Tuesday, March 30, 2010

Applied Materials updates revenue growth expectations. Looks conservative. (AMAT)



Semiconductor-equipment giant Applied Materials (AMAT) updated Wall Street on its revenue expectations for the fiscal year ending October 2010. They boosted their outlook for total revenue to be up 60% from 2009's levels, which still leaves it below the street's estimate of a 65% gain from last year:

From their release:

Applied is seeing growth in demand across a number of its businesses, and the company now expects fiscal 2010 net sales to be more than 60% higher than in fiscal 2009 – compared to its previous forecast of up more than 50%. Applied’s current expectations by business segment are as follows:
Segment Net Sales Expectation as of 2/17/10 Net Sales Expectation as of 3/30/10
SiliconUp >100% over fiscal 2009Up >120% over fiscal 2009
Applied Global ServicesUp 30% over fiscal 2009Up >35% over fiscal 2009
DisplayUp 30% over fiscal 2009Up >50% over fiscal 2009
Energy and Environmental SolutionsFlat to +/- 10% from fiscal 2009Up >5% over fiscal 2009


A look at their fiscal 2009 10k shows AMAT's diligence (or craziness in some people's mind) in maintaining spending on Research & Development and Capital Expenditures.

Even as Gross Profits and backlog (expected revenue) cratered, the company maintained a commitment to invest for the future. As signs of life are coming back to the semiconductor industry, this investment should pay off handsomely. While the company will add to the employee base, we should still see leverage from a smaller operating structure as sales recover.

Net of cash, AMAT trades at 15times 2010 earnings estimates and less than 10 times 2011 expectations. These shares have room to run...




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