Editors Note: This story has been amended to reflect Applied Materials' merger with Tokyo Electron not TE Connectivity as was previously reported
NEW YORK (TheStreet) -- Applied Materials (AMAT) shares are up 3.8% to $21.31 on heavy trading volume on Tuesday after having coverage initiated with a "buy" rating by analysts at Jefferies (JEF).
The positive coverage initiation rests on the firm's belief that the company will experience higher margins and cash returns due to it's proposed merger with Tokyo Electron (TOELY), which it expects to close this year.
"We are confident the merger would complete in 2014, and translate into increased pricing power and scale benefits. We believe AMAT is best positioned among semicap players to benefit from a combination of industry consolidation, technology inflections and foundry competition," said Jefferies analysts.
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TheStreet Ratings team rates APPLIED MATERIALS INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate APPLIED MATERIALS INC (AMAT) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 19.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- AMAT's debt-to-equity ratio is very low at 0.26 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, AMAT has a quick ratio of 1.58, which demonstrates the ability of the company to cover short-term liquidity needs.
- Powered by its strong earnings growth of 290.90% and other important driving factors, this stock has surged by 37.02% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, AMAT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- APPLIED MATERIALS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, APPLIED MATERIALS INC increased its bottom line by earning $0.21 versus $0.06 in the prior year. This year, the market expects an improvement in earnings ($1.06 versus $0.21).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 303.1% when compared to the same quarter one year prior, rising from -$129.00 million to $262.00 million.
- You can view the full analysis from the report here: AMAT Ratings Report