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Is a Beat in the Cards for KLA-Tencor (KLAC) in Q3 Earnings?

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KLA-Tencor Corporation (KLAC - Free Report) is set to report third-quarter fiscal 2018 results on Apr 26.

The company topped the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 8.32%.

Last quarter, KLA delivered a positive earnings surprise of 14.53%. Earnings of $1.97 per share increased 30% from the year-ago quarter and 10% sequentially.

Revenues increased 11.3% year over year and 0.6% sequentially to $975.8 million, driven by rising demand for company’s key products and strong shipments.

For third-quarter fiscal 2018, KLA expects revenues between $970 million and $1.03 billion. Non-GAAP earnings are expected in the range of $1.85-$2.09 per share.

Strong Product Portfolio — Key Catalyst

KLA’s robust product portfolio will continue to cater to the increasing demand for wafer products. Moreover, the company is expected to witness improved end market results, especially in China.

Gen 5 broadband plasma wafer inspection platform continues to gain traction in the market. Management expects the solution to continue to support customers in development of 7-nanometer (nm) technology. It is also expected to have a larger role on the development and ramp of the 5-nm, node.

Gen 4 broadband plasma inspection platform and the Puma laser scanning platforms are likely to drive demand as they will continue to provide cost-effective wafer inspection performance.

Further, the addition of new capacity by wafer manufacturers bodes well given the increasing demand for the company’s new wafer products.

Additionally, KLA’s strong efforts in bringing EUV lithography technology to market by collaborating with every EUV customer remain positive.

Recently, the company agreed to acquire Israel-based circuit board company Orbotech. This will improve KLA’s product offering in the semiconductor industry and strengthen its business in the adjacent market.

Shipment Forecast

For third-quarter fiscal 2018, KLA expects shipments of $945 million to $1.025 billion. Memory shipments are anticipated to be around 70% in the soon-to-be reported quarter. Foundry and Logic orders are expected to be approximately 15% of shipments each.

 

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

KLA is likely to beat estimates this earnings season as the Zacks Rank #3 company has  an Earnings ESP of +1.10%.

Other Stocks That Warrant a Look

Here are a few other stocks worth considering as our model shows that these too have the right combination of elements to deliver an earnings beat in the upcoming releases.

Paycom Software (PAYC - Free Report) has an Earnings ESP of +0.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agilent Technologies (A - Free Report) has an Earnings ESP of +3.72% and a Zacks Rank #2.

NVIDIA Corporation (NVDA - Free Report)     has an Earnings ESP of +0.65% and a Zacks Rank #3.

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