Yahoo Finance Entegris (NASDAQ:ENTG) Posts Better-Than-Expected Sales In Q2 But Quarterly Guidance Underwhelms
Semiconductor materials supplier Entegris (NASDAQ:ENTG) reported results ahead of analysts' expectations in Q2 CY2024, with revenue down 9.8% year on year to $812.7 million. On the other hand, next quarter's revenue guidance of $830 million was less impressive, coming in 4.6% below analysts' estimates. It made a non-GAAP profit of $0.71 per share, improving from its profit of $0.66 per share in the same quarter last year.
Is now the time to buy Entegris? Find out in our full research report.
Entegris (ENTG) Q2 CY2024 Highlights:
Revenue: $812.7 million vs analyst estimates of $802.4 million (1.3% beat)
Adjusted Operating Income: $178.9 million vs analyst estimates of $177.5 million (small beat)
EPS (non-GAAP): $0.71 vs analyst expectations of $0.70 (in line)
Revenue Guidance for Q3 CY2024 is $830 million at the midpoint, below analyst estimates of $869.6 million
Gross Margin (GAAP): 46.2%, up from 42.6% in the same quarter last year
Inventory Days Outstanding: 132, down from 136 in the previous quarter
Free Cash Flow of $51.94 million, down 35.5% from the previous quarter
Market Capitalization: $18.46 billion
Bertrand Loy, Entegris’ president and chief executive officer, said: “The Entegris team delivered another quarter of strong performance and execution. Sales (excluding divestitures) increased 10 percent sequentially and were up in all three divisions and in most product lines.”
With fabs representing the company’s largest customer type, Entegris (NASDAQ:ENTG) supplies products that purify, protect, and generally ensure the integrity of raw materials needed for advanced semiconductor manufacturing.
Semiconductor Manufacturing
The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers, and data storage. The need for technologies like artificial intelligence, 5G networks, and smart cars is also creating the next wave of growth for the industry. Keeping up with this dynamism requires new tools that can design, fabricate, and test chips at ever smaller sizes and more complex architectures, creating a dire need for semiconductor capital manufacturing equipment.
Sales Growth
Entegris's revenue growth over the last three years has been solid, averaging 19.4% annually. But as you can see below, its revenue declined from $901 million in the same quarter last year to $812.7 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
Even though Entegris surpassed analysts' revenue estimates, this was a slow quarter for the company as its revenue dropped 9.8% year on year. This could mean that the current downcycle is deepening.
Entegris may be headed for an upturn. Although the company is guiding for a year-on-year revenue decline of 6.6% next quarter, analysts are expecting revenue to grow 11.7% over the next 12 months.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Entegris's DIO came in at 132, which is 6 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.
Key Takeaways from Entegris's Q2 Results
We were impressed by Entegris's revenue beat and strong gross margin improvement this quarter. We were also glad its inventory levels shrunk. On the other hand, its revenue guidance for next quarter missed analysts' expectations. Overall, this was a mixed quarter for Entegris. The stock traded up 2.3% to $125 immediately after reporting.
So should you invest in Entegris right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
