Applied Materials (NASDAQ: AMAT) reported better-than-expected adjusted EPS for the fiscal first quarter, sending its shares up 2% in premarket trading on Thursday.

The company posted EPS of $1.89 in the quarter, compared to $1.39 per share from the year-ago period and beating the consensus estimates of $1.85 per share. Net sales totaled $6.27 billion, up 21% YOY, and compared to the analyst consensus of $6.17 billion.

Semiconductor Systems generated $4.57 billion in net sales, up 29% YOY, and compared to $4.45 billion consensus. Applied Global Services posted net sales of $1.32 billion, up 14% YOY, slightly missing the consensus estimates of $1.33 billion. Display and Adjacent Markets reported net sales of $366 million in the quarter, down 11% YOY, but more than analyst expectations of $349.6 billion.

Adjusted gross margin came to 47.3% in the quarter, compared to 45.9% in the year-ago quarter and almost in line with the analyst consensus of 47.4%.

For this quarter, Applied Materials sees EPS of $1.75-$2.05, versus the consensus of $1.94. Q2 revenue is expected at $6.35 billion, versus the consensus of $6.38 billion.

“While the supply environment remains challenging, Applied Materials is doing everything we can to deliver for our customers and we recorded our highest-ever quarterly revenues,” said Gary Dickerson, President and CEO.

UBS analyst Timothy Arcuri reiterated a Neutral rating and raised the price target to $160.00 per share from the prior $150.00.

“Considering supply constraints, results were solid with guidance in line w/Street but actually a little better than investor bogeys and what we thought was likely given the constraints…We do like where AMAT sits strategically, as we think dollars will ultimately shift to films companies like AMAT and LRCX, especially as logic adopts GAA/c-FETs and DRAM goes 3D, but the stock to us still has not corrected enough to drive a Buy rating,” Arcuri wrote in a client note.

BofA analyst Vivek Arya reiterated a Buy rating and a $190.00 per share price target on AMAT.

“Given softer start to the year, we keep overall CY22 sales roughly unchanged at $27.8bn, however we now see potential for double digit topline growth in 2023E (vs. 5-6% prior) on stronger visibility/push out of demand. Net net, we reiterate. our Buy rating and raise CY23 sales by $1.4bn/5% and pf EPS by 35c/4%,” Arya said.

By Senad Karaahmetovic | [email protected]