MKS Instruments, Inc. (NASDAQ:MKSI) Will Dump Its Kitchen Sink Out of the Balloon at Key Support Tomorrow Morning

MKS Instruments, Inc. (NASDAQ:MKSI) just announced earnings, reporting Q3 (Sep) earnings of $1.88 per share, $0.16 better than the S&P Capital IQ Consensus of $1.72; revenues rose 0.2% year/year to $487 mln vs the $492.88 mln S&P Capital IQ Consensus. Non-GAAP gross margin was 47.6% compared to 48.0% in 2Q18. Guidance was to the downside as well, (for Q4, sees EPS of $1.38-$1.64 vs. $1.81 S&P Capital IQ Consensus; sees Q4 revs of $420-$460 mln vs. $512.30 mln S&P Capital IQ Consensus).

Perhaps the real story that bears watching for other chip stocks in the days to come was to be found in management commentary: “Despite the recent moderation in the semiconductor market, we are pleased with our strong financial results for the third quarter, reflecting our ability to manage through these cycles,” said Gerald Colella, Chief Executive Officer.  “Although we foresee the semiconductor market will continue to face headwinds in the near term, exiting the third quarter we have seen that our semiconductor business has been more steady and consistent.  We are very optimistic on the long-term growth drivers within the semiconductor market.  Moreover, we have continued to diversify our markets, customers and product portfolio and are on target to grow our Advanced Markets more than two times faster than the overall market.”

MKS Instruments, Inc. (NASDAQ:MKSI) trumpets itself as a company that provides instruments, subsystems, and process control solutions that measure, control, power, deliver, monitor, and analyze critical parameters of manufacturing processes worldwide.

The company operates through two segments: Vacuum & Analysis and Light & Motion.

The Vacuum & Analysis segment provides analytical and control solutions products, including gas analyzers, automation control products, I/O modules, automation software, and precision machined components and electromechanical assemblies; and materials delivery solutions products comprising flow and valve technologies, as well as integrated pressure measurement and control subsystems to provide customers with precise control capabilities that are optimized for a given application.

It also offers power delivery, plasma, and reactive gas generation products used in semiconductor and other thin film applications, and in medical imaging equipment applications; and direct and indirect pressure measurement and integrated process solutions.

The Light & Motion segment offers lasers and laser-based systems, including lasers and amplifiers, fiber lasers, diode-pumped solid-state lasers, high-energy pulsed lasers, and tunable lasers, as well as accessories; optics products, such as precision optics, thin-film filters, and coatings, replicated mirrors, and ruled and holographic diffraction gratings; and photonics products comprising optical components, vibration, lens assemblies, and isolation solutions, as well as three-dimensional non-contact measurement sensors and equipment.

It markets and sells its products and services through global direct sales organization, independent distributors and sales representatives, Websites, and product catalogs.


Interesting Open Ahead

As we discussed earlier, MKSI just disclosed its Q3 data and forward guidance to the market, beating on the bottom line, but coming in a little light on the top line, and dishing out some surprisingly weak guidance.

Shares are indicated to take a beating by the bell tomorrow morning. However, we may see a test of very important technical support at the level that marks the pivot lows from last July, as shown here:

Management also noted some housekeeping, including what we would assume is a hint at the path forward in terms of emphasis. The chase for widened margins and less slavish dependency on the cycle in the chip space continues as the principal quest here.

“The acquisition of Newport Corporation, which was completed two years ago, coupled with strong organic growth has continued to expand our portion of revenue from Advanced Markets,” said Seth Bagshaw, Chief Financial Officer. “In the past five years, we have grown our Advanced Market revenue from approximately $211 million in 2013 to approaching over $900 million in 2018.  Advanced Markets represented approximately 47% of consolidated revenue in the third quarter and year to date revenue increased almost 20% from the same period a year ago.”

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