Advertisement
Canada markets open in 3 hours 32 minutes

  • S&P/TSX

    21,871.96
    +64.59 (+0.30%)
     

  • S&P 500

    5,010.60
    +43.37 (+0.87%)
     

  • DOW

    38,239.98
    +253.58 (+0.67%)
     

  • CAD/USD

    0.7293
    -0.0008 (-0.11%)
     

  • CRUDE OIL

    82.08
    +0.18 (+0.22%)
     

  • Bitcoin CAD

    90,629.38
    +253.38 (+0.28%)
     

  • CMC Crypto 200

    1,421.17
    +6.41 (+0.45%)
     

  • GOLD FUTURES

    2,311.50
    -34.90 (-1.49%)
     

  • RUSSELL 2000

    1,967.47
    +19.82 (+1.02%)
     

  • 10-Yr Bond

    4.6230
    +0.0080 (+0.17%)
     

  • NASDAQ futures

    17,375.25
    +25.25 (+0.15%)
     

  • VOLATILITY

    16.71
    -0.23 (-1.36%)
     

  • FTSE

    8,052.12
    +28.25 (+0.35%)
     

  • NIKKEI 225

    37,552.16
    +113.55 (+0.30%)
     

  • CAD/EUR

    0.6841
    -0.0009 (-0.13%)
     

MKS Instruments (MKSI) Up 20.4% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·4 min read

It has been about a month since the last earnings report for MKS Instruments (MKSI). Shares have added about 20.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is MKS Instruments due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

MKS Instruments Q3 Earnings Beat, Revenues Up Y/Y

MKS Instruments reported third-quarter 2022 adjusted earnings of $2.74 per share, which beat the Zacks Consensus Estimate by 15.13% but declined 1.8% year over year.

Revenues of $954 million missed the consensus mark by 0.02% but increased 28.6% year over year. Strong performance in the advanced electronics and semiconductor business segment contributed to revenue growth.

Products revenues (88.2% of total revenues) were $841 million, up 29.6% year over year. Services revenues (11.8% of total revenues) increased 11.9% to $113 million.

Quarterly Update

Revenues from the semiconductor market (56.7% of total revenues) advanced 10.9% year over year to $541 million, driven by strong demand for its Vacuum solutions and Photonics Solutions divisions.

Revenues from the advanced electronics market (19.4% of total revenues) were $185 million, which surged 105.6% year over year.

Revenues from the specialty industrial market (23.9% of total revenues) increased 39% year over year to $228 million.

Operating Details

In the third quarter, adjusted EBITDA increased 20.7% year over year to $268 million. Adjusted EBITDA margin decreased 150 basis points (bps) to 28.1%.

Research & development, as a percentage of revenues, decreased 30 bps year over year while sales, general & administrative expenses, as a percentage of revenues, increased 50 bps.

MKS Instruments reported a non-GAAP operating income of $240 million, up 19.4% year over year. Adjusted operating margin decreased 160 bps on a year-over-year basis to 25.1%. Rising input cost is one of the primary factors responsible for a decrease in operating margin.

Balance Sheet& Cash Flow

As of Sep 30, 2022, MKS Instruments had cash and cash equivalents of $884 million compared with $1.1 billion as of Jun 30, 2022.

Short-term investments as of Sep 30, 2022, were $1 million compared with $2 million as of Jun 30, 2022.

As of Sep 30, 2022, the secured term loan principal outstanding was $5.2 billion. The company had $500 million of incremental borrowing capacity under an asset-based line of credit, subject to certain borrowing base requirements.

Cash flow from operations was $199 million in the third quarter compared with the second-quarter 2022 figure of $105 million.

Free cash flow was $173 million compared with $41 million reported in the previous quarter.

In the third quarter, the company paid a cash dividend of $12 million or 22 cents per share.

Q4 Guidance

For the fourth quarter of 2022, MKS Instruments anticipates revenues to be $1 billion (+/- $50 million). The Zacks Consensus Estimate for revenues is currently pegged at $757.42 million, indicating growth of 2.09% from the year-ago quarter.

Non-GAAP earnings are expected to be $1.34 per share (+/- 27 cents).

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

ADVERTISEMENT

The consensus estimate has shifted -46.51% due to these changes.

VGM Scores

Currently, MKS Instruments has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise MKS Instruments has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MKS Instruments, Inc. (MKSI) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research