On Tuesday, BMO Capital Markets adjusted its outlook on Entegris Inc (NASDAQ:ENTG), a key player in the semiconductor materials market. Analyst Bhavesh Lodaya reduced the company's price target to $135 from the previous $145 while maintaining an Outperform rating on the stock.
The revision follows Entegris' fourth-quarter outlook, which indicated weaker performance than anticipated. Lodaya noted that expectations for Entegris were already modest, as semiconductor and electronics channel checks had hinted at near-term market softness.
The analyst pointed out that Entegris' results mirror the condition of the wider semiconductor industry, which has seen a slower pace of outperformance this year. Factors contributing to this include delays in technology and node transitions as well as in the adoption of new materials.
Despite the near-term challenges, Lodaya believes that Entegris is poised for a robust earnings increase in the future. This optimism is based on expectations for the year 2025, which include an improvement in year-over-year fundamentals such as market share index (MSI) and capital expenditures. These improvements are anticipated to fuel strong growth in earnings for Entegris.
However, the analyst predicts a period of weakness in the short term, particularly in the fourth quarter of 2024 and the first quarter of 2025. Growth is expected to come from a lower starting point, which has led to the decision to lower the price target. Despite the reduced target, BMO Capital continues to see Entegris in a favorable light, as reflected in the maintained Outperform rating.
In other recent news, Entegris Inc. (NASDAQ:ENTG) experienced a decrease in its third-quarter 2024 earnings, falling short of expectations, and also provided a fourth-quarter forecast that did not meet consensus estimates. Despite this, the company reported a 7% year-on-year increase in revenue, reaching $808 million, largely driven by a 14% revenue increase in the Materials Solutions division.
Needham & Company, in response to these developments, reduced the price target for Entegris to $120 from the previous target of $135 but maintained its Buy rating on the company's shares.
The revision in Entegris' market outlook and revenue guidance is primarily attributed to a decline in non-China mainstream semiconductor nodes and sustained weakness in the NAND sector. The company's management anticipates organic revenue growth of around 4% year-over-year in 2024, a revision from the previously expected 3% growth.
In other recent developments, Entegris has plans to ramp up production at its new facilities in Taiwan and Colorado by late 2025. The company also announced a reduction in its 2024 revenue outlook by approximately $85 million but remains optimistic about industry growth of 1% to 2%. For 2025, Entegris anticipates significant activity in node transitions and aims to outperform the industry by three to six points.
Despite acknowledging a softer demand environment and some supply chain issues, Entegris remains confident in its growth prospects and strategic positioning for future market opportunities.
InvestingPro Insights
To complement BMO Capital Markets' analysis of Entegris Inc (NASDAQ:ENTG), recent data from InvestingPro offers additional context for investors. Despite the company's current challenges, InvestingPro Tips highlight that Entegris has been profitable over the last twelve months and analysts predict continued profitability this year. This aligns with Lodaya's expectation of robust future earnings growth.
The company's P/E ratio stands at 70.87, which InvestingPro identifies as trading at a high earnings multiple. However, another InvestingPro Tip suggests that Entegris is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.88 for the last twelve months as of Q3 2024. This could indicate potential value for investors looking beyond the short-term headwinds mentioned in the article.
It's worth noting that Entegris has shown strong returns over the last five and ten years, according to InvestingPro Tips. This long-term performance may provide some reassurance to investors concerned about the current market softness in the semiconductor industry.
For readers interested in a more comprehensive analysis, InvestingPro offers 8 additional tips for Entegris, providing a deeper dive into the company's financial health and market position.
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