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Lam Research (LRCX) Down 5.5% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Lam Research (LRCX - Free Report) . Shares have lost about 5.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Lam Research due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Lam Research Q4 Earnings & Revenues Beat Estimates

Lam Research reported fourth-quarter fiscal 2021 non-GAAP earnings of $8.09 per share, which surpassed the Zacks Consensus Estimate by 7.4%. The figure increased 69.2% year over year.

Revenues rose 48.5% year over year to $4.14 billion. The figure outpaced the Zacks Consensus Estimate of $4.01 billion.

Year-over-year top-line growth was driven by solid execution across systems and the customer support business.

In the reported quarter, the company witnessed strong momentum across 3D NAND manufacturers for critical applications. Its foundry and logic segment performed well, owing to growing traction among etch, strip and surface treatment solutions. All these drove growth in the company’s system revenues, which were $2.8 billion (66.7% of total revenues), up 48.2% from the year-ago quarter.

Robust growth in chamber count alongwith strength across services, upgrades and Reliant drove top-line growth in the customer support business group. Customer support-related revenues and other for the reported quarter were $1.4 billion (33.3%), up 49.1% year over year.

For 2021, WFE spending is estimated to be more than $80 billion, driven by strength across NAND, DRAM, and Foundry and Logic. Increasing device and manufacturing complexity along with rising semiconductor demand are continuously boosting WFE spending. This remains a major positive for Lam Research for the upcoming days.

Top Line in Detail

China, Korea and Taiwan accounted for 37%, 30% and 13% of the company’s total fiscal fourth-quarter revenues, respectively. On the contrary, Japan, Southeast Asia, the United States and Europe accounted for 9%, 3%, 5% and 3%, respectively.

Operating Details

Non-GAAP gross margin was 46.5%, which expanded 40 basis points (bps) year over year.

Non-GAAP operating expenses were $573.7 million, reflecting an increase of 16.3% from the prior-year quarter. However, as a percentage of revenues, the figure contracted 390 bps year over year to 13.8%.

Non-GAAP operating margin was 32.6%, expanding410 bps from the year-ago quarter.

Balance Sheet & Cash Flow

As of Jun 27, 2021, cash and cash equivalents as well as short-term investments decreased to $5.7 billion from $6 billion as of Mar 28, 2021.

Cash flow from operating activities was $1.4 billion in the reported quarter, up from $1.2 billion in the previous quarter. Capital expenditure was$105 million in the fiscal fourth quarter, up from $90 million in the fiscal third quarter.

In the reported quarter, Lam Research paid out dividends of $185 million and repurchased shares worth $440 million.

Guidance

For first-quarter fiscal 2022, the company expects revenues of $4.3 billion (+/- $250 million).

Non-GAAP gross margin is projected at 46% (+/-1%) and non-GAAP operating margin is expected to be 32% (+/-1%).

Non-GAAP earnings are projected at $8.10 (+/- 50 cents) per share on a share count of 143 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Lam Research has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Lam Research has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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