Earnings Preview: Applied Materials

Applied Materials (AMAT) is expected to report Q4 earnings after the market close on Wednesday, November 11, with a conference call scheduled for 4:30 pm ET.

Guidance

The consensus estimate is 3c for EPS and $1.32B for revenue, according to First Call. Guidance provided by management on its last earnings call was for Q4 EPS breakeven and revenue up 10%-20%, from the reported Q3 $1.13B figure.

Analyst Views

Deutsche Bank believes Applied Materials could report Q4 results above guidance, with quarter-over-quarter bookings that may lag peers due to the one month shift in reporting periods. The firm expects details on a major restructuring. Deutsche believes workforce reductions could be as much as 20% to 25%. With the opening of Applied’s Advanced Solar Research and Customer Demo facilities in Xi’an, China, and the anticipated opening of the Asia Operations Center in Singapore, the firm expects a strong shift to lower cost regions in Asia. Deutsche will be looking for more information on the company's LED efforts.

Applied said at EU PVSEC in Hamburg on Sept. 9 that LED products would start showing up in backlog in 2010; this might foreshadow a product release announcement, but Deutsche does not know the formal release timing. Regardless, the firm believes Applied has made significant progress with at least three or four key customers. Looking forward: Deutsche expects Q1 bookings guidance to be modestly higher quarter-over-quarter, somewhat short of estimates normalized to semiconductor capital equipment, or SCE, peers. With a strong FY10 discounted, Deutsche Bank maintains a Hold rating and $10 price target.