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Chicago, IL – October 7, 2021 – Today Zacks Equity Research discusses electronics including Entegris, Inc. ENTG, Brooks Automation, Inc. BRKS and Nikon Corporation NINOY.
Zacks Electronics – Manufacturing Machinery industry is expected to benefit from increased capital spending on high performance computing, advanced packaging and in memory by semiconductor manufacturers. The growing need for data centers, laptops (due to coronavirus-induced distance work and learning) and games (pandemic-induced demand) is driving the demand for memory.
Entégris, Brooks Automation and Nikon take advantage of the aforementioned trends. These companies provide solutions to semiconductor manufacturers and OEMs. While weak demand for smartphones has been a concern, the strength of the cloud and data centers, healthcare solutions, and games has been a key enabler.
Zacks Electronics – Manufacturing Machinery industry includes companies that provide a range of solutions to meet the needs of wafer processing facilities as well as semiconductor manufacturing process testing and device conditioning facilities. Solutions offered by industry participants include thin film processing systems, photonics, process control tools (which perform macro-defect inspections and metrology), metal chemical vapor deposition -organic, advanced packaging lithography, wet etching and cleaning, laser annealing and 3D wafer. control systems.
A few industry participants also offer microcontamination control products and advanced material handling solutions. In particular, the transportation, storage and delivery of contamination-free materials have gained considerable importance in recent times.
3 trends shaping the future of the electronics industry
Miniaturization improves prospects: Industry participants are benefiting from the ongoing transition in semiconductor manufacturing technology. Demand for advanced packaging enabling the miniaturization of electronic products remains strong.
The constant shift to smaller dimensions and the rapid adoption of new device architecture like FinFET and 3D-NAND transistors, as well as the increasing use of new materials of construction to increase the density of transistors and bits, stimulate demand for solutions provided by industry players.
In addition, the emergence of techniques such as wafer-level packaging is driving the need for a high purity manufacturing environment free of contaminants. The growing demand for clean processing tools as well as wafer carrier cleaning and conditioning tools is a key enabler for industry participants.
Complex process that drives demand: The demand for faster, more powerful, and more energy-efficient semiconductors is expected to increase rapidly with the robust adoption of cloud computing, IoT and AI. Semiconductor manufacturers like Intel, Samsung, Taiwan Semiconductors are primarily concerned with maximizing manufacturing yields at lower cost.
This actually makes semiconductor manufacturing processes more complex and, in turn, drives demand for solutions offered by industry participants. The rapid adoption of IoT-supported factory automation solutions is also a contributing factor.
In addition, the growing deployment of 5G and the growing demand for advanced computing are the main catalysts. However, trade tensions between the United States and China and the impact of the coronavirus on consumer appetites for next-generation smartphones and digital cameras are notable headwinds.
High demand for NAND, DRAM and SSD: Improving demand for NAND and DRAM is positive for industry participants. Additionally, the high demand for SSDs driven by data center and cloud spending is a key enabler. DRAM is also expected to enjoy strong demand in the data center, enterprise and cloud segments. Strong demand for chips and higher spending on semiconductor equipment equipment are helping industry participants.
Zacks Industry Rankings Shows Strong Outlook
Zacks’ Electronics Industry – Manufacturing Machinery is housed within the larger IT and technology sector of Zacks. It carries the Zacks Industry Rank # 59, which places it in the top 24% of over 250 Zacks industries.
The group’s Zacks Industry Rank, which is essentially the average of the Zacks Rank of all member stocks, indicates strong near-term prospects. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.
Before presenting a few stocks that you might want to consider for your portfolio, let’s take a look at the recent stock market performance and industry valuation.
Industry Outperforms Sector and S&P 500
Zacks ‘Electronics Industry – Manufacturing Machinery has outperformed Zacks’ broader computer and technology industry as well as the S&P 500 composite over the past year.
The industry gained 54.9% during this period compared to the S&P 500 rally of 27.7% and the broad sector increase of 30.2%.
Current industry assessment
Based on the 12-month EV / EBITDA ratio, which is a multiple commonly used to value electronics – manufacturing machinery companies, we see that the industry is currently trading at 14.69X from the 15.38X of the S&P 500. It is also above the industry’s 12-month EV / EBITDA of 14.92X.
Over the past five years, the industry has traded down to 19.14X, as low as 5.51X, and the median of 12.54X.
3 electronic stocks to buy now
Nikon: This company’s enviable portfolio of high-end cameras, Zacks Rank # 1 (Strong Buy), including mirrorless products, is a growth driver.
You can see the full list of today’s Zacks # 1 Rank stocks here.
Capital investments for medium to small size panels remain on a recovery trend and capital investments for large size panels remain stable, which bodes well for Nikon. Health has become Nikon’s main cash cow. He plans to focus on drug discovery services, genetic analysis and contracted cell manufacturing outside of equipment sales, to drive growth. The Contracts business should also benefit from the strong demand for components related to UVV.
Zacks’ consensus estimate for 2021 earnings has risen 27.5% to 62 cents a share in the past 60 days.
Brooks Automation: This Chelmsford, MA-based company is enjoying robust growth in its life sciences business, driven by demand related to COVID-19. This global provider of sample-based services and solutions for the life sciences has significantly expanded its customer base in the life sciences in recent times. Ongoing sales of the Semiconductor Solutions Group (automation) segment to Thomas H. Lee Partners for $ 3 billion in cash ($ 2.4 billion in net cash) will strengthen this company’s liquidity position Zacks Rank # 2 (Buy ), which will help it to continue to grow. opportunities in the field of life sciences.
Zacks’ consensus estimate for fiscal 2021 earnings has risen 3.6% to $ 2.58 per share in the past 60 days.
Entégris: This Billerica, MA-based company provides microcontamination control products, specialty chemicals, and advanced material handling solutions for manufacturing processes in semiconductors and other high-tech industries. This Zacks Rank # 2 title benefits from strong demand for its cutting edge solutions in advanced technology nodes and the growing need for end-to-end contamination control solutions.
In addition, the acquisition of GMTI strengthens Entegris’ position as a leading provider of performance improvement solutions for the semiconductor market. The company enjoys strong demand for chips globally.
The consensus mark for current year earnings has remained at $ 3.32 per share for the past 60 days.
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Past performance is no guarantee of future results. The potential for loss is inherent in any investment. This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether an investment is suitable for any particular investor. It should not be assumed that any investment in any identified and described securities, companies, sectors or markets was or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or securities asset management activities. These returns come from hypothetical portfolios made up of stocks with a Zacks rank = 1 that have been rebalanced monthly without any transaction costs. These are not the returns of actual equity portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for more information on the performance numbers displayed in this press release.
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