Why Entegris Inc. Shares Soared

Is Entegris' jump meaningful? Or just another movement?

Feb 4, 2014 at 9:13PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Entegris (NASDAQ:ENTG) rose more than 11% Tuesday after it announced an acquisition following solid fourth quarter results. 

So what: Quarterly sales rose 11% year over year to $186.3 million, which translated to adjusted earnings of $0.18 per share. Analysts, on average, were expecting Entegris to report earnings of just $0.13 per share on sales of $170.82 million.

In addition, Entegris announced it has agreed to acquire semiconductor materials and packaging specliast ATMI for $34 per share in a deal valued at $1.15 billion.

Now what: The transaction is anticipated to close sometime in Q2, boasts annual cost synergies of $30 million, and should be immediately accretive to Entegris' non-GAAP earnings per share. What's more, Entegris says the combined companies' cash flow generation should enable accelerated debt repayments -- a great thing considering they'll need to take on some new debt to cover the purchase -- resulting in even more significant earnings leverage down the road.

Assuming the acquisition goes off without a hitch, the deal does seem like a win-win for everybody involved. With shares of Entegris currently trading at a reasonable 17.6 times next year's estimated earnings, I think investors would be wise to -- at the very least -- add Entegris to their watch lists to keep tabs on its progress.

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Entegris is about to nearly double in size thanks to this acquisition, but keep in mind the stock market also offers plenty of other companies with mind-boggling growth potential.

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Steve Symington and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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