Semiconductor materials supplier Entegris (NASDAQ:) reported results in line with analysts’ expectations for the first quarter of 2024, with revenue down 16.4% year over year to $771 million. On the other hand, revenue forecast for the next quarter was $800 million was less impressive, coming in 1.6% below analysts’ estimates. Non-GAAP earnings were $0.68 per share, up from earnings of $0.65 per share in the same quarter last year.
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Key figures for Entegris (ENTG) in the first quarter of 2024:
- Income: $771 million vs. analyst estimates of $771.5 million (small deviation)
- earnings per share (non-GAAP): $0.68 vs. analysts’ estimates of $0.62 (10.4% increase)
- Q2 2024 Earnings Guidance is $800 million at the midpoint, below analysts’ estimates of $813.4 million.
- Gross Profit (GAAP): 45.6% compared to 44.4% in the same quarter last year.
- Unfulfilled inventory days: 136 compared to 118 in the previous quarter
- Free Cash Flow $80.57 million compared to $21.99 million in the previous quarter.
- Market capitalization: $20.04 billion
With factories that represent the company’s largest type of customer, Entegris (NASDAQ:ENTG) provides products that clean, protect and overall ensure the integrity of raw materials needed for advanced semiconductor manufacturing.
Semiconductor production. The semiconductor industry is driven by the demand for advanced electronic products such as smartphones, PCs, servers and storage devices. The need for technologies such as artificial intelligence, 5G networks and smart cars is also creating the next wave of industry growth. To keep pace with this dynamism, new tools are needed that can design, manufacture and test ever-smaller chips and increasingly complex architectures, creating an urgent need for semiconductor manufacturing capital equipment.
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Sales Growth Entergris’ revenue growth over the past three years has been strong, averaging 22.5% per year. But as you can see below, its revenue declined from $922.4 million in the same quarter last year to $771 million. The semiconductor industry is a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of declining revenue ( which may sometimes offer favorable shopping times).
Entegris had a tough quarter, with revenue falling 16.4% year over year, missing analysts’ estimates by 0.1%. This could mean the current downturn is deepening.
Entegris’ revenue growth has slowed over the past three quarters, and its management team forecasts revenue will fall in the next quarter. As such, the company is projecting revenue to decline 11.2% year over year, but Wall Street believes a recovery will occur next year. Analysts estimate growth of 5.4% over the next 12 months.
Product Demand and InventoryDays Inventory Outstanding (DIO) is an important metric for chip manufacturers as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a supply-constrained environment, inventories tend to be stable, allowing chipmakers to exert influence over pricing. A persistent increase in DIO could be a warning sign that demand is weak, and if inventories continue to rise, the company may have to cut production.
This quarter, Entegris’ DIO Index was 136, 11 days above its five-year average, suggesting the company’s inventories have risen to higher levels than we’ve seen in the past.
Key takeaways from Entegris’ first quarter results. We were impressed by how significantly Entegris beat analysts’ EPS expectations for the quarter. We were also pleased with the increase in gross margin. On the other hand, revenue guidance for the next quarter fell short of analysts’ expectations and inventory levels increased. Overall the results could have been better. The stock was unchanged following the earnings and is currently trading at $131.75 per share.
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