Applied Materials meets 2Q estimates, sees strong 3Q ahead

Applied Materials (Nasdaq: AMAT), the largest chip equipment maker, met Wall Street estimates Wednesday with second quarter earnings of $454 million, or 55 cents a share, excluding one-time items related to the acquisition of Etec Systems.

The Etec purchase closed March 29 and wasn't included in Applied's second quarter results.

Revenue for the second quarter was a record $2.19 billion, up 27 percent from the first quarter and up 87 percent from the $1.17 billion in sales reported a year ago. In the same quarter a year ago, Applied reported earnings of $140 million, or 18 cents a share.

Although Applied's results were strong CFO Joseph Bronson said the third quarter will be even better. Bronson said capital spending will continue to jump. Applied now projects third quarter earnings of 64 cents a share to 68 cents a share on revenue of $2.6 billion to $2.7 billion. First Call Corp. projected a third quarter profit of 62 cents a share.

In the second quarter, ongoing net income, which excludes one-time items and charges related to Etec, was 53 cents a share. Including one-time items such as charges and one-time gains, Applied reported earnings of 58 cents a share. Gross margins were 50.1 percent, up from 49.8 percent in the first quarter.

Orders for the quarter were $2.93 billion, up 19 percent sequentially and 101 percent from a year ago. Applied is cashing in as semiconductor companies such as Intel (Nasdaq: INTC), AMD (NYSE: AMD) and a host of telecommunications chip firms boost capacity. The company said it is benefiting from a move to next-generation technologies for new copper semiconductors.

Backlog going into the third quarter is also strong at $3.18 billion. Taiwan and North America represented half of all Applied's orders in the second quarter. In the third quarter, backlog will top $3 billion.

In a statement, CEO James Morgan said the good times should last. "We are in a major industry upturn and expect strong demand to continue for semiconductor devices that enable Internet-related, telecommunications and consumer products, said Morgan.
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