What's in Store for Applied Materials (AMAT) in Q2 Earnings?

Applied Materials, Inc. AMAT is set to report second-quarter fiscal 2022 results on May 19.

For the fiscal second quarter, the company expects net sales of $6.35 billion (+/-$300 million). The Zacks Consensus Estimate for revenues is pegged at $6.35 billion, suggesting growth of 13.8% from the year-ago reported figure.

Applied Materials projects non-GAAP earnings of $1.75-$2.05 per share for the quarter under review. The Zacks Consensus Estimate for earnings is pegged at $1.89, indicating growth of 15.9% from the year-ago reported figure.

AMAT surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, while meeting the same once, the surprise being 4.52%, on average.

Applied Materials, Inc. Price and EPS Surprise

Applied Materials, Inc. Price and EPS Surprise

Applied Materials, Inc. price-eps-surprise | Applied Materials, Inc. Quote

Factors to Consider

Applied Materials’ portfolio strength, expanding position in memory and increasing design wins are expected to have driven the fiscal second-quarter performance.

More clients are expected to have upgraded their equipment, owing to the increasing deployment of 5G in key markets. This, in turn, is expected to have aided AMAT’s top line in the quarter to be reported.

The growing adoption of IoT, AI and Big Data is expected to have contributed to the fiscal second-quarter performance.

Growth opportunities across specialty nodes and new node ramps across foundry, logic, NAND and DRAM are expected to have benefited the company in the to-be-reported quarter. Moreover, inventory reductions across memory and demand elasticity in NAND are anticipated to have acted as tailwinds.

The company is expected to have witnessed solid customer momentum across automotive and advanced packaging, owing to the rising foundry logic spending.

The above-mentioned factors are expected to have driven sales in the Semiconductor Systems Group segment in the to-be-reported quarter. For second-quarter fiscal 2022, the company anticipates Semiconductor Systems revenues of $4.6 billion. The Zacks Consensus Estimate for the same is pegged at $4.61 billion, suggesting growth of 16.1% from the prior-year quarter’s reported figure.

Coming to the Applied Global Services (“AGS”) segment, the company’s new systems added to its installed base are likely to have driven momentum across the subscription part of AGS in the quarter under review.

For second-quarter fiscal 2022, the company anticipates AGS revenues of $1.35 billion. The consensus mark for the same is pegged at $1.35 billion, suggesting year-over-year growth of 12.5%

The company projects Display revenues of $380 million. The Zacks Consensus Estimate for the same is pegged at $384 million, indicating a year-over-year rise of 2.4%.

However, uncertainties related to the ongoing pandemic are likely to have been headwinds for the company in the to-be-reported quarter.

Further, the impacts of mounting expenses are likely to get reflected in the upcoming results.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Applied Materials this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Applied Materials has an Earnings ESP of -5.82% and a Zacks Rank #4.

Stocks to Consider

Here are some stocks that you may consider as our model shows that these have the right combination of elements to beat on earnings this season.

Cisco Systems CSCO has an Earnings ESP of +0.84% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cisco Systems is set to report third-quarter fiscal 2022 results on May 18. The Zacks Consensus Estimate for CSCO’s earnings is pegged at 86 cents per share, indicating an increase of 3.6% from the prior-year period’s reported figure.

BJ’s Wholesale Club BJ has an Earnings ESP of +5.04% and a Zacks Rank of 3 at present.

BJ’s Wholesale Club is scheduled to release first-quarter 2022 results on May 19. The Zacks Consensus Estimate for BJ’s earnings is pegged at 72 cents per share, which suggest no change from the year-ago reported figure.

Advanced Auto Parts AAP has an Earnings ESP of +4.89% and a Zacks Rank of 3 at present.

Advanced Auto Parts is scheduled to release first-quarter 2022 results on May 23. The Zacks Consensus Estimate for AAP’s earnings is pegged at $3.50 per share, indicating an increase of 4.8% from the prior-year period’s reported figure.

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