MKS Instruments, Inc. (MKSI) reported decent results for the third quarter of 2014, backed by improved productivity and advanced business processes. Buoyed by strong earnings and positive outlook, share prices were up by 5.4% post earnings release. Quarterly non-GAAP earnings came in at 43 cents per share, which comfortably surpassed both the Zacks Consensus Estimate of 37 cents and the year-ago quarter tally of 25 cents per share. The year-over-year improvement in adjusted earnings was primarily attributable to better-than-expected demand in the semiconductor market and continued growth in other advanced markets. On a GAAP basis, MKS Instruments recorded earnings per share of 55 cents, compared with 25 cents earned in the year-ago quarter.
Revenues
Net sales increased 12.2% year over year to $186.8 million. Reported revenues also beat the Zacks Consensus Estimate of $182.0 million.
Revenues from the sale of Products came in at $158.5 million, representing 84.8% of total revenues; while sales from Services came in at $28.2 million and accounted for the remainder.
Margins/Costs
MKS Instruments’ adjusted gross profit margin increased 210 basis points to 43.3% from the year-ago quarter. Selling, general and administrative expenses stood at $32.4 million, down 2.4% year over year. Research and development expenditure increased 3.7% year over year to $15.8 million. Adjusted operating margin was 17.5%, up from 12.2% recorded in the year-ago comparable period.
Balance Sheet/Cash Flow
Cash and cash equivalents at the quarter-end were $295.4 million, compared with $288.9 million at year-end 2013. In the third quarter, the company experienced a restructuring charge of $1.2 million, resulting from the reduction of its input and workforce costs.
MKS Instruments increased its quarterly cash dividend to 16.5 cents from 16 cents per share. On a year-to-date basis, total value of share repurchase, Granville-Phillips acquisition and dividends amounted to $135 million.
Outlook
The company expects its shipments to commence from the fourth quarter onwards and continue until the beginning of 2015. Given the present business level, MKS Instruments estimates fourth-quarter sales within 185–$200 million. Additionally, expected gross margin in the coming quarter is expected in the range of 44%–45%. For fourth-quarter 2014, the company anticipates non-GAAP operating expenses within $49–$50 million, and aggregate innovation cost within $16.1–$16.5 million. The fourth-quarter earnings are likely to range between 42–53 cents per share.
Other Stocks to Consider
MKS Instruments currently carries a Zacks Rank #2 (Buy). Some other stocks worth considering within the semiconductor industry include Aixtron SE (AIXG), Axcelis Technologies Inc. (ACLS) and Cohu, Inc. (COHU), each having the same Zacks Rack as MKS Instruments.
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