For the past several weeks, companies across the markets have been reporting their quarterly results. The next couple of weeks should be light on earnings news, as Wall Street takes a breather before the next quarter's earnings roll in. Rudely interrupting the analysts' nap, however, is semiconductor equipment maker Applied Materials
What analysts say:
- Buy, sell, or waffle? Thirty-two analysts follow Applied Materials, with 17 of them rating the stock a buy, 13 a hold, and two a sell.
- Revenues. Sales are expected to climb 15% to $2.1 billion.
- Earnings. And Wall Street will be looking for 28% profit growth to $0.23 per share.
What management says:
On May 4, Applied Materials announced its intention to acquire nanotech company Applied Films
In other news, in March, Applied Materials announced that it is cutting short last year's $4 billion stock buyback program just over halfway through its run, and replacing it with a new, $5 billion program that will run over the next three years. Prior to terminating last year's program, management spent $2.2 billion to buy back 128 million shares
What management does:
Spending $17.22 per share to buy back shares over the last year has made for a sound investment -- that's about 5% cheaper than today's price. Even at today's higher share price, $5 billion would reclaim about 17% of the company's stock. What's more, even after paying in full for Applied Films, Applied Materials would still have enough cash in the bank to make it happen.
But would the new buybacks be as prudent as the old? Let's take a look at where Applied Materials' margins have been trending. Namely, down:
Margins % |
10/04 |
1/04 |
5/05 |
7/05 |
10/05 |
1/06 |
---|---|---|---|---|---|---|
Gross |
46.2 |
46.3 |
45.7 |
44.8 |
44.1 |
44.3 |
Op. |
24.4 |
25.2 |
24.4 |
22.2 |
20.7 |
20.2 |
Net |
16.9 |
18.9 |
18.4 |
19 |
17.3 |
15.1 |
One Fool says:
A Fool has to wonder whether Applied Materials' margin slide has anything to do with the woes of one of its biggest customers: Intel
Competitors:
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Intel is a Motley Fool Inside Value recommendation.
Fool contributor Rich Smith owns shares of Intel.