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What Can Investors Expect from Applied Materials’ Q2 Earnings?

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Applied Materials (NASDAQ:AMAT) stock fell 3.1% on Tuesday and closed at $52.33. The stock was trading 24.6% below its 52-week high of $69.44. Meanwhile, the stock was trading 42.8% above its 52-week low of $36.64. At the closing price on Tuesday, Applied Materials stock had a market capitalization of $48.1 billion.

What can investors expect from Applied Materials’ results in the second quarter of fiscal 2020? The semiconductor company will likely release its earnings results for the April ended quarter on Thursday after the closing bell.

What to expect from Applied Materials’ Q2 earnings

Wall Street analysts expect Applied Materials to post sales of $4.1 billion in the second quarter—a rise of 16.6% YoY (year-over-year) compared to $3.5 billion in the second quarter of fiscal 2019. Also, analysts expect the company’s non-GAAP EPS to rise by 34% YoY to $0.94 in the second quarter.

In the second quarter, Applied Materials’ free cash flow will likely increase to $985 million from $682 million a year ago. The company’s operating cash flow could rise by 17.6% YoY to $941 million. Meanwhile, the company’s capital expenditures will likely decline 26% YoY to $87 million in the second quarter. Applied Materials could return $193 million to shareholders in the form of dividends. On Tuesday, the company’s dividend yield was 1.68%.

Analysts also expect Applied Materials revenues to rise 12.7% YoY in fiscal 2020 to $16.5 billion. The sales will likely rise by 8% YoY in fiscal 2021 to $17.8 billion. The adjusted earnings could rise by 23.4% YoY in fiscal 2020 to $3.75 per share. However, the profits will likely rise by 15% YoY to $4.31 per share in fiscal 2021.

Analysts’ recommendations for Applied Materials

Among the 27 analysts following Applied Materials stock, 21 recommend a “buy,” while six recommend a “hold.” None of the analysts recommend a “sell.” Wall Street analysts’ mean target price on the stock is $66.04, which implies a 26.2% gain from the current level of $52.33. The consensus target price for the stock has risen from $65.22 in April—a growth of 1.3%.

Peer comparison

AMD (NYSE:AMD) generated sales of $1.8 billion in the first quarter, which ended in March—a growth of 40.4% from the first quarter of 2019. The company met analysts’ consensus revenue expectation of $1.78 billion. In the first quarter, AMD reported a non-GAAP EPS of $0.18 compared to $0.06 in the first quarter of 2019. The earnings also met analysts’ consensus expectation of $0.18 per share. Read Is AMD Stock a ‘Sell’ after Its Q1 Earnings? to learn more.

In the first quarter, Intel (NASDAQ:INTC) reported revenue of $19.8 billion, which grew 23.5% YoY from $16.1 billion in the first quarter of 2019. The company beat analysts’ consensus revenue expectation of $18.7 billion. Intel’s non-GAAP EPS of $1.45 was above analysts’ estimates of $1.28 per share in the first quarter. However, the company posted a non-GAAP EPS of $0.89 in the first quarter of 2019. Read Is Intel Stock a ‘Sell’ after Its Q1 Earnings? to learn more.

Technical analysis

Based on the closing price on Tuesday, Applied Materials stock was trading 2.6% above its 20-day moving average of $51.01. The stock is also trading 6.4% above its 50-day moving average of $49.17 and 5.8% below its 100-day moving average of $55.57. The company’s 14-day relative strength index number is 53. The number suggests that the stock isn’t oversold or overbought.

Stay tuned to learn how Applied Materials performed in the second quarter of fiscal 2020.

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