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KLA-Tencor (KLAC) to Post Q3 Earnings: What's in the Cards?

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KLA-Tencor Corporation (KLAC - Free Report) is set to report third-quarter fiscal 2020 results on May 5. It delivered a positive earnings surprise of 4.3% in the last reported quarter.

The company topped the Zacks Consensus Estimate in the trailing four quarters, with average of 7.9%.

Fiscal Q3 Forecasts

For the fiscal third quarter, the company expects revenues in the range of $1.325-$1.525 billion. The Zacks Consensus Estimate for revenues is currently pegged at $1.42 billion, indicating growth of 29.1% from the year-ago quarter.

Memory is expected to contribute 28% to system revenues in the fiscal third quarter. Foundry is expected to constitute 60% of total shipments and Logic is anticipated to account for 12% of semi-process control system revenues.

Non-GAAP earnings are expected in the range of $1.79-$2.57 per share. The Zacks Consensus Estimate for earnings is currently pegged at $2.35 per share, indicating an increase of 30.6% from the year-ago quarter.

KLA Corporation Price and EPS Surprise

 

Performance in the Last Reported Quarter

KLA-Tencor had reported fiscal second-quarter 2019 non-GAAP earnings of $2.66 per share, beating the Zacks Consensus Estimate of $2.55.

Revenues increased 34.7% from the year-ago quarter and 6.8% sequentially to $1.51 billion, surpassing the Zacks Consensus Estimate by 2.1%.

Factors to Note

Due the global coronavirus-driven economic crisis, the company’s fiscal third-quarter sales might have been affected. Lockdowns and movement restrictions disrupted supply chains in China and Europe, which is expected to have impacted the chip-equipment company’s top line in the to-be-reported quarter.

Nevertheless, KLA-Tencor’s robust product portfolio has been catering to increasing demand for wafer products.

The company’s Gen5 optical inspection platform has been gaining momentum. Increased deployment of Gen5 for both technology development and production monitoring at the advanced nodes by customers is expected to have positively impacted top-line growth in the quarter. Increasing demand for mask inspection should have helped it to contribute to the revenue upside in the to-be-reported quarter.

The company’s efforts in bringing the EUV lithography technology to the market have been gaining momentum. These efforts, along with the expanding value of inspection and measurement in addressing critical customer problems, are expected to have driven KLA-Tencor’s performance in the to-be-reported quarter.

Foundry and logic performed well in the fiscal second quarter, a trend that most likely continued in the fiscal third quarter as well, driven by next-generation technology development, capacity additions at leading-edge nodes, increasing competitive dynamics and investment in EUV infrastructure.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for KLA-Tencor this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company has an Earnings ESP of -2.14%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, KLA-Tencor has a Zacks Rank #4 (Sell).

Stocks That Warrant a Look

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

Ericsson (ERIC - Free Report) has an Earnings ESP of +25.94% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Baidu, Inc. (BIDU - Free Report) has an Earnings ESP of +10.27% and a Zacks Rank of 2.

Etsy, Inc. (ETSY - Free Report) has an Earnings ESP of +8.17% and a Zacks Rank #2.

5 Stocks Set to Double

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Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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