On Aug 6, 2013, we initiated our coverage of MKS Instruments, Inc. (MKSI) with a Neutral recommendation. Mass.-based MKS Instruments provides instruments, subsystems and process control solutions, required to measure, control, power, monitor and analyze parameters that help in improving process performance and productivity.
Why Neutral?
MKS Instruments reported sequentially-improved results for the second quarter of 2013, with earnings per share of 14 cents. Revenues also improved 13.7% sequentially to $132.5 million backed by improvement in the semiconductor industry. However, the results declined year over year.
MKS Instruments’ main clients include semiconductor equipment manufacturers. For 2012, sales to semiconductor capital equipment manufacturers and semiconductor device manufacturers accounted for roughly 62% of the net sales. The semiconductor industry is on the rise, giving the company the scope to expand.
The company has launched products in the semiconductor manufacturing related temperature controllers range as well as medical equipment and organic light-emitting diode (OLED) display manufacturing. These products are expected to drive the company’s revenues further.
However, MKS Instruments feels the brunt of its customers’ locations. Most of the semiconductor equipment manufacturers are based out of the U.S. making the company susceptible to various geo-political as well as foreign currency risks.
As is common with hi-tech products, MKS Instruments’ products also take a relatively longer period of time to develop. However, in the meantime, the company’s competitors might launch a similar product or the technology might be replaced by a newer one. This will result in the company incurring losses on its investments.
Other Stocks to Consider
MKS Instruments currently carries a Zacks Rank #4 (Sell). Other stocks worth a watch in the industry are Axcelis Technologies Inc. (ACLS), Cohu, Inc. (COHU) and EMCORE Corporation (EMKR), each carrying a Zacks Rank #2 (Buy).
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