Applied Materials reports sharp rise in quarterly orders, shares rise

Applied Materials reported a sharp rise in quarterly profits on the back of improvement in all its key financial metrics.

The semiconductor equipment manufacturer's net sales jumped by 15% in its third fiscal quarter ending on 31 July versus the previous three-month stretch to reach $2.82bn (consensus: $2.84bn) and grew by 13% year-on-year.

As a result, on an adjusted basis net income was 45% higher in comparison to the 2015 level of $550m, which was equivalent to 50 cents per share (consensus: 48 cents).

"With earnings and orders at an all-time high, Applied is performing better than ever and in a great position to sustainably outperform our markets," said Gary Dickerson, president and CEO.

"We are in the early stages of large, multi-year industry inflections that are driving our business today and creating new opportunities for future growth."

New orders rose by 26% from a year ago to stand at a record $3.658bn (consensus: $2.76bn), driven by strength in semi equipment and displays, alongside a two percentage point improvement in the company's operating margins to 22.8%.

"Going forward, AMAT stated that the orders will remain strong for the coming two quarters, but may not be as strong as the past two quarters. The strong Q4 reflects that the company is well positioned in the foundry industry for 10nm/7nm capacity ramp up," Berenberg analyst Tammy Qiu said in a research report sent to clients on 19 August.

For the next quarter, the Santa Clara, California-based outfit forecast profits would rise by between 15% to 19% with EPS in a range of 61 to 69 cents, including at least four cents per share in extraordinary charges which had already been identified.

Qiu also explained to clients how Applied Materials's increased confidence on the outlook for demand from capital outlays on wafer fabrication equipment was similar to that shown by rival LAM Research during its conference call in July.

As of 14:3 BST the company's shares were higher by 4.05% to $27.68.