On Sep 30, 2014, we issued an updated research report on MKS Instruments, Inc. (MKSI). This electric machinery maker primarily serves the semiconductor capital equipment manufacturers.
Long-term growth prospects for MKS Instruments appear bright, especially on the back of continued improvement in the semiconductor industry. Bulk orders from semiconductor equipment vendors are an added advantage, boosting the company’s organic revenue growth.
Also, MKS Instruments constantly innovates and improves its product portfolio in order to match pace with the ever-developing technological field. Meaningful acquisitions over time have diversified the company’s product offerings. In this regard, the acquisition of Granville-Phillips is worth mentioning. This acquisition is expected to boost the company’s earnings significantly, starting from the second half of 2014.
Moreover, shareholders are rewarded handsomely through dividend payments and share repurchases. Since 2007, the company has returned $370 million to its shareholders in the form of dividends and share repurchases.
Despite these positives, potential near-term headwinds have made us dubious about MKS Instruments’ performance in the quarters ahead. The company’s international operations expose it to economical, political, social and foreign currency translation risks associated with these regions. In 2013, international sales accounted for 46% of the company’s total revenue.
Additionally, some of the company’s products may require a long time to be developed, but prove futile eventually, thus increasing the costs.
Also, MKS Instruments faces competition from other players in the industry providing similar products. Some other major players in the industry include Tessera Technologies Inc. (TSRA), Brooks Automation, Inc. (BRKS) and Ultratech, Inc. (UTEK).
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