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Lam Research (LRCX) Tops Q2 Earnings, Revenue Estimates

Lam Research CorporationLRCX reported second-quarter fiscal 2017 non-GAAP earnings of $2.24 per share, surpassing the Zacks Consensus Estimate of $2.19. Earnings were up 23.7% sequentially and 42.8% year over year.

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The stock jumped 1.99% in yesterday's trading.

Coming to share price performance, the stock outperformed the Zacks Semiconductor Equipment Wafer Fabrication industry in the last one year. It returned 67.30% compared with the industry's gain of 60.04%.

Revenues

Revenues of $1.88 billion increased 15.3% sequentially and 32.0% year over year. Also, revenues were above the Zacks Consensus Estimate of $1.85 billion.

Revenues by Geography

Region-wise, Taiwan contributed 37%, Korea accounted for 26%, Japan brought in 8%, China contributed 10% and Southeast Asia generated 5%. The U.S. and Europe each accounted for 7% of revenues.

Shipments

Total system shipments were $1.92 billion during the reported quarter, up 12.3% from $1.71 billion reported last quarter.

Margins

Non-GAAP gross profit was $874.2 million or 46.4% of revenues, reflecting an increase of 127 basis points (bps) sequentially and 96 bps year over year.

Total adjusted operating expenses were $384.2 million, 3.4% higher sequentially. Operating margin was 26.0%, reflecting an increase of 362 bps from the prior quarter and 525 bps from the year-ago quarter.

Net Income

GAAP net income was $332.8 million ($1.81 per share) compared with $263.8 million ($1.47 per share) last quarter and $223.0 million ($1.28 per share) in the year-ago quarter.

Non-GAAP net income was $405.2 million (21.5% of sales) compared with $322.1 million (19.7%) last quarter and $270.3 million (19.0%) in the year-ago quarter.

Balance Sheet

Exiting fiscal second-quarter 2017, cash and cash equivalents, short-term investments, and restricted cash and investment balances were $5.8 billion compared with $7.2 billion at the end of fiscal first-quarter 2017.

Cash flow from operating activities was $404.1 million versus $473.2 million in the previous quarter. Capital expenditures amounted to $36.5 million. The company paid $48.4 million in cash dividends to stockholders during the Dec 2016 quarter.

Guidance

Lam Research provided guidance for the third quarter of fiscal 2017.

On a non-GAAP basis, the company expects revenues of approximately $2.350 billion (+/- $75 million). Shipments are projected to be roughly $2.125 billion (+/- $75 million). Gross margin is predicted at around 45.5% (+/-1%), while operating margin is likely to be about 25.5% (+/-1%).

Earnings per share are projected at $2.55 (+/- 10 cents) on a share count of nearly 180 million. The Zacks Consensus Estimate is pegged at $2.34 per share, which makes guidance better than expected. GAAP earnings per share are projected at $2.31 (+/- 10 cents).

Our Take

Lam Research delivered strong fiscal second-quarter 2017 results with both earnings and revenues outperforming our estimates.

Calendar year 2016 was pretty good for the company and it continues to see strong success in the areas of device architecture, process flow and advanced packaging technology inflections.

The company has been improving on the WFE market share significantly since 2013 and expects to continue making gains.

Lam Research continues to see increased adoption rates of 3D NAND technology, FinFETs and multi-patterning. The company has initiated cost reduction and density scaling for 3D NAND and new memory technologies.

The company is likely to remain the market leader in dielectric etches as VECTOR Strata and ALTUS deposition and its Flex and Kiyo etch products are extremely successful thus far. It anticipates strong demand for leading-edge silicon in the enterprise market to continue driven by the long-term move to the cloud, storage and networking applications.

Moreover, Lam Research is making good progress with its customer support business and anti-trust agency reviews.

However, concerns persist in the form of volatility and lower growth expectations globally, with a slow-but-steady improvement in some developed markets balancing the weakness in certain emerging economies.

Lam Research Corporation Price, Consensus and EPS Surprise

Lam Research Corporation Price, Consensus and EPS Surprise | Lam Research Corporation Quote

Currently, Lam Research has a Zacks Rank #2 (Buy). Some other stocks worth considering in the industry are Itron, Inc. ITRI , sporting a Zacks Rank #1 (Strong Buy) and NVIDIA Corporation NVDA and Intersil Corporation ISIL carrying a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Itron, Inc. delivered a positive earnings surprise of 30.55%, on average, in the past four quarters.

NVIDIA Corporation delivered a positive earnings surprise of 24.93%, on average, in the trailing four quarters.

Intersil Corporation delivered a positive earnings surprise of 20.42%, on average, in the trailing four quarters.

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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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