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AMAT rises on 4Q results
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November 16, 2000: 11:52 a.m. ET
Chip equipment maker's stock up; 4Q beat Street; analysts lower estimates
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NEW YORK (CNNfn) - The stock of Applied Materials rose in early trading Thursday even though some analysts reduced their estimates for the company after it reported fiscal fourth-quarter earnings.
After the close of markets Wednesday, the world's largest maker of wafer fabrication equipment for semiconductor plants reported fourth-quarter earnings that exceeded analysts' expectations, as its revenue rose 81 percent from the same period last year.
The Santa Clara, Calif.-based company reported net income, excluding one-time items, for its fourth quarter ended Oct. 29 of $664 million, or 77 cents per share, up 119 percent from $303 million, or 37 cents per share, for the same period last year. The mean of analysts' estimates was 76 cents, according to earnings tracker First Call.
The company's stock rose as much as $2 to $44.75 in morning trading Thursday and it was the most actively traded issue on Nasdaq.
Applied Materials told analysts that its fiscal first-quarter revenue is likely to be $2.9 billion to $2.95 billion, with earnings per share of 75 to 78 cents. Those estimates were slightly lower than the analysts' forecast for the first quarter. The company's management said that the equipment industry could grow by 20 percent in 2001, with $6 billion to $8 billion of revenue coming from equipment to make 300 millimeter wafers.
Analysts had wide-ranging views about Applied Materials' outlook, with Lehman Brothers recommending buying the shares, while other firms lowered their earnings and revenue estimates.
"We think 2001 earnings could be well above the lower end of the Street range, due to higher operating margins and interest income, and modest growth in share count," said Lehman Brothers analyst Edward White in a research note. "We think the shares offer exceptional value."
By contrast, Morgan Stanley analyst Jay Deahna cut his fiscal 2001 earnings estimate to $2.65 from $3.20, and said that he sees calendar 2002 as a better growth year for Applied Materials than calendar 2001. Likewise, Merrill Lynch analyst Brett Hodess cut his fiscal 2001 estimate to $2.95 per share from $3.50 and reduced his revenue estimate for that year to $11.7 billion from $13.6 billion.
"With the potential for 20 percent revenue and earnings per share growth in 2001 for Applied Materials, we believe that the stock could trade to a 18x price/earnings multiple on 2001 earnings of $2.95, resulting in a $55 price target," Hodess said. "Thus, we are reducing our price target from $76 to $55, but maintaining our intermediate-term accumulate rating." 
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