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MKSI Instruments Looks Bullish on Robust Growth Drivers

Zacks Equity Research
Updated

We issued an updated research report on premium scientific and technical instruments company, MKS Instruments, Inc. MKSI, on Oct 6.

In the last month, shares of this Zacks Rank #2 (Buy) stock have yielded a return of 91.2%, outperforming 57.4% growth recorded by the industry.

Notably, the attractiveness of this stock as a current investment choice is further accentuated by its favorable VGM Score  B.

Also, the stock’s projected sales growth is 41.8% and earnings per share growth is 79.5% for 2017 compared to the respective tallies of 10.7% and 57.1% estimated for the industry. Moreover, the company’s earnings are projected to be up 15.7% in the next three to five years.

Why Should You Grab the Stock?

MKS Instruments has a well-balanced technology portfolio and intends to boost its market share on the back of solid customer relationships. Semiconductor, electronic thin film, life & health sciences, research & defense, and process & industrial technologies are the major advanced and booming business domains of the company.  

The company’s second-quarter 2017 earnings and revenues surpassed the year-ago tallies by 95.8% and 47.5% respectively. This upside stemmed from the robust semiconductor and other advanced markets’ sales. Premium technologies of MKS Instruments (such as the Green Idle Mode technology) and state-of-the-art products (like the EtherCAT pressure control product line) help solve complex end-user problems, in turn, strengthening the company’s customer relationships. The company believes these positives, as well as sturdy sales generated from the life sciences, general industrial and research end markets will likely drive its top- and bottom-line performance in the quarters ahead.

Moreover, MKS Instruments intends to boost its financial fundamentals through strategic inorganic moves. For instance, the Newport Corporation acquisition (completed in April 2016) is driving the company’s top and bottom lines, by reinforcing its presence in the Life Sciences, Semiconductor, Research and Industrial markets. On the back of this buyout, the company anticipates generating $40 million cost synergies by the end of 2017.
In addition, on Apr 3, 2017, MKS Instruments successfully divested its Data Analytics Solutions business to Sartorius Stedim Biotech. MKS Data Analytics Solutions offers a premium solution to end users, named Umetrics Suite. The company secured after-tax gain of $72 million cash from the spin-off process and intends to fund productive capital investment programs with the proceeds.

MKS Instruments has also implemented a new financial strategy aimed at reducing interest expenses and deleveraging its balance sheet over the long term. Earlier this July, the company noted that it has successfully accomplished the third repricing of secured term loan and thereby trimmed the interest expense of its term loan by 50 basis points (from LIBOR plus 2.75% to LIBOR plus 2.25%). Notably, via two consecutive prepayments, MKS Instruments reduced its principle owing amount from $780 million to $523 million.

The company projects to report earnings within $1.32-$1.56 per share and revenues within $450-$490 million in third-quarter 2017.

Other Stocks to Consider

Other top-ranked stocks in the same space are listed below:

Applied Materials, Inc. AMAT has an average positive earnings surprise of 2.66% for the last four quarters and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Adobe Systems Incorporated ADBE currently carries a Zacks Rank #2 and has an average positive earnings surprise of 7.80% over the trailing four quarters.

AMTEK, Inc. AME also holds a Zacks Rank #2 and has an average positive earnings surprise of 2.98% for the same time frame.

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MKS Instruments, Inc. (MKSI) : Free Stock Analysis Report
 
Adobe Systems Incorporated (ADBE) : Free Stock Analysis Report
 
Applied Materials, Inc. (AMAT) : Free Stock Analysis Report
 
AMTEK, Inc. (AME) : Free Stock Analysis Report
 
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