Applied Materials posts optimistic outlook for semiconductor industry

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Applied Materials posts optimistic outlook for semiconductor industry.
Image: Applied Materials

On February 12, Applied Materials posted its fiscal first-quarter financial results, and the firm had a strong showing. The company, which makes machinery used to manufacture semiconductors, experienced its first growth quarter in 15 months. In addition, the corporation offered guidance for FQ2 2020 that suggests good things about the health of the components sector.

Applied Materials FQ1 2020 Results

In the fiscal first quarter, Applied Materials generated $4.16 billion in sales, up 11 percent from the same frame the year previous. As such, the firm experienced its first year-over-year revenue growth in five quarters. Also, Bloomberg reports the equipment maker outpaced market expectations; Wall Street pegged the firm’s sales at $4.11 billion.

The corporation also saw growth in its net income. The company brought in profits of $892 million or $.92 per share, which is a year-over-year improvement of 15 percent. In FQ1 2019, Applied Materials reported income of $771 million or $.80 per share. Conversely, Zacks Investment Research predicted the Santa Clara, California-based company would generate earnings of $.92 per share.

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Following the announcement of its fiscal first-quarter earnings, Applied Materials saw its share price increase by one percent. Notably, the firm has experienced a 60 percent rise in its market capitalization since February 2019.

Applied Materials Optimistic FQ2 2020 Outlook

Applied Materials CEO Gary Dickerson offered an optimistic near-term outlook for his company, and by implication, the broader semiconductor industry. The executive provided guidance of $4.34 billion in revenue in the fiscal second quarter, give or take $200 million. Dickerson also said the equipment manufacturer would generate earnings of $.98 to $1.12 per share in the same frame.

Comparatively, Bloomberg notes financial analysts have lower expectations of the firm’s FQ2 2020 performance. Wall Street estimates the manufacturer will bring in $4 billion in revenue against earnings of $.92 per share.

Notably, Applied Materials counts Intel, Samsung, and the Taiwanese Semiconductor Manufacturing Company among its clients. As such, if the firm is projecting two consecutive growth quarters, it must anticipate significant equipment sales to its customers. Indeed, Samsung announced plans to build a $500 million component plant in India last month.

Although the semiconductor sector experienced a protracted downturn last year, it has experienced a significant recovery recently. Factors like manufacturers burning through their access component inventories and the 5G deployment have prompted an industry-wide revival.

Furthermore, Dickerson said that his firm would see double-digit growth due to the needs of its manufacturing clients. However, the executive attributed the surge in semiconductor production to the robustness of big data and artificial intelligence fields.

As such, it seems a perfect storm demand and innovation will produce strong sales in the component industry in this year.

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