Lam Research (LRCX) Up 9.6% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Lam Research Corporation LRCX. Shares have added about 9.6% in that time frame.

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

Lam Research Tops Q1 Earnings & Revenue Estimates

 

Lam Research Corporation reported first-quarter fiscal 2018 non-GAAP earnings of $3.46 per share, surpassing the Zacks Consensus Estimate of $3.27. Earnings increased 11.3% sequentially and 91.2% year over year.

 

Revenues

 

Revenues of $2.48 billion increased 5.7% sequentially and 31.7% year over year. Also, revenues came in above the Zacks Consensus Estimate of $2.46 billion.

 

Revenues by Geography

 

Region wise, Korea contributed 38%, Japan accounted for 20% and Taiwan and China generated 14% each of first-quarter revenues. The United States, Southeast Asia and Europe generated 6%, 5% and 3%, respectively.

 

Shipments

 

Total system shipments were $2.38 billion during the reported quarter, down 6.3% from $2.54 billion reported last quarter. However, shipments were above the Zacks Consensus Estimate of $2.35 billion.

 

Martin Anstice, president and chief executive officer of Lam Research, expects strong shipments growth in the calendar year of 2017.

 

Margins

 

Non-GAAP gross profit was $1.17 billion or 47.2% of revenues, reflecting an increase of 70 bps sequentially.

 

Total adjusted operating expenses were $438.1 million, reflecting an increase of 0.5% sequentially. Operating margin was 29.6%, increasing 190 bps from the prior quarter.

 

Net Income

 

GAAP net income was $590.7 million compared with $526.4 million in the last quarter and $263.8 million in the year-ago quarter.

 

Non-GAAP net income was $627.8 million compared with $565.5 million in the last quarter.

 

Balance Sheet

 

Exiting first-quarter fiscal 2018, cash and cash equivalents, short-term investments, and restricted cash and investment balances were $6.2 billion compared with $6.04 billion at the end of fourth-quarter fiscal 2017.

 

Cash flow from operating activities was $858.0 million against $729.2 million in the previous quarter. Capital expenditures amounted to $60.0 million. The company paid $73.0 million in cash dividends and spent approximately $155.0 million on share repurchases.

 

Guidance

 

Lam Research provided guidance for second-quarter fiscal 2018.

 

On a non-GAAP basis, the company expects revenues of approximately $2.55 billion (+/- $100 million). The Zacks Consensus Estimate is pegged at $2.50 billion. Shipments are projected to be roughly $2.60 billion (+/- $100 million). Gross margin is predicted at around 47.5% (+/-1%), while operating margin is likely to be about 30% (+/-1%).

 

Earnings per share are projected at $3.65 (+/- 12 cents) on a share count of nearly 182 million. The Zacks Consensus Estimate is pegged at $3.39 per share, which makes guidance better than expected. GAAP earnings per share are projected at $3.40 (+/- 12 cents).

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter.

Lam Research Corporation Price and Consensus

 

Lam Research Corporation Price and Consensus | Lam Research Corporation Quote

VGM Scores

At this time, Lam Research's stock has a strong Growth Score of A, though it is lagging a lot on the momentum 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.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise that the stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock in the next few months.

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