Entegris Delivers on a Perfect Day in Semi-Land

 | Jul 27, 2016 | 8:40 AM EDT
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We first highlighted Entregis (ENTG) last month in our "Companies Never Heard Of" series as an under-the-radar semiconductor name with filtration, equipment and advanced chemical attributes. Billerica, Mass.-based Entegris is a bit of an orphan, but the company has executed quite well over the years, becoming an indispensable research and development partner to many of the largest semiconductor and process technology companies.

Entegris reported strong second-quarter results, beating Wall Street consensus earnings forecasts by 40% on a 9% revenue surprise. I love when this business model hums -- and it isn't at the expense of research and new product development. Sales and earnings guidance is similarly solid, handily beating the Street for the third quarter.

With $1.2 billion in run-rate revenue, Entegris has heft, high margins and a wide moat around aftermarket and process technologies. It is important to remind ourselves that Pall Corporation, Entegris' largest competitor in microelectronics, was acquired by Danaher DHR last year at an extraordinary valuation.

Entegris has a disciplined target business model that helps navigate the relative cyclicality in the business, but above the regular cyclicality in the semiconductor capital spending curve, it is showing solid organic growth.

This news, for a relatively lightly traded technology stock, could not have been delivered on a better day. All will be scouring for names in the semiconductor supply chain today, following the announced Analog Devices (ADI) and Linear Technology (LLTC) tie-up last night. ADI is up briskly in pre-market trading, on potential solid accretion and product and technology.

Apple's (AAPL) results won't hurt either.

What an interesting time in semiconductors. Put Entegris on the shopping list. On the equipment side, MKS Instruments (MKSI) , Ultra Clean (UCTT) , Cohu  (COHU)  and Brooks Automation (BRKS) are well-capitalized niche players that can fill out larger product portfolios as the hunt continues.

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