On Apr 23,
Lam Research Corporation
) reported third quarter fiscal 2014 non-GAAP earnings of $1.26
per share, which beat the Zacks Consensus Estimate by 10 cents.
This Zacks Rank #2 (Buy) company has a very good earnings
surprise history, posting an average four-quarter surprise of
Revenues of $1.23 billion increased 10.0% sequentially and 45.3%
year over year. Revenues also beat the Zacks Consensus Estimate
of $1.21 billion. The sequential improvement was primarily driven
by an increase in market share in the memory space.
Revenues by Geography
Region-wise, the U.S. contributed 10% of fiscal third quarter
2014 revenues (13% in the prior quarter). Europe's share was 6%
(5% in the prior quarter) while Japan brought in 11% (17% in the
prior quarter). China accounted for 22% of the revenues (12% in
the previous quarter), Korea added 28% (19% in last quarter) and
Taiwan contributed 19% (28% in the previous quarter). Southeast
Asia contributed the remaining 4% (6% in the previous quarter).
Total system shipments were roughly $1.26 billion during the
quarter, up 11.0% from $1.14 billion in the prior quarter. The
memory segment collectively accounted for 66% of shipments, NAND
shipments contributed 36.0% while DRAM added 30.0% to the same.
DRAM shipments again comprised 25 nanometer (nm) conversions as
well as 20 nm pilot production. The company benefitted
excessively from these shipments due to its strong position in
multiple pattern applications market.
Foundries accounted for 28% of total shipments, which were flat
on percentage terms with the previous quarter but up 15% on a
Logic and others constituted 6% of the total shipments, which
declined from 8% in the last quarter.
Geographically, the U.S. accounted for 11% of fiscal third
quarter 2014 shipments (9% in the first quarter of fiscal 2014).
Europe generated 5% (7% in the prior quarter), while Japan
brought in 11% (13% in the prior quarter). Korea contributed 28%
(24% in the previous quarter) and was the largest contributor for
the quarter. Taiwan accounted for 22% (in line with the prior
quarter). China constituted 20% (21% in the previous quarter),
while Southeast Asia contributed 3% (4% in the previous quarter)
of total shipments.
Non-GAAP gross profit was $558.9 million, or 45.5% of revenues
compared with non-GAAP gross profit of $510.7 million, or 45.8%
of revenues in the prior quarter. Several factors such as
favorable customer mix, product mix and higher business volume
contributed to the improved gross margin performance.
Total operating expenses were $311.0 million, up from $302.1
million in the prior quarter. Operating margin was 20.2%, up 150
basis points (bps) from 18.7% recorded in the prior quarter.
Non-GAAP net income was $216.4 million compared with income of
$188.7 million in the prior quarter and $74.5 million in the
Exiting fiscal third quarter 2014, cash and cash equivalents,
short-term investments, and restricted cash and investment
balances were $2.9 billion compared with $2.7 billion in the
prior quarter. This increase was mainly attributable to around
$290 million in cash flow from operating activities during the
reported quarter, partly offset by $52 million of stock
Deferred revenue and deferred profit balances improved to $431.5
million and $257.3 million, respectively, compared with $405.0
million and $224.4 million in the prior quarter. Long term debt,
convertible notes, and capital leases amounted to $810.7 million
compared with $803.3 million in the prior quarter.
For the fourth quarter of fiscal 2014, Lam Research provided
guidance on a non-GAAP basis.
It expects revenues of approximately 1.24 billion (+/- 50
million). Shipments are expected to be roughly $1.15 billion (+/-
50 million). Gross margin is expected to be approximately 45%
(+/-1%) while operating margin is expected to be around 17%
(+/-1%). Earnings per share are projected to be 98 cents (+/- 7
cents) on a share count of $172.0 million.
Lam Research delivered encouraging fiscal third quarter 2014
results with both the top and bottom lines beating the Zacks
Consensus Estimate. Foundries are not the only segment witnessing
growth. Lam's memory business was also very strong in the
quarter. Further, the company provided strong fourth quarter
guidance, reflecting modest improvement in semiconductor
spending, but management expects a slowdown in shipments by
mid-2014. This might be due to current doubts over the extent and
timing of investments in next generation products.
Lam Research believes that the company's product mix including
multi-patterning, 3D device and advanced packaging industry
transitions will boost growth and profitability going forward.
However, uncertainties in the semiconductor industry, customer
electronics business and the entire economy; fierce competition
and uncertainties related to the acceptance of its new
technologies and products can be hindrances to the company's
Other companies in the computer and technology sector include
Advanced Energy Industries, Inc.
E-Commerce China Dangdang Inc.
), all with a Zacks Rank #1 (Strong Buy). Considering the
favorable Zacks Ranks, these stocks may be better selections at
ADV ENERGY INDS (AEIS): Free Stock Analysis
CONVERSANT INC (CNVR): Free Stock Analysis
E-COMMRC CH-ADR (DANG): Free Stock Analysis
LAM RESEARCH (LRCX): Free Stock Analysis
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