Chip Gear-Maker ASML’s Forecast Beat Estimates, Shares Rise

  • Stock rises in biggest daily increase in almost a year
  • Europe’s largest semiconductor-equipment reveals new orders

ASML Holding NV’s forecast for its first-quarter profitability has topped analysts’ estimates, as Europe’s largest semiconductor-equipment maker won orders for six more of its newest lithography machines in the fourth quarter. 

ASML’s shares jumped as much as 5.7 percent in early trading Wednesday, the biggest daily rise since Jan. 21, 2016.

Key Points

  • The Dutch company expects a profit margin of about 47 percent in the first quarter of 2017, versus an average analyst estimate of 44.4 percent, according to a statement Wednesday.
  • First-quarter revenue will be about 1.8 billion euros ($1.9 billion). Analysts had projected 1.76 billion euros on average. A year earlier, ASML reported sales of 1.33 billion euros.
  • The six orders ASML received for its newest machines, called extreme ultraviolet lithography systems, or EUV, brought the backlog to 18 EUV systems.
  • Fourth-quarter sales rose 33 percent to 1.91 billion euros, marking the fourth consecutive year of revenue growth. Analysts had predicted sales of 1.77 billion euros. Profit increased to 524 million euros, beating a 419.3 million euros estimate.

The Big Picture

Veldhoven, Netherlands-based ASML is pushing chipmaker clients such as Intel Corp., Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. to upgrade to EUV, which uses concentrated light rays to burn lines into layers of materials deposited on silicon, a crucial step in creating transistors.

ASML’s stock has gained some 50 percent over the past year, valuing the company at 47.6 billion euros. Since the start of 2017, shares of ASML have increased about 1 percent through Tuesday, outperforming the benchmark AEX index in Amsterdam, which declined.

Last November, ASML agreed to buy a quarter stake in optics company Carl Zeiss SMT for 1 billion euros as part of its EUV push. While ASML is speeding up development a new optical system for the next generation of machines, Nikon Corp. in mid-October announced it would slash development costs for its lithography machines, citing slow uptake by customers.

ASML’s Chief Executive Officer Peter Wennink said in a video Wednesday production capacity is “sold out” for 2017. ASML currently has a backlog of 18 orders for lithography machines, with a value of around 2 billion euros, and can currently produce 12 per year, set to expand to 24 by next year.

Street Takeaways

  • “The backlog, which has never been so high, now consists for the half of EUV systems,” analyst Jos Versteeg of Theodoor Gilissen Bankiers said Wednesday by phone.
  • “The equipment demand outlook for 2017 remains favorable, with ASML’s longer-term investment case underpinned by continued progress on EUV,” Peter Olofsen, an analyst at Kepler Cheuvreux, said in a note.

— With assistance by Kasper Viita

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