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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: NightClub who wrote (13282)	12/14/1997 8:26:00 PM
From: Darin	Respond to of 70976

To All: Headline: Applied Materials: EPS Estimate Reduced To Factor In S. Korean Impact Author: Edward C. White, Jr., CFA 1(212)526-4744 Rating: 1 Company: AMAT Country: EPS CUS Industry: ELECTS Ticker : AMAT Rank(Prev): 1-Buy Rank(Curr): 1-Buy Price : $27 5/16 52wk Range: $54-17 Price Target: $63 Today's Date : 12/12/97 Selected Growth Stock List Fiscal Year : OCT ------------------------------------------------------------------------------ EPS 1997 1998 1999 - - QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr. 1st: 0.24A 0.51E 0.47E 0.63E 0.63E - - 2nd: 0.27A 0.53E 0.49E 0.65E 0.65E - - 3rd: 0.38A 0.54E 0.51E 0.67E 0.67E - - 4th: 0.49A 0.57E 0.53E 0.70E 0.70E - - ------------------------------------------------------------------------------ Year:$ 1.38A $ 2.15E $ 2.00E $ 2.65E $ 2.65E $ - $ - Street Est.: $ 2.14E $ 2.13E $ 5.12E $ 5.44E $ - - $ - - ------------------------------------------------------------------------------ Price (As of 12/11): $27 5/16 Revenue (1997): 4.1 Bil. Return On Equity (97): 19.7 % Proj. 5yr EPS Grth: 25.0 % Shares Outstanding: 375.8 Mil. Dividend Yield: Nil Mkt Capitalization: 10.26 Bil. P/E 1998; 1999 : 13.7 X; 10.3 X Current Book Value: $7.64 /sh Convertible: None Debt-to-Capital: 17.6 % Disclosure(s): C, A ------------------------------------------------------------------------------ * S. Korean chip manufacturers are delaying capital investments, and although the company is not yet guiding estimates down, we are reducing our FY98 EPS projection on Applied Materials to $2.00 from $2.15. * One reason for the reduction is that Kulicke & Soffa, an assembly equipment manufacturer, is experiencing order delays from South Korean customers, due to restricted access to funds to finance equipment investments. * Assembly equipment trends tend to differ from front-end trends, and often the two segments often do not turn together. However, the same capital constraints that are affecting assembly may dampen near-term front-end orders. * Overall, Applied Materials remains well positioned, because of its high concentration of 0.25 and 0.18 micron equipment, which should become a much greater share of total equipment investment in 1998. * We are reiterating our 1 (BUY) rating on Applied Materials. The shares have declined nearly 48% since 8/97, even though EPS could grow more than 40% in FY98. At 12.6X calendarized 1998 EPS, we think the shares offer opportunity. Highlights: 1. Less than 10% estimated exposure in FY 1998. Applied is assuming roughly $500 million in sales to South Korean customers in FY 1998. This amount does not include the deferred Samsung Line 9, but it does include Hyundai's European plant, and orders from Anam. Samsung business would represent $100 million of the total. It is not realistic to assume that the total amount goes to zero, because the South Koreans can still afford to make some investments, and because some delayed orders may go to other customers who are pulling in deliveries. 2. Our reduction factors in a pessimistic scenario on South Korea. We have cut our estimate by $0.15 per share, an amount which we think represents the company's exposure to South Korea. We have not taken out all of the Asian business, because some areas (particularly Taiwan) still represent a potential area of growth for the company in 1998. Also, we have not tried to factor in the indirect impact if there were to be a general slowdown of local electronics consumption in Japan. But at the present we do not see Japan and Taiwan as high risk areas for Applied Materials. 3. Key factor is mix shift. Regardless of the rate of growth of the semiconductor equipment market in 1998, we think the mix of equipment purchased will shift to 0.25 and 0.18 micron capable systems. The motivator for this move will be the push for a combination of lower cost and enhanced functionality in all varieties of electronic systems. ------------------------------------------------------------------------------ BUSINESS DESCRIPTION: A global growth company, the largest company in the world dedicated solely to the manufacture of semiconductor production equipment. Products: Etchers, CVD, PVD, epi reactors, ion implanters. ------------------------------------------------------------------------------ Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities.]