On Thursday, August 18th, after the market has closed, Applied Materials (NASDAQ:AMAT) will release the company’s earnings report for the FQ3 period.
In the past two years, the semiconductor equipment company has met or exceeded expectations for earnings per share (EPS) 75% of the time, with the only two failures occurring in the most recent three quarters.
As a result of Applied Materials (NASDAQ:AMAT) reporting Q2 results that fell short of expectations and issuing a dismal outlook, some Wall Street analysts lowered their price targets for the company. Constraints in the supply chain have been a problem for the company, notably in the most recent quarter, and shareholders will be watching to see if this has impacted sales.
In addition, the company will have to deal with an impact of $150 million caused by COVID-related limits in the third quarter. Furthermore, the market for wafer fab equipment (WFE) remains tight, despite the robust demand.
Late in July, Morgan Stanley lowered its earnings expectations for Applied Materials (NASDAQ:AMAT), along with those of its competitors Lam Research (LRCX) and KLA (KLAC), due to concerns regarding potential reductions in expenditure on semiconductor equipment. At the beginning of this month, Wells Fargo similarly lowered its forecasts, stating that the coming quarter is likely to be a “tough setup” for semiconductor equipment manufacturers.
Applied Materials’ (NASDAQ:AMAT) estimated earnings per share (EPS) have experienced zero upward revisions and twenty negative revisions over the past three months. There was one upward modification to revenue expectations, while there were 16 downward revisions. The average estimate for earnings per share is $1.79 (a decrease of 5.8% year over year), and the consensus estimate for revenue is $6.27 billion (a growth of 1.1% year over year).
Despite this, Riley Securities has predicted that the company will have a better-than-expected performance for the third quarter. According to a note provided by an analyst in advance of the results report, it was stated that although supply chain and shipping challenges still exist, a healthy backlog, expansion of the new product SAM, and significant underlying services growth drivers will push up sales.
As we approach the year’s second half, Stifel anticipates some improvements, including favorable expenditure trends; but the firm predicts management will reduce expectations for 2022 WFE. Citi forecasts an increase in equipment sales for the year’s second half as supply catches up with demand. However, the company anticipates a decline in H1 sales due to a slowdown in demand, with lackluster preannouncements from Nvidia (NASDAQ:NVDA) and Micron (NASDAQ:MU) serving as a leading indicators.
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Author Shariq Khan 
