Despite a strong third-quarter performance from Applied Materials (NASDAQ:AMAT), a weaker fourth-quarter outlook has the chip equipment maker's shares treading water today.
In its fiscal third quarter, Applied Materials saw net sales climb 11% sequentially to $2.24 billion, more than doubling sales in last year's quarter. New orders also increased 11% to $2.46 billion. Meanwhile, gross margins continued to climb, edging up to 47.4% from 46.5% in the second quarter and 31.7% in the same quarter last year.
The company earned $441 million, or $0.26 per share, up from the $0.22 per share in second-quarter earnings and reversing last year's $0.02-per-share loss. That was also ahead of analyst estimates as well as the guidance it gave at its last quarter's report.
Applied Materials has been on a tear over the past several quarters. However, its fourth-quarter guidance is seen as disappointing: The company forecast merely flat to 5% sequential sales growth, or sales of about $2.24 billion to $2.36 billion, with new order growth climbing a similarly weaker 5%. Earnings are also expected to fall sequentially to $0.24 to $0.26 per share.
That said, many investors feel that the momentum has slowed, and Applied Materials' fourth-quarter guidance offers little to suggest otherwise. So despite the company's strong performance in recent quarters, that may explain why the stock is still reasonably priced -- but not cheap -- near its 52-week low at less than 19 times this year's earnings.
Fool contributor Jeff Hwang owns none of the companies mentioned above.
