Applied Materials Posts 3Q Beat But View Disappoints, Shares Fall

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Applied Materials (AMAT) weighed in with third-quarter earnings that topped expectations, but the stock fell in after-hours, as the chip-maker warned that sales would slide in the fourth-quarter.

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The company forecast fourth-quarter sales would be off 15% to 30% compared with the third quarter, and forecast adjusted earnings in the range of 16 cents to 24 cents a share. That forecast puts the revenue range well below the $2.66 billion analysts had expected, and adjusted earnings below the 33 cents the Street had forecast.

AMAT posted net income of $476 million, or 36 cents a share, compared with year-ago earnings of $123 million or 9 cents a share. Adjusted earnings came in at 35 cents a share, up from last years non-GAAP earnings per share of 17 cents.

Revenue rose 11% to $2.79 billion, up from sales of $2.52 billion in the third quarter of last year. Gross margin widened to 42.5%, compared with gross margin of 41.5% in the second-quarter.  Backlog fell by $637 million to $3.24 billion.

Third-quarter results easily topped expectations for both the top and bottom line, as the Street had predicted earnings of 33 cents a share on revenue of $2.68 billion, according to a poll by Thomson Reuters.

Mike Splinter, chairman and chief executive officer boasted that the quarters results were at the upper end of the companys own expectations, but noted in a statement, "while the fundamental drivers of our markets remain strong, we are seeing softness in our business resulting from the uncertain economic environment and overcapacity in solar."

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New orders, which totaled $2.39 billion in the third quarter, fell in each of the companys four business segments, compared to the previous quarter, except for its global services division, which saw orders rise 2% to $613 million. New orders in the companys silicon systems group fell 28% to $1.24 billion, due to weaker foundry demand, while display orders fell 14% to $220 million on lower demand from LCD TV customers. Energy and environmental solutions orders fell 48% to $318 million as customers digested record capital additions in recent quarters, the company said in a release.

Shares of Applied Materials fell 8 cents in Wednesdays session, closing the day at $11.36. The stock was down another 41 cents, or 4% in after-hours trading. Year-to-date, Applied shares have fallen 19%.

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