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Lam Research (LRCX) Q1 Earnings & Revenues Beat Estimates

Zacks Equity Research

Lam Research Corporation (LRCX) reported first-quarter fiscal 2019 non-GAAP earnings of $3.18 per share, which beat the Zacks Consensus Estimate of $3.00. However, the figure decreased 12.2% sequentially.

Moreover, adjusted revenues decreased 8.3% sequentially and 7.1% year over year to $2.17 billion. However, the reported revenues surpassed the Zacks Consensus Estimate by 0.7%.

Management expects to see improvements in the memory market, primarily led by NAND. The company expects NAND demand dynamics to further improve and oversupply conditions to abate in the near term. Foundry and logic spending should remain strong in the future. Also, both the server and smart home markets are expected to perform well in the near term.

Top Line in Detail

China, Korea, Taiwan and Japan accounted for 27%, 21%, 18% and 13% of the company’s total fiscal first-quarter revenues, respectively. On the contrary, Southeast Asia, the United States and Europe accounted for 10%, 8% and 3%, respectively.

 

Lam Research Corporation Price, Consensus and EPS Surprise

 

Lam Research Corporation Price, Consensus and EPS Surprise

Lam Research Corporation price-consensus-eps-surprise-chart | Lam Research Corporation Quote

Operating Details

Non-GAAP gross margin came in at 45.4%, which contracted 50 basis points (bps) sequentially.

Non-GAAP operating expenses were $431 million, reflecting a decrease of 4.4% sequentially. As a percentage of sales, research & development expenses marked an increase, while selling, general & administrative costs decreased.

Adjusted operating margin was 25.5%, down 140 bps sequentially. The decrease was primarily due to higher-than-expected expenses.

Balance Sheet & Cash Flow

At the end of the fiscal first quarter, cash and cash equivalents, and short-term investments increased to $5.8 billion from $5.4 billion in the fiscal fourth quarter.

Cash flow from operating activities was $464 million, down from $880.5 million in the fiscal fourth quarter. Capital expenditures were $39.3 million, down from $65.9 million in the fiscal fourth quarter.

During the quarter, Lam Research paid dividends of $158.9 million.

Guidance

For second-quarter fiscal 2020, Lam Research projects revenues to be $2.5 billion (+/- $150 million). The Zacks Consensus Estimate for the same is pegged at $2.19 billion.

Gross margin is projected at around 45% (+/-1%) and operating margin is expected to be 27% (+/-1%).

Non-GAAP earnings are projected at $3.80 (+/- 20 cents) per share on a share count of nearly 150 million. The Zacks Consensus Estimate for non-GAAP earnings per share is pegged at $3.16.

Zacks Rank & Other Stocks to Consider

Currently, Lam Research carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include Itron, Inc. ITRI, Booking Holdings Inc. BKNG and Ambarella, Inc. AMBA. While Itron sports a Zacks Rank #1 (Strong Buy), Booking Holdings and Ambarella carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Itron, Booking Holdings and Ambarella is currently projected at 25%, 13.08% and 11.18%, respectively.

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