Applied Materials, Inc. (NASDAQ:AMAT) reported results for its second quarter ended May 1, 2016.
Second quarter orders were $3.45 billion, up 52 percent sequentially and up 37 percent year over year. Backlog increased to $4.17 billion. Net sales of $2.45 billion were up 9 percent sequentially, flat year over year, and near the high end of guidance.
The company recorded gross margin of 41.0 percent, operating margin of 17.3 percent, and net income of $320 million or $0.29 per diluted share. On a non-GAAP adjusted basis, the company reported second quarter gross margin of 42.7 percent, operating margin of 19.2 percent, and net income of $376 million or $0.34 per diluted share.
The company generated $481 million in cash from operations during the second quarter, paid dividends of $113 million and used $900 millionto repurchase 45 million shares of common stock.
“In our second quarter we booked our highest orders in 15 years and we expect to deliver record earnings in fiscal 2016,” said Gary Dickerson, president and CEO. “We are making significant progress with our strategy in semiconductor, display and service, and have a great pipeline of differentiated products that will fuel future growth.”
Applied’s non-GAAP adjusted results exclude the impact of the following, where applicable: certain items related to mergers and acquisitions; restructuring charges and any associated adjustments; impairments of assets, or investments; gain or loss on sale of strategic investments; and certain discrete adjustments and tax items. A reconciliation of the GAAP and non-GAAP adjusted results is provided in the financial tables included in this release. See also “Use of Non-GAAP Adjusted Financial Measures” section.
In the third quarter of fiscal 2016, Applied expects net sales to be up 14 percent to 18 percent sequentially. Non-GAAP adjusted diluted EPS is expected to be in the range of $0.46 to $0.50.
This outlook excludes known charges related to completed acquisitions of $0.04 per share and does not exclude other non-GAAP adjustments that may arise subsequent to this release.
Applied’s backlog increased 34 percent to $4.17 billion and included positive adjustments of $58 million, primarily consisting of favorable foreign currency impact. Backlog composition by reportable segment was as follows:
|Applied Global Services
|Energy and Environmental Solutions
Shares of Applied Materials are up over 4% to $20.79 in after-market trading. AMAT has a 1-year high of $21.67 and a 1-year low of $14.25. The stock’s 50-day moving average is $20.66 and its 200-day moving average is $18.75.
On the ratings front, AMAT has been the subject of a number of recent research reports. In a report released yesterday, Credit Suisse analyst Farhan Ahmad reiterated a Buy rating on AMAT, with a price target of $23, which represents a potential upside of 16.2% from where the stock is currently trading. Separately, on May 17, Deutsche Bank’s Sidney Ho reiterated a Buy rating on the stock and has a price target of $24.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Farhan Ahmad and Sidney Ho have a total average return of 0.8% and -12% respectively. Ahmad has a success rate of 66.7% and is ranked #2065 out of 3842 analysts, while Ho has a success rate of 38.7% and is ranked #3702.
The street is mostly Bullish on AMAT stock. Out of 7 analysts who cover the stock, 5 suggest a Buy rating and 2 recommend to Hold the stock. The 12-month average price target assigned to the stock is $24.50, which implies an upside of 23.8% from current levels.
Applied Materials, Inc. provides manufacturing equipment, services and software to the global semiconductor, flat panel display, solar photovoltaic and related industries. It operates through the following segments: Silicon Systems Group, Applied Global Services, Display, and Energy and Environmental Solutions.