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Lam Research (LRCX) Q2 Earnings & Revenues Beat Estimates

Zacks Equity Research

Lam Research Corporation (LRCX) reported second-quarter fiscal 2020 non-GAAP earnings of $4.01 per share, which beat the Zacks Consensus Estimate of $3.81. Also, the figure increased 26.1% sequentially.

Moreover, adjusted revenues increased 19.3% sequentially and 2.4% year over year to $2.58 billion. The reported revenues also surpassed the Zacks Consensus Estimate by 3.2%.

Following the better-than-expected fiscal second-quarter results, its share price rose 6.3% in after-hours trading.

Management remains optimistic about the improving wafer fabrication equipment environment. The company witnessed better-than-expected WFE spending in 2019, driven by strength in foundry and logic.

For 2020, management expects WFE spend in the mid-to-high $50-billion range, driven by sustained strong spending in foundry and logic, and an improved spending in memory. Overall, management expects spending in memory and foundry/logic segments to increase in 2020 on a year-over-year basis.

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

Top Line in Detail

China, Taiwan and Korea accounted for 29%, 26% and 18% of the company’s total fiscal second-quarter revenues, respectively. On the contrary,the United States, Japan, Southeast Asia and Europe accounted for 9%, 8%, 7% and 3%, respectively.

Operating Details

Non-GAAP gross margin came in at 45.7%, which expanded 30 basis points (bps) sequentially.

Non-GAAP operating expenses were $480.8 million, reflecting an increase of 11.6% sequentially. As a percentage of sales, research & development expenses marked an increase, while selling, general & administrative costs decreased.

Adjusted operating margin was 27.1%, up 160 bps sequentially. The increase was primarily due to lower-than-expected expenses.

Balance Sheet & Cash Flow

At the end of the fiscal second quarter, cash and cash equivalents, and short-term investments decreased to $4.9 billion from $5.8 billion in the fiscal first quarter.

Cash flow from operating activities was $307.9 million, down from $464 million in the fiscal first quarter. Capital expenditures were $62.1 million, up from $39.3 million in the fiscal first quarter.

During the quarter, Lam Research paid dividends of $166.7 million.

Guidance

For third-quarter fiscal 2020, Lam Research projects revenues to be $2.8 billion (+/- $200 million). The Zacks Consensus Estimate for the same is pegged at $2.58 billion.

Gross margin is projected at 46.5% (+/-1%) and operating margin is expected to be 28% (+/-1%).

Non-GAAP earnings are projected at $4.55 (+/- 40 cents) per share on a share count of nearly 149 million. The Zacks Consensus Estimate for non-GAAP earnings per share is pegged at $4.04.

Zacks Rank & Other Stocks to Consider

Currently, Lam Research carries a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the broader technology sector include Splunk Inc. SPLK, Itron, Inc. ITRI and Waters Corporation WAT. While Splunk and Itron sport a Zacks Rank #1, Waters Corp carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Splunk, Itron and Waters Corp is currently projected at 31.2%, 25% and 9.5%, respectively.

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