MKS Instruments Ranked Strong Buy On Healthy Growth Drivers

We issued an updated research report on premium scientific and technical instruments company, MKS Instruments, Inc. (NASDAQ:MKSI) , on May 24.

Over the last one month, shares of this Zacks Rank #1 (Strong Buy) stock yielded a return of 7.66%, outperforming 3.90% growth recorded by the Zacks classified Electronics - Manufacturing Machinery industry.

Why Should You Grab the Stock?

MKS Instruments reported better-than-expected revenues in first-quarter 2017. The stellar top-line performance was stemmed by stronger semiconductor and other advanced markets demand. The company witnessed impressive semiconductor sales growth, which is nearly two times higher than the average industry growth rate, backed by its non-imitable broad and deep technology portfolio. Premium technologies of MKS Instruments, such as the latest Green Idle Mode technology, aid in solving complex end-user problems, in turn strengthening the company’s customer relationships.

In second-quarter 2017, MKS Instruments anticipates to accrue revenues within the range of $440–$480 million, estimating a 5% year-over-year mid-point growth.

In addition, the company intends to boost its financial fundamentals through strategic inorganic growth programs. For instance, the Newport Corporation acquisition (completed in Apr 2016) is boosting the company’s top and bottom lines, by reinforcing its presence in the Life Sciences, Semiconductor, Research and Industrial markets. On the back of this buyout, the company generated roughly $32 million cost synergies in the recently reported quarter. MKS Instruments projects to generate $40 million cost synergies from this deal by the end of 2018.

Moreover, MKS Instruments has implemented a new financial strategy aimed at reducing interest expense and deleveraging its balance sheet over the long term. In first-quarter 2017, the company paid $50 million worth voluntary principal prepayment of term loan. Since Apr 29, 2016, MKS Instruments has repaid $200 million term loan through voluntary principal prepayments and effectively reduced interest rate spreads in two junctures, mirroring strength of its financial results. Notably, since last April, the company has lowered annual cash interest expense by more than 40%.

Over the last 30 days, the Zacks Consensus Estimate for the stock moved north for both 2017 and 2018, reflecting positive market sentiments.

Other Key Picks

Some other top-ranked stocks in the industry are listed below:

Applied Optoelectronics, Inc. (NASDAQ:AAOI) pulled off a remarkable average positive earnings surprise of 118.33% in the last four quarters and currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axcelis Technologies, Inc. (NASDAQ:ACLS) , which also boasts a Zacks Rank #1, generated an impressive average positive earnings surprise of 135.78% over the past four quarters.

Agilent Technologies, Inc. (NYSE:A) currently carries a Zacks Rank #2 (Buy) and delivered an average positive earnings surprise of 11.68% over the trailing four quarters.

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