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Lam Research (LRCX) Down 2.5% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Lam Research (LRCX - Free Report) . Shares have lost about 2.5% 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 catalysts.
Lam Research Q2 Earnings Beat Estimates
Lam Research Corporation reported second-quarter fiscal 2023 non-GAAP earnings of $10.71 per share, which surpassed the Zacks Consensus Estimate by 7.6%. The figure increased by 25.6% from the year-ago fiscal quarter’s reading.
Revenues improved by 24.9% year over year to $5.28 billion. Further, the figure surpassed the Zacks Consensus Estimate of $5.08 billion.
Top line growth was driven by strong momentum in both the systems and customer support businesses.
Lam Research’s system revenues were $3.55 billion (67.2% of the total revenues), up 29.5% from the year-ago fiscal quarter’s figure.
In the Customer Support Business Group, revenues for the reported quarter were $1.73 billion (32.8%), up 16.4% from the year-ago fiscal quarter’s number.
Lam Research’s proper execution, expanding and diversifying global footprints and growing installed base remain positives. Further, the company remains optimistic about its technological advancements, with a focus on technology inflections, especially in foundry-logic devices, strength in ‘dry resist’ technology and solid momentum with SEMSYSCO.
However, the weak outlook for 2023 wafer fabrication equipment (WFE) spending remains a concern. For 2023, WFE spending is estimated to plunge to the mid-$70 billion range.
Cautionary actions being taken by the customers in memory market, reductions in capacity additions and fab utilization and new export regulations remain overhangs.
Regions in Detail
China, Korea and Taiwan accounted for 24%, 20% and 19% of Lam Research’s total revenues for the fiscal second quarter, respectively. Additionally, Japan, Southeast Asia, the United States and Europe accounted for 11%, 10%, 10% and 6%, respectively.
Operating Details
The non-GAAP gross margin was 45.1%, which contracted 170 basis points (bps) from the year-ago fiscal quarter’s level.
Non-GAAP operating expenses were $686.3 million, up 9.4% from the prior-year fiscal quarter’s reading. As a percentage of revenues, the figure contracted 180 bps from the year-earlier fiscal quarter’s level to 13%.
The non-GAAP operating margin was 32.1%, expanding 10 bps from the year-ago fiscal quarter’s level.
Balance Sheet & Cash Flow
As of Sep 25, 2022, cash and cash equivalents and short-term investments increased to $4.59 billion from $4.38 billion.
Cash flow from operating activities was $1.14 billion for the reported quarter, down from $1.2 billion in the previous fiscal quarter. Capital expenditure was $163 million in second-quarter fiscal 2023 compared with $140 million in first-quarter fiscal 2023.
In the reported quarter, Lam Research paid out dividends of $236 million and repurchased shares worth $456 million.
Guidance
For third-quarter fiscal 2023, LRCX expects revenues of $3.8 billion (+/- $300 million).
The non-GAAP gross margin is projected at 44% (+/-1%), while the non-GAAP operating margin is expected to be 27.5% (+/-1%).
Non-GAAP earnings are projected to be $6.50 (+/- 75 cents) per share on a diluted share count of 135 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -15.18% due to these changes.
VGM Scores
Currently, Lam Research has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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Lam Research (LRCX) Down 2.5% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Lam Research (LRCX - Free Report) . Shares have lost about 2.5% 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 catalysts.
Lam Research Q2 Earnings Beat Estimates
Lam Research Corporation reported second-quarter fiscal 2023 non-GAAP earnings of $10.71 per share, which surpassed the Zacks Consensus Estimate by 7.6%. The figure increased by 25.6% from the year-ago fiscal quarter’s reading.
Revenues improved by 24.9% year over year to $5.28 billion. Further, the figure surpassed the Zacks Consensus Estimate of $5.08 billion.
Top line growth was driven by strong momentum in both the systems and customer support businesses.
Lam Research’s system revenues were $3.55 billion (67.2% of the total revenues), up 29.5% from the year-ago fiscal quarter’s figure.
In the Customer Support Business Group, revenues for the reported quarter were $1.73 billion (32.8%), up 16.4% from the year-ago fiscal quarter’s number.
Lam Research’s proper execution, expanding and diversifying global footprints and growing installed base remain positives. Further, the company remains optimistic about its technological advancements, with a focus on technology inflections, especially in foundry-logic devices, strength in ‘dry resist’ technology and solid momentum with SEMSYSCO.
However, the weak outlook for 2023 wafer fabrication equipment (WFE) spending remains a concern. For 2023, WFE spending is estimated to plunge to the mid-$70 billion range.
Cautionary actions being taken by the customers in memory market, reductions in capacity additions and fab utilization and new export regulations remain overhangs.
Regions in Detail
China, Korea and Taiwan accounted for 24%, 20% and 19% of Lam Research’s total revenues for the fiscal second quarter, respectively. Additionally, Japan, Southeast Asia, the United States and Europe accounted for 11%, 10%, 10% and 6%, respectively.
Operating Details
The non-GAAP gross margin was 45.1%, which contracted 170 basis points (bps) from the year-ago fiscal quarter’s level.
Non-GAAP operating expenses were $686.3 million, up 9.4% from the prior-year fiscal quarter’s reading. As a percentage of revenues, the figure contracted 180 bps from the year-earlier fiscal quarter’s level to 13%.
The non-GAAP operating margin was 32.1%, expanding 10 bps from the year-ago fiscal quarter’s level.
Balance Sheet & Cash Flow
As of Sep 25, 2022, cash and cash equivalents and short-term investments increased to $4.59 billion from $4.38 billion.
Cash flow from operating activities was $1.14 billion for the reported quarter, down from $1.2 billion in the previous fiscal quarter. Capital expenditure was $163 million in second-quarter fiscal 2023 compared with $140 million in first-quarter fiscal 2023.
In the reported quarter, Lam Research paid out dividends of $236 million and repurchased shares worth $456 million.
Guidance
For third-quarter fiscal 2023, LRCX expects revenues of $3.8 billion (+/- $300 million).
The non-GAAP gross margin is projected at 44% (+/-1%), while the non-GAAP operating margin is expected to be 27.5% (+/-1%).
Non-GAAP earnings are projected to be $6.50 (+/- 75 cents) per share on a diluted share count of 135 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -15.18% due to these changes.
VGM Scores
Currently, Lam Research has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Lam Research has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.