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