Applied Materials (AMAT) Reports Earnings Tomorrow. What To Expect

Petr Huřťák /
2023/05/17 4:54 am EDT

Maker of machinery employed in semiconductor manufacturing, Applied Materials (NASDAQ:AMAT) will be announcing earnings results tomorrow afternoon. Here's what to look for.

Last quarter Applied Materials reported revenues of $6.74 billion, up 7.46% year on year, beating analyst revenue expectations by 1.25%. It was a mixed quarter for the company, with a beat on the bottom line but a decline in operating margin.

Is Applied Materials buy or sell heading into the earnings? Read our full analysis here, it's free.

This quarter analysts are expecting Applied Materials's revenue to grow 2.02% year on year to $6.37 billion, slowing down from the 11.9% year-over-year increase in revenue the company had recorded in the same quarter last year. Adjusted earnings are expected to come in at $1.83 per share.

Applied Materials Total Revenue

Majority of analysts covering the company have reconfirmed their estimates over the last thirty days, suggesting they are expecting the business to stay the course heading into the earnings. The company missed Wall St's revenue estimates twice over the last two years.

Looking at Applied Materials's peers in the semiconductor manufacturing segment, some of them have already reported Q2 earnings results, giving us a hint of what we can expect. Kulicke and Soffa's revenues decreased 55% year on year, beating analyst estimates by 1.17% and Teradyne reported revenue decline of 18.2% year on year, exceeding estimates by 2.4%. Kulicke and Soffa traded up 1.87% on the results, Teradyne was up 8.46%. Read our full analysis of Kulicke and Soffa's results here and Teradyne's results here.

There is still much uncertainty in the markets. The Federal Reserve's hawkish stance on rates, meant to tame inflation, remains a key market narrative. There is an added wrinkle now with troubles in the banking sector, triggered by Silicon Valley Bank's fairly sudden and surprising collapse. Given these, the question is whether higher rates (which dampen economic activity) and potentially less lending from the overall banking sector will trigger a recession. While some tech stocks have recovered year-to-date, most are still well off their 52-week highs. Applied Materials is up 9.27% during over the last month, and is heading into the earnings with analyst price target of $131.3, compared to share price of $121.81.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.