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KLA-Tencor (KLAC) Beats on Q1 Earnings and Revenues
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KLA-Tencor Corporation (KLAC - Free Report) reported first-quarter fiscal 2017 earnings of $1.16 a share, topping the Zacks Consensus Estimate of $1.06. Earnings were also up 25.3% from the year-ago quarter. The increase was driven by higher revenues and strengthening gross margins.
Following the better-than-expected results, the share price was up by 0.07%.
A quick look at the numbers:
Revenues
KLA reported revenues of $751.0 million, down 18.3% sequentially but up 16.8% from the year-ago quarter. Revenues were above the Zacks Consensus Estimate of $733.0 million and at the high end of the management guidance range, courtesy of strong customer acceptance for the company’s new products.
Products generated 75% of total revenue, up 21.9% year over year. Services revenue comprised the remaining 25%, up 3.9% year over year.
Orders
Shipments in the first quarter were $786 million, up sequentially and within the guided range.
Order contribution by segment was as follows: foundry customers accounted for 69% of new semiconductor system orders, memory 15% and logic 16%.
Management said that foundry contribution is expected to decline to 30% of total system orders in the second quarter due to project timing. Memory orders are expected to jump to 60% in the upcoming quarter due to concentration of orders to support a single new memory project build out in Korea. Also, Logic is expected to increase to 10% of the order mix in the fiscal second quarter.
Margins
KLA’s gross margin shrank 27 basis points (bps) sequentially and expanded 437 bps year over year to 63.1%. The better-than-expected year-over-year gross margin was backed by a favorable mix of products and services.
Operating expenses of $219.7 million were down 2.4% sequentially but up 6.6% from the year ago-quarter. Operating margin decreased 504 bps sequentially but increased 717 bps from last year helped by cost management.
Pro forma net income was $181.7 million, or 24.2% of sales compared with $276.8 million, or 12.2% in the Jun 2016 quarter and $112.2 million, or 20.3% in the Sep quarter of last year. Including restructuring and merger-related charges, the GAAP net income was $178.1 million ($1.13 a share) compared to $271.5 million ($1.73 a share) in the previous quarter and $104.9 million ($0.66 a share) in the year-ago quarter.
Balance Sheet
KLA ended with a cash and short-term investments balance of $2.49 billion, flat sequentially. Account receivables were $654.7 million, up from $613.2 million in the fiscal fourth quarter.
During the quarter, the company generated $169.8 million of cash from operations after spending $9.9 million on capital expenses, $89.3 billion on dividends and $40.0 million to repay its debt.
Guidance
For the second quarter of fiscal 2017, KLA expects shipments of $800–$880 million, up 7% sequentially at the mid-point. Quarterly revenues are expected between $805 million and $865 million, reflecting an increase of 11% sequentially at the mid-point. Non-GAAP EPS is expected in the range of $1.28 to $1.48, above the Zacks Consensus Estimate of $1.26.
In Conclusion
KLA-Tencor reported a strong quarter with both the top and the bottom lines exceeding the Zacks Consensus Estimate. Note that since each system is high-valued, customer concentration is obviated, which results in great fluctuations in revenue/orders in times of uncertain demand.
However, underlying demand remains strong given high demand for more efficient manufacturing processes and the preference for mobile. The technical complexity of manufacturing semiconductors and increasingly challenging yield issues remain revenue drivers for this leading manufacturer of process control equipment.
During the quarter, the company increased its quarterly dividend by 4%, reflecting the company’s strong fundamentals. Also, Lam Research (LRCX - Free Report) terminated its proposed acquisition of KLA-Tencor, following antitrust objections from the Justice Department.
Currently, KLA-Tencor carries a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the industry include Intel Corp. (INTC - Free Report) and Applied Materials, Inc. (AMAT - Free Report) .
Applied Materials carries a Zacks Rank #2 (Buy) and witnessed a 0.23% gain in its last day’s stock price. On average, the company delivered a positive earnings surprise 5.05% in the trailing four quarters.
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KLA-Tencor (KLAC) Beats on Q1 Earnings and Revenues
KLA-Tencor Corporation (KLAC - Free Report) reported first-quarter fiscal 2017 earnings of $1.16 a share, topping the Zacks Consensus Estimate of $1.06. Earnings were also up 25.3% from the year-ago quarter. The increase was driven by higher revenues and strengthening gross margins.
Following the better-than-expected results, the share price was up by 0.07%.
A quick look at the numbers:
Revenues
KLA reported revenues of $751.0 million, down 18.3% sequentially but up 16.8% from the year-ago quarter. Revenues were above the Zacks Consensus Estimate of $733.0 million and at the high end of the management guidance range, courtesy of strong customer acceptance for the company’s new products.
Products generated 75% of total revenue, up 21.9% year over year. Services revenue comprised the remaining 25%, up 3.9% year over year.
Orders
Shipments in the first quarter were $786 million, up sequentially and within the guided range.
Order contribution by segment was as follows: foundry customers accounted for 69% of new semiconductor system orders, memory 15% and logic 16%.
Management said that foundry contribution is expected to decline to 30% of total system orders in the second quarter due to project timing. Memory orders are expected to jump to 60% in the upcoming quarter due to concentration of orders to support a single new memory project build out in Korea. Also, Logic is expected to increase to 10% of the order mix in the fiscal second quarter.
Margins
KLA’s gross margin shrank 27 basis points (bps) sequentially and expanded 437 bps year over year to 63.1%. The better-than-expected year-over-year gross margin was backed by a favorable mix of products and services.
Operating expenses of $219.7 million were down 2.4% sequentially but up 6.6% from the year ago-quarter. Operating margin decreased 504 bps sequentially but increased 717 bps from last year helped by cost management.
Pro forma net income was $181.7 million, or 24.2% of sales compared with $276.8 million, or 12.2% in the Jun 2016 quarter and $112.2 million, or 20.3% in the Sep quarter of last year. Including restructuring and merger-related charges, the GAAP net income was $178.1 million ($1.13 a share) compared to $271.5 million ($1.73 a share) in the previous quarter and $104.9 million ($0.66 a share) in the year-ago quarter.
Balance Sheet
KLA ended with a cash and short-term investments balance of $2.49 billion, flat sequentially. Account receivables were $654.7 million, up from $613.2 million in the fiscal fourth quarter.
During the quarter, the company generated $169.8 million of cash from operations after spending $9.9 million on capital expenses, $89.3 billion on dividends and $40.0 million to repay its debt.
Guidance
For the second quarter of fiscal 2017, KLA expects shipments of $800–$880 million, up 7% sequentially at the mid-point. Quarterly revenues are expected between $805 million and $865 million, reflecting an increase of 11% sequentially at the mid-point. Non-GAAP EPS is expected in the range of $1.28 to $1.48, above the Zacks Consensus Estimate of $1.26.
In Conclusion
KLA-Tencor reported a strong quarter with both the top and the bottom lines exceeding the Zacks Consensus Estimate. Note that since each system is high-valued, customer concentration is obviated, which results in great fluctuations in revenue/orders in times of uncertain demand.
However, underlying demand remains strong given high demand for more efficient manufacturing processes and the preference for mobile. The technical complexity of manufacturing semiconductors and increasingly challenging yield issues remain revenue drivers for this leading manufacturer of process control equipment.
During the quarter, the company increased its quarterly dividend by 4%, reflecting the company’s strong fundamentals. Also, Lam Research (LRCX - Free Report) terminated its proposed acquisition of KLA-Tencor, following antitrust objections from the Justice Department.
KLA-TENCOR CORP Price, Consensus and EPS Surprise
KLA-TENCOR CORP Price, Consensus and EPS Surprise | KLA-TENCOR CORP Quote
Currently, KLA-Tencor carries a Zacks Rank #1 (Strong Buy). Other stocks worth considering in the industry include Intel Corp. (INTC - Free Report) and Applied Materials, Inc. (AMAT - Free Report) .
Intel delivered a positive earnings surprise of 11.86%, on average, in the trailing four quarters. It carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Materials carries a Zacks Rank #2 (Buy) and witnessed a 0.23% gain in its last day’s stock price. On average, the company delivered a positive earnings surprise 5.05% in the trailing four quarters.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>