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Lam Research (LRCX) Down 1.2% 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 1.2% 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 Q3 Earnings & Revenues Miss Estimates

Lam Research Corporation reported third-quarter fiscal 2020 non-GAAP earnings of $3.98 per share, which missed the Zacks Consensus Estimate of $4.02. Also, the figure decreased 1% sequentially.

Adjusted revenues decreased 3.1% sequentially but increased 2.6% year over year to $2.50 billion. The reported revenues missed the Zacks Consensus Estimate by 5.6%.

Following the weaker-than-expected fiscal third-quarter results, its share price rose 2.1% in after-hours trading.

Top Line in Detail

China, Korea and Taiwan accounted for 32%, 23% and 21% of the company’s total fiscal third-quarter revenues, respectively. On the contrary, Japan, the United States, Europe and Southeast Asia accounted for 10%, 9%, 3% and 2%, respectively.

Operating Details

Non-GAAP gross margin came in at 46.3%, which expanded 60 basis points (bps) sequentially.

Non-GAAP operating expenses were $486.5 million, reflecting an increase of 3.5% sequentially. As a percentage of sales, both research & development expenses and selling, general & administrative costs decreased.

Adjusted operating margin was 26.9%, down 20 bps sequentially. The increase was primarily due to higher-than-expected expenses.

Balance Sheet & Cash Flow

At the end of the fiscal third quarter, cash and cash equivalents, and short-term investments increased to $5.6 billion from $4.9 billion in the fiscal second quarter.

Cash flow from operating activities was $541.4 million, up from $307.9 million in the fiscal second quarter. Capital expenditures were $51.4 million, down from $62.1 million in the fiscal second quarter.

During the quarter, Lam Research paid dividends of $163.5 million.

Guidance

The company did not provide any guidance for the June quarter due to risks and uncertainties related to the COVID-19 crisis.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month. The consensus estimate has shifted -7.94% due to these changes.

VGM Scores

At this time, 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 second quintile 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

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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