A month has gone by since the last earnings report for MKS Instruments (MKSI Quick QuoteMKSI - Free Report) . Shares have lost about 1.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is MKS Instruments due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

MKS Instruments Q2 Earnings Top Estimates, Revenues Down

MKS Instruments reported adjusted earnings of $1.53 per share in second-quarter 2024, up from the year-ago quarter’s earnings of $1.32 per share. The figure beat the Zacks Consensus Estimate by 50%.

Revenues of $887 million beat the consensus mark by 2.73% but declined 11.6% year over year.

Products revenues (86.8% of total revenues) were $770 million, down 13% year over year. 

Services revenues (13.2% of total revenues) dropped 0.8% year over year to $117 million.

Quarterly Update

Revenues from the Semiconductor market (41.6% of total revenues) fell 16.3% year over year to $369 million. The figure beat the Zacks Consensus Estimate by 7.62%.

Electronics & Packaging revenues (25.8% of total revenues) were $229 million, higher than $225 million reported in the year-ago quarter. The figure beat the Zacks Consensus Estimate by 6.55%.

Specialty Industrial revenues (32.6% of total revenues) declined 14.2% year over year to $289 million. The figure missed the Zacks Consensus Estimate by 5.97%.

Operating Details

In the second quarter, the adjusted gross margin expanded 40 basis points (bps) on a year-over-year basis to 47.2%.

Research & development, as a percentage of revenues, was flat year over year. Sales, general & administrative expenses, as a percentage of revenues, contracted 100 bps on a year-over-year basis.

MKS Instruments reported a non-GAAP operating income of $192 million, down 15.4% year over year. The adjusted operating margin contracted 100 bps year over year to 21.6%.

Adjusted EBITDA was down 14% year over year to $228 million. Adjusted EBITDA margin fell 70 bps on a year-over-year basis to 25.7%.

Balance Sheet

As of Jun 30, 2024, MKS Instruments had cash and cash equivalents of $850 million compared with $845 million as of Mar 31, 2024.

Cash flow from operations was $122 million in second-quarter 2024 compared with the first-quarter 2024 figure of $67 million.

Free cash flow was $96 million compared with $49 million reported in the previous quarter.

In the second quarter, the company paid a cash dividend of $15 million or 22 cents per share.

Guidance

MKSI expects third-quarter 2024 revenues of $870 million (+/- $40 million).

The company expects an Adjusted EBITDA of $206 million (+/- 23 million).

On a non-GAAP basis, MKSI expects earnings of $1.43 (+/- 28 cents) per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

The consensus estimate has shifted 5.65% due to these changes.

VGM Scores

At this time, MKS Instruments has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

MKS Instruments has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.