Why Applied Materials, Inc. (NASDAQ: AMAT) stock is going gangbusters today

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Applied Materials, Inc. (NASDAQ: AMAT) stock surged over 10.2% on 15th November, 2019 (as of 10:59 am GMT-5; Source: Google finance) driven by posted better than expected results for the fourth quarter of FY 19. In AGS, the company’s revenue was stronger than it had expected in the fourth quarter, and the company still anticipates better than seasonal revenue in the first quarter, the subscription like portion of AGS has momentum, and will benefit from the thousands of new systems that the company had added to the installed base in 2019.

AMAT in the fourth quarter of FY 19 has reported the adjusted earnings per share of 80 cents, beating the analysts’ estimates for the adjusted earnings per share of 76 cents. The company had reported the adjusted revenue of $3.75 billion in the fourth quarter of FY 19, beating the analysts’ estimates for revenue of $3.68 billion, according to FactSet. On a non-GAAP adjusted basis, the company has delivered the gross margin of 43.8 percent, operating income of $888 million or 23.7 percent of net sales.

In 2019, the company had returned about $3.2 billion to shareholders, equivalent to 113% of free cash flow. the company has returned about $800 million in dividends, raised the dividend by 5% and took advantage of market volatility to repurchase 60 million shares of the stock at an average price of $39.86.

The company expects the first-quarter adjusted earnings to be in the range of 87 cents to 95 cents a share on sales expected to be in the range of $3.95 billion to $4.25 billion, after posting adjusted earnings of 81 cents a share on sales of $3.75 billion in the first quarter of the just-completed fiscal year. The analysts had anticipated the adjusted earnings to be of 74 cents a share on sales of $3.71 billion for the fiscal first quarter, according to FactSet.

In addition, for the first quarter 2020, the company expects Semiconductor Systems revenue to be approximately $2.775 billion. Services revenue to be approximately $975 million, and Display revenue to be approximately $330 million. The company also expect non-GAAP gross margin to be approximately 44.6%, and non-GAAP opex, to be approximately $800 million.

Meanwhile, the company is enabling new DRAM capacitor module capabilities, and new patterning technologies that is projected to create large new opportunities for AMAT where the company is reducing the number of steps for a multi-patterning and also improving pattern placement.

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