3 Electronics Stocks to Watch From a Prospering Industry

Industry Overview - The Zacks Electronics - Manufacturing Machinery industry is experiencing growth due to increased capital spending on high-performance computing, AI, mobility, augmented reality, virtual reality, and advanced packaging by semiconductor manufacturers [1] - Key players such as Entegris, MKS Instruments, and Axcelis Technologies are benefiting from trends in cloud computing, healthcare, and automotive sectors [1] - The industry is facing challenges from global macroeconomic conditions and softness in the 3D NAND end-market [1] Industry Description - The industry comprises companies providing solutions for wafer processing, device packaging, and testing in semiconductor manufacturing [2] - Solutions include thin-film processing systems, photonics, process-control tools, advanced packaging lithography, and contamination control products [2] - The significance of contamination-free transportation and storage of materials has increased recently [2] Trends Shaping the Industry - Miniaturization in semiconductor manufacturing is driving demand for advanced packaging and new device architectures like FinFET transistors and 3D-NAND [3] - The complexity of semiconductor manufacturing processes is increasing due to the demand for faster, more powerful, and energy-efficient semiconductors, driven by cloud computing, IoT, and AI [4] - Strong demand for NAND and DRAM, particularly in data centers and cloud segments, is a positive indicator for the industry [5] Industry Performance - The Zacks Electronics - Manufacturing Machinery industry ranks 69, placing it in the top 27% of over 250 Zacks industries, indicating bullish near-term prospects [6][7] - The industry's earnings estimates for 2024 have increased by 2.4% since September 30, 2024, reflecting a positive earnings outlook [8] Market Performance - Over the past year, the industry has underperformed compared to the broader Zacks Computer and Technology sector and the S&P 500, returning 15.9% compared to 39.4% and 48.3% respectively [10] - The industry is currently trading at a trailing 12-month EV/EBITDA ratio of 12.32X, below the S&P 500's 19.38X and the sector's 19.08X [11] Company Highlights - Entegris expects sales of approximately $3.3 billion for the current year, indicating a 7% growth over 2023, despite a slight decline in earnings estimates [13] - MKS Instruments is benefiting from strong adoption of its photonics and optical solutions, with a positive earnings estimate revision for 2024 [15][16] - Axcelis Technologies is experiencing robust demand for ion implantation systems, particularly in the silicon carbide market, although its earnings estimate has slightly declined [19]