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Lam Research (LRCX) Q1 Earnings Beat, Revenues In Line

Lam Research CorporationLRCX reported first-quarter fiscal 2016 non-GAAP earnings of $1.82 per share, which beat the Zacks Consensus Estimate by a good 12 cents. Moreover, earnings increased 21.5% sequentially and a whopping 90.4% on a year-over-year basis.

Lam Research Corporation - Earnings Surprise | FindTheBest

This Zacks Rank #3 (Hold) company has a good earnings surprise history and has an average positive four-quarter earnings surprise of 5.76%.

Revenues

Revenues of $1.60 billion increased 8% sequentially and 38.8% year over year. Revenues matched the Zacks Consensus Estimate.

Revenues by Geography

Region-wise, Korea contributed 17% of fiscal first quarter 2016 revenues (down 34.4% from the prior quarter). Taiwan added 28% (up 59.2% from the last quarter), China contributed 16% (up 1.7% from the previous quarter) and Japan brought in 18% of the revenues (up 38.9% from the prior quarter).

The U.S accounted for 9% of the revenues (down 30.6% from the previous quarter). Europe added 4% (up 8% from the previous quarter). Southeast Asia contributed the remaining 8% (up 116% from the prior quarter).

Shipments

Total system shipments were roughly $1.58 billion during the quarter, down 2.3% from $1.62 billion in the prior quarter.

Geographically, Korea accounted for 13% of fiscal first quarter 2016 shipments (down from 23% in the previous quarter). Taiwan accounted for 26% (up from 24% in the prior quarter) and was the largest contributor. China accounted for 25% (up from 12% in the prior quarter).The U.S contributed 8% (down from 13% in the previous quarter). Japan accounted for 17% (down from 20% in the prior quarter) while Europe generated 3% (down from 4% in the previous quarter). Southeast Asia constituted 8% of the total shipments (up from 4% in the previous quarter).

Margins

Non-GAAP gross profit was $744.0 million, or 46.5% of revenues, an increase of 101 basis points from the previous quarter.

Total operating expenses were $363.6 million, up 2.6% sequentially. Operating margin was 23.8%, an increase of 222 basis points from the prior quarter. The increase in operating margin was led by higher revenues and improved gross margin.

Net Income

Non-GAAP net income was $313.0 million (19.6% of sales) compared with $260.0 million in the prior quarter.

Balance Sheet

Exiting fiscal first quarter 2016, cash and cash equivalents, short-term investments, and restricted cash and investment balances were $4.5 billion, compared with $4.2 billion in the last quarter.

Cash flow of $449.0 million was utilized for treasury stock purchases, which included net share settlement on employee stock-based compensation ($98.4 million). Capital expenditures amounted to $49.5 million. The company paid $47.7 million of cash dividends to stockholders during the Sep 2015 quarter.

Deferred revenues decreased from $518.1 million in the previous quarter to $517.4 million, while deferred profit balances increased to $325.0 million from $322.1 million in the previous quarter.

Guidance

Lam Research provided guidance for the second quarter of fiscal 2016.

On a non-GAAP basis, it expects revenues of approximately $1.41 billion (+/- 75 million). Shipments are expected to be roughly $1.28 billion (+/- 75 million). Gross margin is expected to be approximately 45.5% (+/-1%) while operating margin is expected to be around 20.5% (+/-1%). Earnings per share are projected to be $1.42 (+/- 10 cents) on a share count of approximately 172.0 million. The Zacks Consensus estimate is pegged at $1.41 per share for earnings and $1.41 billion for revenues.

Our Take

Lam Research delivered modest fiscal first quarter 2016 results with earnings beating the Zacks Consensus Estimate and revenues meeting the same.

In the quarter Lam delivered record revenues and earnings and is on track to achieve more than 20% revenue growth for the third consecutive year in calendar 2015. The company is focused on its commitment to deliver the best services to its customers with the help of its differentiated products and services, thereby helping them to solve their most critical challenges.

A strong September quarter and a positive guidance for the next quarter along with some exclusiveness to market dynamics Lam well for a strong second half.

Along with its results, Lam announced that it has entered into a definitive agreement with KLA-Tencor KLAC per which Lam Research will acquire all outstanding KLA-Tencor shares in a cash and stock transaction. Also, the deal will create a leading semiconductor capital equipment company, will strengthen its performance, hasten innovation and expand market relevance.

It will also generate significant cost and revenue synergies -- around $250 million in expected annual on-going pre-tax cost synergies within 18-24 months of the closure of the deal, and $600 million in annual revenue synergies by 2020. It will also be accretive to non-GAAP EPS and free cash flow per share during the first 12 months following the close of the deal.

The company believes that its strong position, combined with its commitment to customers and value-enhancing collaborations will help drive performance over the next several years.

Stocks worth considering in the technology sector include Amazon.com. Inc. AMZN , and Apple AAPL . Both the stocks sport a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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