Bull of the Day: Applied Materials (AMAT)

Few companies have managed to surprise this earnings season and soar higher following the release of their results. However, one that definitely was an exception to this rule was Applied Materials (AMAT).

This technology company provides services, manufacturing equipment, and software to companies in the semiconductor, display and solar PV industries around the globe and it edged out earnings estimates for its most recent quarter. The company then saw shares surge by double digits following this bullish release and a solid outlook, which was in stark contrast to many companies this earnings season which beat estimates and actually fell on their reports.

AMAT is now up about 24% in the past three months, which is roughly triple the S&P 500 in the time frame. And with this type of outperformance, investors have to be wondering if this trend can continue heading into the summer.

The price action is definitely a concern for those considering jumping in now, but the PE is still below 16, and the growth outlook remains robust. Additionally, analysts seem to be believers in the stock, as they have been ratcheting up estimates lately, a potentially great sign for AMAT investors.

Recent Estimates

In just the past week, seven estimates have marched higher for the current quarter and the next quarter, while we have seen a similar amount move higher for the full year and the next year time period too. And best of all, not a single estimate has moved lower, suggesting universal agreement from analysts on AMAT’s near term prospects.

But not only have estimates moved higher, but the magnitude of these revisions have also been impressive. In the past week, the current quarter consensus estimate has surged by over 30%, while the full year has seen a 16% move in the past week alone too.

And with a great history in earnings season which includes meeting or beating estimates every time since August 2013, it is pretty clear that AMAT knows how to manage expectations. In fact, that miss in August of 2013 was the only such time that AMAT has failed to meet or beat the consensus estimate in the past five years.

With these kinds of metrics, it shouldn’t be much of a surprise to note that AMAT currently has a Zacks Rank #1 (strong buy) and that we are looking for more outperformance from this stock. In fact, the company is in the top 5% of all stocks that we cover, so it will be hard for investors to find a better choice in the technology world right now.

Bottom Line

AMAT may have surged following its earnings beat, but it is still trading at a reasonable valuation and its future appears bright. Plus, the company has a great history of living up to expectations so there is little reason to worry about the company’s near term prospects following a flurry of earnings estimate revisions by analysts.

The stock also finds itself in great company, as its industry rank is in the top 5% of all industries we cover, meaning there are few areas of the market that are better positioned in the market this summer. So, if you are looking for a top ranked stock in a great industry, look no further than AMAT which remains poised to continue its run in the months ahead too.

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