Hey, Applied Materials
Think y'all could manage to sell 28% less stuff this year than last, and earn, say, 40% of last year's profits?
Basically, that's the conversation Wall Street had with Applied going into Tuesday's earnings report. And true to form, the company did, in fact, exceed expectations -- on revenues, at least. So if you like, you can chalk up the 5% spike in the stock price to the power of low expectations.
Me? I think the stock's good performance has more to do with its prospects. See, while Applied sold $1.85 billion in products last quarter, it booked $2.03 billion in new orders. That was an 11% drop from what the company booked in the year-ago quarter, but it was less than sales fell. So the declines in sales may be approaching an inflection point and getting ready to move back up again.
Save the planet or watch TV?
Part of the credit for the sales turnaround has to go to CEO Mike Splinter's timely decision to move into the solar power industry. The company is now building thin-film manufacturing equipment for the likes of LDK Solar
More credit, though, has to go to Applied's "Display" business, which has benefited from booming consumer demand for flat-panel LCD TVs, at least as much as Corning
Foolish final thought
For all of the hype about how solar power will save the planet, Applied's numbers tell us something interesting -- and unexpected. EES sales today are roughly equal to what Display sales were a year ago. But Display was profitable even back then, while EES isn't there yet.
Seems the best way to make money lies in people watching TV, rather than in trying to save the planet.
Apply yourself to researching the company further:
Fool contributor Rich Smith owns no shares of any company named above. Suntech Power is a Motley Fool Rule Breakers pick. Best Buy is both a Motley Fool Stock Advisor and Inside Value selection. The Motley Fool owns share in Best Buy. Why do we tell you this? Because The Motley Fool has a disclosure policy.