TMS Tms International Corp. Class A

MKS Instruments, Inc.’s (MKSI) first quarter 2013 earnings of 7 cents per share beat the Zacks Consensus Estimate of 3 cents by a solid 133.3%. However, earnings of this company, a leading provider of instruments and solutions to semiconductor equipment manufacturers, plunged 83.7% year over year due to a downfall in the semiconductor and associated markets.

Revenue

MKSI generated revenues of $141.6 million in the first quarter, declining 25.8% year over year. Revenues came in at the higher end of the company’s guidance of $125.0 million to $145.0 million, led by sequential improvements in the semiconductor market. Revenues surpassed the Zacks Consensus Estimate of $135.0 billion by 4.9%.

Revenue from Products decreased 29.1% in the quarter to $116.6 million while revenue from Services decreased 5.1% in the quarter to $25.0 million.

Margins/Costs

During the quarter, gross margin was recorded at approximately 38.6%, indicating a decrease of 530 basis points from the year-ago comparable quarter.

Selling, general and administrative expenses, as a percentage of net sales, were recorded at 24.1% compared with 17.9% recorded a year ago. On the other hand, research & development (R&D) expenditure, as a percentage of net sales, was 10.8%, up from 8.5% recorded a year ago.

Operating margin was recorded at 3.7% in the quarter, sinking from 17.5% in the year-ago comparable quarter.

Balance Sheet/Cash Flow

Exiting the first quarter, MKS’ cash and cash equivalents stood at approximately $266.7 million versus $287.6 million at the end of fourth quarter of 2012.

Capital expenditure in the quarter was recorded at $3.4 million, against $4.6 million recorded in the first quarter of 2012.

MKSI acquired the European company, Alter SRL in the quarter for a total consideration of $2.5 million, along with a debt assumption of $800,000.

Outlook

Management expects the semiconductor market to revive slowly in the future followed by other markets. Thus, for second quarter of 2013, MKS’ sales are expected to be in the range of $145.0 million to $165.0 million. Earnings per share are expected to lie within 4 cents to 18 cents in the coming quarter.

Our Recommendation

Currently, MKSI carries a Zacks Rank #3 (Hold). Other stocks worth a look in the diversified machinery industry are Mattson Technology Inc. (MTSN), TMS International Corp. (TMS) and Tessera Technologies Inc. (TSRA); each carrying a Zacks Rank #2 (Buy).

 
MKS INSTRUMENTS (MKSI): Free Stock Analysis Report
 
MATTSON TECH (MTSN): Free Stock Analysis Report
 
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TESSERA TEC INC (TSRA): Free Stock Analysis Report
 
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