Why Entegris (ENTG) Shares Are Falling Today

Radek Strnad /
2024/05/01 12:09 pm EDT

What Happened:

Shares of semiconductor materials supplier Entegris (NASDAQ:ENTG) fell 6.9% in the morning session after the company reported first-quarter results and provided revenue guidance for the next quarter below analysts' expectations. In addition, its inventory levels increased. 

On the other hand, profitability improved as Entegris blew past analysts' EPS and adjusted EBITDA expectations during the quarter. Looking ahead, Management maintained the outlook for the semiconductor industry with expectations for inventory normalization based on a gradual market recovery throughout the year. Overall, this was a mixed quarter for Entegris.

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What is the market telling us:

Entegris's shares are very volatile and over the last year have had 9 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 12 months ago, when the stock gained 8.2% on the news that the company reported first-quarter revenue, operating income, and free cash flow that surpassed analysts' expectations. Inventory levels rose, with management adding that "2023 continues to be an uncertain year for the semiconductor industry." Despite this, earnings per share (EPS) also came in strong, beating estimates by a robust 25%. Revenue guidance for the next quarter exceeded Consensus, while the EPS guidance was in line. 

As a reminder, management had suggested some sequential decline in Q2 on the Q4 call, so these results are likely a positive surprise for investors. In addition, management provided some updates on the recent sale of the Electronic Chemicals and QED business and hoped to realize $800 million. Earlier, Entegris announced the sale of the Electronic Chemicals business to Fujifilm for $700m. These actions mark important milestones in the company's path towards optimizing the product portfolio for long-term strategic value and to reduce leverage. The market seems to be cheering the results, guidance, and strategic actions.

Entegris is up 7.7% since the beginning of the year, but at $122.70 per share it is still trading 15.6% below its 52-week high of $145.37 from March 2024. Investors who bought $1,000 worth of Entegris's shares 5 years ago would now be looking at an investment worth $3,024.

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