Applied Materials Gives Weak Forecasts, Cites Market Headwinds

(Bloomberg) -- Applied Materials Inc., the biggest maker of equipment used to manufacture semiconductors, gave weak forecasts that indicate the chip industry is holding off on expansion plans in the face of a murky outlook for electronics demand. The stock fell in extended trading.

The company is a bellwether for the industry because chip makers must buy gear from Applied Materials well ahead of new manufacturing plans. When the industry is cutting back, Applied Materials is often one of the first to feel those chills, too.

The increasing difficulty of manufacturing chips and the addition of electronic functions in everything from cars to fridges fueled a four-year boom. But there are now signs this could be followed by another cyclical downturn. After hitting a record earlier this year, Applied Materials shares have dropped more than 40 percent.

Key Insights

  • Applied projected first-quarter sales of $3.56 billion to $3.86 billion, the company said Thursday in a statement. That compares with an average analyst estimate of $3.96 billion, according to data compiled by Bloomberg.
  • Adjusted earnings per share will be 75 cents to 83 cents, compared with an average estimate of 92 cents.
  • Chief Executive Officer Gary Dickerson said in a statement that "near-term market headwinds remain."

Market Reaction

  • Shares fell more than 3 percent in extended trading following the announcement. They’d earlier closed at $35.02 in regular New York trading. The stock has declined 31 percent this year.