Update: Entegris Q2 Earnings And Sales Slightly Beat Estimates But Q3 Guidance Disappoints - Stock Down 5%

| About: Entegris, Inc. (ENTG)


Entegris reported a solid quarter with $251.6M in sales, $0.11 GAAP loss per share and $0.20 Non-GAAP profit per share. However, Q3 guidance fell short of consensus estimates.

ENTG exceeded expectations and price target of my long thesis due to the acquisition announced later in the year. A potential larger acquisition was mentioned by ENTG and my thesis.

I remain bullish on ENTG and raise my target price to $14 per share based on the ATMI acquisition, and current sales and earnings outlook.

Entegris, Inc. (NASDAQ:ENTG) reported solid Q2 earnings results today (SEC filing, earnings call), showing strong initial accretive potential of the recent acquisition of ATMI as two months of ATMI sales were included in the numbers. Revenues rose 41.7% Y/Y to $251.6M fueled by the acquisition, beating $240.2M consensus. GAAP net loss was $14.7M, or $0.11 per diluted share. Non-GAAP net income reached $27.4M, or $0.20 per diluted share, beating consensus estimates by $0.02. Operating loss margin was negative 9.3%; adjusted operating margin reached positive 18.8%. Q2 GAAP results included unusual amortization of intangible assets of $9.4M and $66.6M of aggregated acquisition-related costs. Non-GAAP earnings for the first half of 2014 show less fluctuation and showed Non-GAAP EPS of $0.32 per diluted share, versus $0.28 in the same period last year.

Business trends were positive across all major business units. Sales were boosted by record-level shipments of leading-edge wafer handling FOUPs and fluid handling products related to new fab construction activity. The ATMI integration is on track and ahead of schedule toward eventual $30M of annualized cost synergies.

Since my call to buy ENTG on a dip last July, with the dip occurring in August and September, the stock is still up ~33% (~40% including the dip). Despite the slightly lower Q3 guidance and potential post-acquisition and post-earnings blues, I am actually raising my original target price from a year ago to $14 per share now based on the large ATMI acquisition late last year and solid earnings numbers. I remain bullish on Entegris. I see the post-earnings weakness in the stock - as well as any potential general market jitters in August and September - as a buying opportunity.

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