MKS Instruments Reports Strong Q3 Earnings, Sets Optimistic Q4 Expectations

MKS Instruments (MKSI) announced adjusted earnings of $1.72 per share for the third quarter of 2024, a rise from $1.46 per share during the same period last year. This figure exceeded the Zacks Consensus Estimate by 21.13%.

Revenue reached $896 million, beating the consensus estimate by 2.62%, although it marked a decline of 3.9% from the previous year.

Product revenues, which account for 86% of total revenue, stood at $776 million, down 5.1% year over year. This amount surpassed the Zacks Consensus Estimate by 1.78%.

Conversely, service revenues, representing 13.4% of total revenues, experienced a 5.3% increase year over year, totaling $120 million, exceeding the Zacks Consensus Estimate by 6.92%.

MKS Instruments, Inc. Financial Summary

MKS Instruments, Inc. price-consensus-eps-surprise-chart | MKS Instruments, Inc. Quote

Year-to-date, MKSI shares have increased by 0.4%, while the Zacks Computer & Technology sector has risen by 11.5%. An optimistic outlook for the future may support MKSI’s stock recovery.

Quarterly Breakdown from MKSI

Revenue from the Semiconductor market, which comprises 42.2% of total revenue, rose by 3% year over year to $378 million, beating the Zacks Consensus Estimate by 4.80%.

Revenue from Electronics & Packaging, making up 25.8% of total revenue, fell to $231 million, down from $243 million last year. This figure, however, surpassed the Zacks Consensus by 3.02%.

Specialty Industrial revenue, which constitutes 32% of total revenue, saw a significant decline of 10.9% year over year, totaling $287 million. This result missed the Zacks Consensus Estimate by 0.94%.

Operating Metrics of MKSI

The adjusted gross margin for MKS Instruments widened by 110 basis points (bps) year over year, reaching 48.2% in the third quarter.

Research & Development expenses increased slightly as a percentage of revenue, expanding 20 bps year over year. Sales, General & Administrative expenses also increased, up 70 bps year over year.

Non-GAAP operating income fell to $195 million, down 3.9% from the prior year, while the adjusted operating margin remained stable at 21.8%.

Adjusted EBITDA decreased by 3.7% year over year to $232 million, although the adjusted EBITDA margin improved by 10 bps to 25.9%.

Financial Position of MKSI

As of September 30, 2024, MKS Instruments reported cash and cash equivalents of $861 million, up from $850 million on June 30, 2024.

Cash flow from operations for the third quarter totaled $163 million, compared to $122 million in the prior quarter.

Free cash flow surged to $141 million, growing from $96 million reported the previous quarter.

During this quarter, the company also paid out cash dividends of $15 million, equating to 22 cents per share.

MKS Instruments Offers Q4 Guidance

Looking ahead, MKSI anticipates third-quarter revenues of approximately $910 million, with a potential variance of +/- $40 million.

For adjusted EBITDA, the company foresees figures around $226 million, with a variance of +/- $23 million.

On a non-GAAP basis, MKSI expects to deliver earnings of $1.95 per share, with a variance of +/- 32 cents.

MKSI’s Market Outlook

At present, MKSI holds a Zacks Rank #3 (Hold).

Investors may also look at other promising stocks in the sector, including Shopify (SHOP), BiliBili (BILI), and NVIDIA (NVDA). Shopify, currently a Zacks Rank #1 (Strong Buy), has seen its shares rise by 4.9% year to date and is set to report third-quarter 2024 results on November 12. Meanwhile, Bilibili has gained 82% for the year and will report results on November 14, and NVIDIA has surged by 194% year to date, with its results expected on November 20.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.