Semiconductor materials supplier Entegris (NASDAQ:ENTG) reported Q4 CY2024 results exceeding the market’s revenue expectations, with sales up 4.6% year on year to $849.8 million. On the other hand, next quarter’s revenue guidance of $790 million was less impressive, coming in 0.6% below analysts’ estimates. Its non-GAAP profit of $0.84 per share was 7.7% above analysts’ consensus estimates.
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Entegris (ENTG) Q4 CY2024 Highlights:
- Revenue: $849.8 million vs analyst estimates of $823 million (4.6% year-on-year growth, 3.3% beat)
- Adjusted EPS: $0.84 vs analyst estimates of $0.78 (7.7% beat)
- Adjusted EBITDA: $248.4 million vs analyst estimates of $238.1 million (29.2% margin, 4.3% beat)
- Revenue Guidance for Q1 CY2025 is $790 million at the midpoint, below analyst estimates of $795.1 million
- Adjusted EPS guidance for Q1 CY2025 is $0.68 at the midpoint, below analyst estimates of $0.74
- Operating Margin: 17.6%, up from 12.4% in the same quarter last year
- Free Cash Flow Margin: 8.1%, up from 2.7% in the same quarter last year
- Inventory Days Outstanding: 126, down from 134 in the previous quarter
- Market Capitalization: $15.69 billion
Bertrand Loy, Entegris’ President and Chief Executive Officer, said: “We concluded 2024 with strong performance in the fourth quarter, exceeding our guidance for both sales and non-GAAP EPS. For the year, we continued to outperform the market and demonstrated leverage in our model with EBITDA growth that was twice the rate of our sales growth.”
Company Overview
With fabs representing the company’s largest customer type, Entegris (NASDAQ:ENTG) supplies products that purify, protect, and generally ensure the integrity of raw materials needed for advanced semiconductor manufacturing.
Semiconductor Manufacturing
The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers, and data storage. The need for technologies like artificial intelligence, 5G networks, and smart cars is also creating the next wave of growth for the industry. Keeping up with this dynamism requires new tools that can design, fabricate, and test chips at ever smaller sizes and more complex architectures, creating a dire need for semiconductor capital manufacturing equipment.
Sales Growth
A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, Entegris’s 15.3% annualized revenue growth over the last five years was excellent. Its growth beat the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Entegris’s recent history shows its demand slowed significantly as its revenue was flat over the last two years. 
This quarter, Entegris reported modest year-on-year revenue growth of 4.6% but beat Wall Street’s estimates by 3.3%. Company management is currently guiding for a 2.5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 7.6% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and indicates its newer products and services will catalyze better top-line performance.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Entegris’s DIO came in at 126, which is one day below its five-year average. At the moment, these numbers show no indication of an unusual inventory buildup.
Key Takeaways from Entegris’s Q4 Results
We enjoyed seeing Entegris exceed analysts’ EPS expectations this quarter. We were also glad its adjusted operating income outperformed Wall Street’s estimates. On the other hand, its revenue guidance for next quarter slightly missed. Overall, we think this was a mixed quarter. The stock traded up 3.4% to $107.50 immediately after reporting.
Sure, Entegris had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.