MKS Instruments Reports Strong Q3 Earnings, Faces Mixed Revenue Trends

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

The company’s revenues reached $896 million, which edged past the consensus estimate by 2.62% despite experiencing a 3.9% decline year over year.

Revenues from products, making up 86% of total revenues, totaled $776 million, down 5.1% from the previous year. This still managed to outperform the Zacks Consensus Estimate by 1.78%.

In contrast, services revenues, accounting for 13.4% of total revenues, rose by 5.3% year over year to $120 million, exceeding the Zacks Consensus Estimate by 6.92%.

Earnings Overview and Market Position

The chart below illustrates MKS Instruments’ price, consensus, and earnings per share (EPS) surprises:

As of now, MKSI’s stock has increased by 0.4% in 2024, while the Zacks Computer & Technology sector has seen a growth of 11.5%. Analysts believe the raised guidance could positively influence MKSI’s stock performance in the near future.

Major Revenue Contributors for MKSI

The Semiconductor segment, contributing 42.2% of total revenues, grew by 3% year over year, reaching $378 million. This figure also exceeded the Zacks Consensus Estimate by 4.80%.

Revenue from Electronics & Packaging, which comprised 25.8% of total revenues, decreased to $231 million from $243 million a year ago. However, it still surpassed the consensus estimate by 3.02%.

On the other hand, Specialty Industrial revenues, representing 32% of total revenues, fell by 10.9% year over year to $287 million, missing the Zacks Consensus Estimate by 0.94%.

Operational Efficiency and Financials

In the third quarter, MKSI’s adjusted gross margin improved by 110 basis points to 48.2%, reflecting a stronger operational performance.

Research and development costs, as a percentage of revenues, grew by 20 basis points year over year, while sales, general, and administrative expenses increased by 70 basis points.

The company reported a non-GAAP operating income of $195 million, a decline of 3.9% from the previous year, while the adjusted operating margin remained steady at 21.8%.

Adjusted EBITDA dropped by 3.7% year over year to $232 million, although the adjusted EBITDA margin saw a slight increase of 10 basis points to 25.9%.

Financial Position and Future Outlook

As of September 30, 2024, MKS Instruments held $861 million in cash and cash equivalents, an increase from $850 million at the end of June 2024.

Cash flow from operations reached $163 million for the third quarter, up from $122 million in the second quarter. Free cash flow also improved to $141 million, compared to $96 million in the previous quarter.

Additionally, the company distributed cash dividends totaling $15 million, translating to 22 cents per share.

Q4 Guidance Provided by MKSI

Looking ahead, MKSI anticipates revenues between $910 million (+/- $40 million) for the fourth quarter of 2024. The adjusted EBITDA is expected to be approximately $226 million (+/- $23 million), with non-GAAP earnings projected at $1.95 (+/- 32 cents) per share.

Stock Rankings and Comparisons

Currently, MKSI holds a Zacks Rank #3 (Hold). Investors may want to explore stocks like Shopify (SHOP), BiliBili (BILI), and NVIDIA (NVDA), which have been rated higher in the sector. Shopify boasts a Zacks Rank #1 (Strong Buy), while BILI and NVDA carry Zacks Rank #2 (Buy) at this time.

Year-to-date, Shopify shares have increased by 4.9%. The company is slated to release its third-quarter results on November 12. Bilibili’s shares have surged by 82% in the same timeframe and will report results on November 14. NVIDIA has gained a significant 194% this year, with its fiscal 2025 third-quarter results set for November 20.

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