Lam Research (LRCX) Q3 Earnings & Revenues Beat Estimates
Zacks Investment Research | Apr 17, 2018 11:15PM ET
Lam Research Corporation (NASDAQ:LRCX) reported third-quarter fiscal 2018 non-GAAP earnings of $4.79 per share, which came ahead of the Zacks Consensus Estimate of $4.36. The figure increased 10.4% sequentially and 71.1% on a year-over-year basis.
Adjusted revenues increased 12% sequentially and 34.4% year over year to $2.89 billion beating the Zacks Consensus Estimate of $2.85 billion.
The year-over-year growth was attributed to robust performance of both etch and deposition technologies which resulted in expansion of serviceable addressable market of the company.
Total system shipments were $3.13 billion during the third quarter, which was up 19% sequentially and 29.9% on a year-over-year basis. However, shipments were below management’s guidance of $3.17 billion.
We note that in spite of strong quarter results, share price of Lam Research dropped 6.4% in after-hours trading, primarily due to lower-than-expected shipment.
Moreover, the stock has returned 46.9% over a year, underperforming the Lam Research Corporation Quote
Balance Sheet & Cash Flow
As of Mar 25, 2018, cash and cash equivalents, short-term investments and restricted cash and investment balances came in $6.7 billion compared with $6 billion as of Dec 24, 2017. This increase was attributed to cash flow from operating activities was $1.05 billion, up from $28.7 million in the prior quarter.
Also, capital expenditures amounted to $49 million which were down from $84.7 million in the last quarter. The company also repaid debt of $29 million.
Lam Research paid $80 million in cash dividends to stock holders and covered 25% of the current $4 billion share repurchase authorization by spending $1 billion to buy back shares.
Guidance
For fourth-quarter fiscal 2018, Lam Research’s revenues are projected at $3.1 billion (+/- $150 million) and the Zacks Consensus Estimate is pegged at $2.91 billion. Management believes that memory segment will continue to perform well and expects consumer spending for its NAND products to increase further. Foundry and Logic segments are also expected to improve.
Shipments are projected to be around $3 billion (+/- $150 million). Gross margin is predicted at around 47.5% (+/-1%), while operating margin is likely to be about 31% (+/-1%).
Earnings per share are projected at $5 (+/- 15 cents) on a share count of nearly 181 million. The Zacks Consensus Estimate is pegged at $3.81 per share, which makes guidance better than expected. GAAP earnings per share are projected at $4.10 (+/- 15 cents).
Based on a share count of 178 million, management expects non-GAAP earnings of $5 (+/- 20 cents) per share. The Zacks Consensus Estimate is pegged at $4.59 for the upcoming quarter.
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Conclusion
We believe Lam Research’s strong focus toward innovation will continue to aid the robust performance of its products in the end-markets.
Moreover, the company’s increasing investments in research and development bodes well for the idea of product innovation and expansion.
Additionally, deployment of 5G networks will require DRAM content especially in the smartphones and this is likely to drive the demand for the company’s DRAM memories.
Further, the company’s popular etch and deposition technologies are suitable for the ongoing vertical scaling, multi-patterning, advanced packaging and advanced transistor architectures. This will help the company to gain momentum in the market.
Zacks Rank & Other Stocks to Consider
Lam Research carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader technology sector are Micron Technology (NASDAQ:MU) , AMETEK (NYSE:AME) and Analog Devices (NASDAQ:ADI) . While Micron Technology sports a Zacks Rank #1 (Strong Buy), AMETEK and Analog Devices carries a Zacks Rank #2. You can see Zacks Investment Research