Q4 Preview: Applied Materials (AMAT) May See Tough Quarter, and Q1 Isn't Looking Much Better

Applied Materials (Nasdaq: AMAT) shares are trading down more than 1 percent Wednesday ahead of its fourth-quarter earnings report, expected out after the market close.

The Street is looking for EPS of 19 cents on revenue of $2.15 billion. Earnings would be a drop from 36 cents reported in the same period last year. Applied Materials' last three reports showed EPS in the mid 30-cent range.

Shares of Applied Materials gained about 0.8 percent through the quarter, and are up 32 percent better since. The stock is still down about 8 percent for 2011.

Excluding cash, Applied Materials is going for about 8.6x next year's earnings, compared with 8.1x at KLA-Tencor (Nasdaq: KLAC) and 7.2x for Lam Research (Nasdaq: LRCX).

Data from Blomberg has 10 analysts with a Buy rating, 12 at Hold, and three with a Sell. The price target average its $13, with a low of $10 and high of $17.

Analyst Comments

• JPMorgan is looking for earnings of 16 cents per share. The firm cites challenging business conditions. JPMorgan said it believes solar module pricing is only going to get worse "given that solar PV module pricing continues to decline in C2H11, even though this is the strong demand season. It is our view that subsidy cuts in Germany/Italy next year will cause demand destruction for solar PV, exacerbating the industry’s oversupply situation further. We are modeling a 58% decline in solar equipment revenue in F12 vs. F11, but in spite of this large expected decline, we believe that the outlook could be even worse ex the addition of Varian’s solar contribution."
  
  Looking ahead, JPMorgan sees first-quarter SemiCap flat sequentially, but stresses lack of visibility. The firm said checks indicate Samsung, Toshiba, and Intel are the only ones ordering volume equipment at this time.
  
  
• D.A. Davidson is looking for earnings of 16 cents and revenue of $2 billion, saying overall ordering was weak, and bookings were likely down meaningfully on a sequential basis. However, the firm expects the first quarter to be a trough for Applied Materials, and said business should reaccelerate thereafter.
  
  On the recently closed acquisition of Varian semi, DA Davidson said, "Varian’s market-leading position in ion implant expands Applied’s TAM by ~$1.5 billion and provides additional growth opportunities over the next few years. We expect the deal to be accretive to 2012 earnings and should help provide some upside to current consensus estimates."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Applied Materials' past performance at Streetinsider's Applied Materials' Income Statement.

Click here to go to Applied Materials' Investor Relations page for a webcast of its quarterly presentation.

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