Bull of the Day: Applied Material (AMAT)

Semiconductor sector is one of the best performing sectors this year. It is up about 11%, handily beating the broader technology sector’s return of 9.3% and S&P 500’s return of 3.4%.

About the Company

Headquartered in Santa Clara, CA, Applied Material (AMAT) is a leading equipment supplier to the global semiconductor industry. They have been the industry leader for over twenty years. Their equipment is mainly used in the manufacturing of semiconductors, flat panel liquid crystal displays (LCDs), and solar photovoltaic (PV) cells and modules.

Impressive Results 

The company reported excellent fiscal first-quarter 2018 results, beating on both the top and the bottom lines.

Adjusted earnings of $1.06 per share beat the Zacks Consensus Estimate of $0.97 and were also at the higher end of the guided range of 94 cents to $1.02 per share. Earnings were up 14% sequentially and 59% year over year.

Revenues also surpassed our estimate and increased 5.9% sequentially and 28.2% year over year. 

Surging Estimates

After strong results, analysts have been raising their estimates for the company. Rising estimates sent the stock to a Zacks Rank # 1 (Strong Buy).

The company has an excellent record of beating estimates. They have missed only once in the past five years.

Applied Materials, Inc. Price, Consensus and EPS Surprise

Applied Materials, Inc. Price, Consensus and EPS Surprise | Applied Materials, Inc. Quote

Multiple Growth Drivers

The company continues to gain market share in the semiconductor market. Additionally, in the past few years, the company has successfully diversified its business which is no longer PC demand driven. Additional demand drivers have emerged in the areas of big data, Internet of Things (IoT), cloud infrastructure, artificial intelligence, virtual reality and self-driving cars.

The Bottom-Line

Shares of this company are up more than 55% over the past year but despite this surge, they are still trading at an attractive valuation of 13.59 times forward earnings. The Zacks Industry Rank for “Semiconductor Equipment - Wafer Fabrication” is currently 5 out of 265 (top 2%), suggesting more upside in the short to medium term.

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