MKS Instruments (NASDAQ:MKSI) MKSI reported fourth-quarter 2021 adjusted earnings of $3.02 per share, which beat the Zacks Consensus Estimate by 5.59% and surged 29.1% year over year.
Revenues of $763.9 million surpassed the consensus mark by 0.47% and improved 15.7% year over year, driven by rising demand for the company’s solutions in the semiconductor and advanced market despite the negative impact of pandemic and supply chain constraints.
Products revenues (87.4% of total revenues) were $667.8 million, up 16.4% year over year. Services revenues (12.6%) increased 3.6% year over year to $96.1 million.
Quarterly Update
Revenues from the semiconductor market (64.8% of total revenues) increased 25.9% year over year to $494.8 million, owing to robust performance by the Vacuum & Analysis division.
Revenues from advanced markets (35.2% of total revenues) were $269.1 million, up 0.7% year over year. The upside can be attributed to recovery in demand trends for advanced electronics applications.
Segment-wise, Vacuum and Analysis (63.5% of total revenues) revenues surged 18% year over year to $484.4 million.
Light and Motion division revenues (30.1% of total revenues) climbed 26.1% year over year to $229.8.
Equipment & Solutions segment revenues (6.4% of total revenues) were $49.2 million, down 26.6% year over year.
Operating Details
In the fourth quarter, adjusted gross margin expanded 70 basis points (bps) on a year-over-year basis to 46.4%.
Adjusted EBITDA increased 26.4% year over year to $228.4 million. Adjusted EBITDA margin expanded 250 bps on a year-over-year basis to 29.9%.
Research & development, and sales, general & administrative expenses, as a percentage of revenues, declined 20 bps and 150 bps on a year-over-year basis, respectively.
MKS Instruments reported non-GAAP operating income of $207.2 million, up 26.8% year over year. Adjusted operating margin expanded 240 bps on a year-over-year basis to 27.1%.
Balance Sheet
As of Dec 30, 2021, MKS Instruments had cash and short-term investments of $1.04 billion compared with $879.6 million as of Sep 30, 2021.
Total debt as of Dec 31 2021, was $818.7 million. Secured term loan principal outstanding as of Dec 31, 2021, was $827 million. The company had $100 million of incremental borrowing capacity under an asset-based line of credit, subject to certain borrowing base requirements.
Cash flow from operations was $194.3 million in the fourth quarter compared with the previous quarter’s figure of $153.1 million. Free cash flow was $170.9 million compared with $132.6 million reported in the previous quarter.
MKS Instruments paid out dividends worth $12 million during the reported quarter.
Q4 Guidance
For the first quarter of 2022, MKS Instruments anticipates revenues to be $750 million (+/- $30 million). The Zacks Consensus Estimate for revenues is currently pegged at $782.33 million, indicating growth of 15.6% from the year-ago quarter.
Non-GAAP earnings are expected to be $2.57 per share (+/- 25 cents).
The consensus mark for earnings is currently pegged at $2.96 per share, suggesting an increase of 15.63% from the prior-year quarter.
Zacks Rank & Stocks to Consider
Currently, MKS Instruments has a Zacks Rank #3 (Hold).
MKS Instruments shares have underperformed the Zacks Computer & Technology sector in the past year. While MKSI shares have fallen 12.9%, the Computer & Technology sector rallied 2.7%.
Littelfuse (NASDAQ:LFUS) LFUS, NETGEAR NTGR and Mandiant MNDT are some better-ranked stocks that investors can consider in the broader sector. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Littelfuse shares have underperformed the Zacks Computer & Technology sector in the past year. Littelfuse returned 0.8% compared with the sector’s growth of 2.7%.
LFUS is expected to report fourth-quarter 2021 on Feb 1, 2022.
NETGEAR shares have underperformed the Zacks Computer & Technology sector in the past year. NETGEAR shares are down 39.2%.
NTGR is slated to report fourth-quarter 2021 results on Feb 2.
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