Applied Materials Earnings: A Mixed Picture

Despite reversing to a loss in the fourth quarter, S&P 500 (NYSE:SPY) component Applied Materials Inc. (NASDAQ:AMAT) can hang its hat on beating Wall Street’s expectations. Applied Materials manufacturers and produces capital equipments, and it provides manufacturing equipment, software, and solutions for the global semiconductor, flat panel liquid crystal displays, solar, and related industries.

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Applied Materials Inc. Earnings Cheat Sheet

Results: Reported a loss of $515 million (42 cents per diluted share) in the quarter. The silicon wafers had net income of $456 million or 34 cents per share in the year-earlier quarter.

Revenue: Fell 24.5% to $1.65 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Applied Materials Inc. reported adjusted net income of 6 cents per share. By that measure, the company beat the mean estimate of 3 cents per share. It fell short of the average revenue estimate of $2.39 billion.

Quoting Management: “In our fourth quarter, Applied delivered profit at the high end of our outlook despite challenging industry conditions in semiconductor, solar and display,” said Mike Splinter, Chairman and CEO. “Our strong cash flow performance allowed us to increase our quarterly dividend and share buybacks, returning $1.85 billion to stockholders in the year. We see improving business conditions entering 2013, with orders projected to increase after bottoming in the fourth quarter,” Splinter added. “Accelerated changes in device technology and the adoption of new materials in all of the industries we serve provide opportunities for Applied to build on our leadership and grow our market share.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 3.4 percentage points to 35.6% from the year-earlier quarter. Over that time, margins have contracted on average 3.5 percentage points per quarter on a year-over-year basis.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 2 cents in the third quarter, by 3 cents in the second quarter, and by 6 cents in the first quarter.

Revenue has dropped for four quarters in a row. Revenue declined 15.9% to $2.34 billion in the third quarter. The figure fell 11.2% in the second quarter from the year earlier and dropped 18.5% in the first quarter from the year-ago quarter.

Looking Forward: Expectations for the company’s next-quarter results are lower than they have been. Over the past sixty days, the average estimate for first quarter of the next fiscal year has fallen from 13 cents per share to 10 cents. The average estimate for the fiscal year is now 72 cents per share, down from 73 cents sixty days ago.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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