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Lam Research (LRCX) Up 16.4% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Lam Research (LRCX - Free Report) . Shares have added about 16.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lam Research 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 Q1 Earnings & Revenues Beat, Decline Y/Y
Lam Research delivered first-quarter fiscal 2024 non-GAAP earnings of $6.85 per share, which surpassed the Zacks Consensus Estimate by 12.8%. The figure decreased 34.3% from the year-ago quarter.
Revenues of $3.48 billion surpassed the Zacks Consensus Estimate of $3.41 billion. The figure declined 31.4% year over year. This was primarily attributed to weakness in the systems business due to sluggish memory spending.
Lam Research’s system revenues were $2.06 billion (59.1% of the total revenues), down 35.4% from the year-ago fiscal quarter’s figure. The reported figure surpassed the Zacks Consensus Estimate of $1.87 billion.
In the Customer Support Business Group, revenues for the reported quarter were $1.43 billion (40.9%), down 24.7% from the year-ago fiscal quarter’s number. The figure lagged the consensus mark of $1.53 billion.
Although sluggish wafer fabrication equipment (“WFE”) spending remains a concern, improvement in the outlook for the same is a positive. For 2023, WFE spending is expected to be in the $80 billion range, which was previously anticipated in the mid-$70 billion range.
NAND and foundry/logic spending remain weak, while DRAM spending has shown signs of improvement on the back of HBM-related demand and China upside.
Nevertheless, Lam Research’s proper execution and expanding and diversifying global footprints remain positives. The company’s technological advancements, especially with AI, are noteworthy. Also, its strength in 3D DRAM and advanced packaging is a tailwind.
Regions in Detail
China, Korea and Taiwan accounted for 48%, 16% and 7% of Lam Research’s total revenues for the fiscal first quarter, respectively. Japan, Southeast Asia, the United States and Europe accounted for 9%, 5%, 8% and 7%, respectively.
Operating Details
The non-GAAP gross margin was 47.9%, which expanded 190 basis points (bps) from the year-ago fiscal quarter’s level.
Non-GAAP operating expenses were $622.2 million, down 3.9% from the prior-year fiscal quarter’s reading. As a percentage of revenues, the figure expanded 510 bps from the year-earlier fiscal quarter’s level to 17.9%.
The non-GAAP operating margin was 30.1%, contracting 320 bps from the year-ago fiscal quarter’s level.
Balance Sheet & Cash Flow
As of Jun 25, 2023, cash and cash equivalents and short-term investments were $5.16 billion compared with $5.38 billion as of Jun 25, 2023.
Cash flow from operating activities was $951.2 million for the reported quarter, down from $1.12 billion in the previous fiscal quarter. Capital expenditure was $77 million in first-quarter fiscal 2024 compared with $78.7 million in fourth-quarter fiscal 2023.
In the reported quarter, Lam Research paid out dividends of $230 million and repurchased shares worth $830 million.
Guidance
For second-quarter fiscal 2024, LRCX expects revenues of $3.7 billion (+/- $300 million).
The non-GAAP gross margin is projected at 47% (+/-1%), while the non-GAAP operating margin is expected to be 29.5% (+/-1%).
Non-GAAP earnings are projected to be $7 (+/- 75 cents) per share on a diluted share count of 132 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 6.13% due to these changes.
VGM Scores
Currently, Lam Research has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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Lam Research (LRCX) Up 16.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Lam Research (LRCX - Free Report) . Shares have added about 16.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lam Research 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 Q1 Earnings & Revenues Beat, Decline Y/Y
Lam Research delivered first-quarter fiscal 2024 non-GAAP earnings of $6.85 per share, which surpassed the Zacks Consensus Estimate by 12.8%. The figure decreased 34.3% from the year-ago quarter.
Revenues of $3.48 billion surpassed the Zacks Consensus Estimate of $3.41 billion. The figure declined 31.4% year over year. This was primarily attributed to weakness in the systems business due to sluggish memory spending.
Lam Research’s system revenues were $2.06 billion (59.1% of the total revenues), down 35.4% from the year-ago fiscal quarter’s figure. The reported figure surpassed the Zacks Consensus Estimate of $1.87 billion.
In the Customer Support Business Group, revenues for the reported quarter were $1.43 billion (40.9%), down 24.7% from the year-ago fiscal quarter’s number. The figure lagged the consensus mark of $1.53 billion.
Although sluggish wafer fabrication equipment (“WFE”) spending remains a concern, improvement in the outlook for the same is a positive. For 2023, WFE spending is expected to be in the $80 billion range, which was previously anticipated in the mid-$70 billion range.
NAND and foundry/logic spending remain weak, while DRAM spending has shown signs of improvement on the back of HBM-related demand and China upside.
Nevertheless, Lam Research’s proper execution and expanding and diversifying global footprints remain positives. The company’s technological advancements, especially with AI, are noteworthy. Also, its strength in 3D DRAM and advanced packaging is a tailwind.
Regions in Detail
China, Korea and Taiwan accounted for 48%, 16% and 7% of Lam Research’s total revenues for the fiscal first quarter, respectively. Japan, Southeast Asia, the United States and Europe accounted for 9%, 5%, 8% and 7%, respectively.
Operating Details
The non-GAAP gross margin was 47.9%, which expanded 190 basis points (bps) from the year-ago fiscal quarter’s level.
Non-GAAP operating expenses were $622.2 million, down 3.9% from the prior-year fiscal quarter’s reading. As a percentage of revenues, the figure expanded 510 bps from the year-earlier fiscal quarter’s level to 17.9%.
The non-GAAP operating margin was 30.1%, contracting 320 bps from the year-ago fiscal quarter’s level.
Balance Sheet & Cash Flow
As of Jun 25, 2023, cash and cash equivalents and short-term investments were $5.16 billion compared with $5.38 billion as of Jun 25, 2023.
Cash flow from operating activities was $951.2 million for the reported quarter, down from $1.12 billion in the previous fiscal quarter. Capital expenditure was $77 million in first-quarter fiscal 2024 compared with $78.7 million in fourth-quarter fiscal 2023.
In the reported quarter, Lam Research paid out dividends of $230 million and repurchased shares worth $830 million.
Guidance
For second-quarter fiscal 2024, LRCX expects revenues of $3.7 billion (+/- $300 million).
The non-GAAP gross margin is projected at 47% (+/-1%), while the non-GAAP operating margin is expected to be 29.5% (+/-1%).
Non-GAAP earnings are projected to be $7 (+/- 75 cents) per share on a diluted share count of 132 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 6.13% due to these changes.
VGM Scores
Currently, Lam Research has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Lam Research has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.