Applied Materials Earnings: Strong Results, Weak Bookings Guidance

Applied Materials (AMAT) reported strong results for its fiscal second quarter. Applied reported sales of $2.53 billion and EPS of 29 cents; the Street had expected $2.35 billion and 28 cents. New orders of $2.65 billion, up 4% sequentially, was consistent with previous guidance of 2%-7% sequential growth.

In a statement, CEO Mike Splinter said revenue and earnings were higher than expected; while the display business “remained soft,” he said Silicon and Fab Solutions segments “exceeded expectations, fueled by continued high levels of memory investment and momentum from market share gains.”

In a conference call with analysts yesterday following the announcement of second quarter results, AMAT CFO George Davis said the company sees third quarter orders down 10%-15% from the second quarter, with revenues flat, plus-or-minus 2%, and EPS of 30-32 cents a share. The Street has been at $2.44 billion in revenue and 30 cents. (FY Q2 revenues were $2.53 billion.)

The order decline is considerably worse than most analysts had expected.

CEO Mike Splinter says the foundry business has come back slower than expected. He says DRAM orders will trend down next quarter, partially offset by flash memory. Splinter says he is expecting 5% growth in the wafer processing equipment business this year, but with “increased downside risk to the numbers.”

“Bookings from foundries will increase but remain relatively weak,” Splinter says.

The display equipment business remains weak; he sees the sector down 30%-40% for the year, “more than our prior estimates.”

Splinter says the solar business has already topped the company’s goal of $200 million in orders for the year; the total had topped $300 million by the end of Q2. Applied now has raised its target for solar industry orders to more than $400 million for the fiscal year.

The weak bookings guidance weighed on the stock in after hours trading; the stock, which was higher early yesterday afternoon, fell 13 cents at $19.65, after a decline of 64 cents in the regular session.

AMAT 1-yr chart: