Applied Materials (AMAT): Why Investors Should Include It In Their Portfolio

Applied Materials, Inc. ( (NASDAQ:AMAT) ) is the world’s largest maker of semiconductor and display manufacturing equipment. It is impossible to pick up an electronic product from top brands and not have something inside that Applied Materials helped made. The company is not only a Zacks Rank #1 (Strong Buy), but it also has a Style Score of 'B' and multiple positive earnings estimates in the past 30 days. Below, I take a detailed look at Applied Materials’ Style Scores and impressive earning estimates.

Value

Applied Materials' stock trades at a PE of 13.88, compared to its industry, which has an average PE of 16.58. This means that Applied Materials is trading at a relative discount to its industry peers. It is reasonable to say that companies in this industry are decent choices for value investors but that Applied Materials is even better. No wonder, Applied Materials has a Style Score of ‘B’ for Value, especially with a PEG of just 0.9, which means the stock is currently cheap from an earnings growth perspective, too.

Growth

Applied Material isn’t just a great value choice, as it also has some interesting growth metrics as well. Also scoring a ‘B’ for its Growth Style Score, the company’s projected earnings per share growth is at 47.67%, which crushes the industry average of 17.15%. Analysts also projected Applied Materials' sales growth to be 22.46%, which is easily ahead of the industry – coming in at 14.78%, again.

Earnings Estimates

In the past 30 days, Applied Materials has seen eight positive estimate revisions for the current quarter, compared to none lower. According to Zacks Equity Research, the earnings estimate for the current quarter has also been favorable, with estimates rising from $0.62 a share 30 days ago to $0.76 per share today, a move of 22.6%.

Promising Outlook

Applied Materials is expecting a profitable second quarter in fiscal 2017 from their outstanding performance in the last two quarters. Not only did Applied Materials report record profit of $1.72 billion in the fourth quarter ending in October of fiscal 2016, but the company also reported record orders of $4.24 billion in the first quarter of fiscal 2017. The company sees the second quarter of 2017 as another opportunity to set new records.

Revenue in the first quarter of fiscal 2017 rose by 45% year-over-year and is expected to grow even more as China looks to strengthen and expand its own chip and advanced panel industry. Applied Materials controls a large share of the market in China, as reported by Nikkei Asian Review. Gary Dickerson, CEO and President of Applied Materials, said 2017 annual revenue in China would reach $2.6 billion.

“I’ve never been so positive about our core businesses, and our position has never been better in our market,” Dickerson told Nikkei reporters in Taipei on Wednesday. “I am very excited about the near term and very excited about our future long term.“

The major products that are helping the company’s growth are the global demand of 3-D NAND flash memory chips and advanced organic light-emitting diode (OLED). The memory chips are used in a broad range of electronics such as laptops and mobile devices. OLED is considered a popular option for premium smartphones since Apple Inc. ( (NASDAQ:AAPL) ) adopted them for the iPhone that’s scheduled for release later this year.

Bottom Line

With high demands and customers from around the world including Intel ( (NASDAQ:INTC) ), Samsung Electronics (KS:005930), Toshiba, Taiwan Semiconductor Manufacturing Co. ( (NYSE:TSM) ) and Semiconductor Manufacturing Co., Applied Materials is looking to be a powerhouse in its industry.

The company expects net sales in the second quarter of fiscal 2017 to be in the range of $3.45 billion to $3.6 billion, which at the midpoint of the range will be approximately 44% growth year over year. With a record of consistently beating our consensus earnings estimate and positive growth in revenues and new orders, Applied Materials should be on your radar now if it’s not already.

A Full-Blown Technological Breakthrough in the Making

Zacks’ Aggressive Growth Strategist Brian Bolan explores autonomous cars in our latest Special Report, Driverless Cars: Your Roadmap to Mega-Profits Today. In addition to who will be selling them and how the auto industry will be impacted, Brian reveals 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>