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Why Is KLA-Tencor (KLAC) Down 3.5% Since the Last Earnings Report?
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About a month has gone by since the last earnings report for KLA-Tencor Corporation (KLAC - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 catalysts.
KLA-Tencor Beats Earnings and Revenue Estimates in Q1
KLA-Tencor Corporation reported first-quarter fiscal 2018 earnings of $1.80 per share, beating the Zacks Consensus Estimate by 17 cents. The figure surged 55.2% from the year-ago quarter
Revenues increased 29.2% from the year-ago quarter to $969.6 million, which comfortably surpassed the Zacks Consensus Estimate of $943 million. The figure was almost in line with the high end of management’s guidance of $910-$970 million.
Products revenues (almost 78.5% of total revenues) increased 35.4% year over year to $760.8 million. The figure was better than the consensus estimate of $740 million.
Services revenues (21.5% of total revenues) increased 10.5% from the year-ago quarter to $208.8 million, which was also better than the consensus estimate of $202 million.
Stable Shipments Drove Top Line
Shipments in the first quarter were $977 million, up 0.6% sequentially and within the guidance of $945 million to $1.025 billion. New orders totaled approximately $3 billion on a year-to-date basis in 2017. Foundry customers accounted for 40% (as compared with guidance of 42%) of shipments, 46% of memory (as compared with guidance of 46%) and 14% of logic.
In terms of end market, Wafer Inspection, Service, Non semi (includes back-end component inspection business) and Patterning (includes shipments from reticle inspection business) contributed 46%, 21%, 3% and 30% of shipments, respectively. KLA continues to experience strong growth for its Wafer Inspection solutions. Management stated that new capacity addition by Wafer manufacturers and adoption of more complex architectures by IC customers are driving demand for new bare wafer products. These are needed to support more stringent wafer flatness and process tool cleanliness specifications in advanced technologies.
Moreover, Gen 5 broadband plasma wafer inspection platform continues to gain momentum in the marketplace. Management expects the solution to continue to support customers in development of 7-nanometer (nm) technology. It is also expected to have a larger role on the development and ramp of the 5-nm, node.
Geographically, Korea, the United States and Taiwan contributed 34%, 19% and 17% to shipments, respectively. China accounted for 10% of shipments in the quarter. Management noted that China was strong both in terms of both process control adoption and market share gains.
Operating Details
KLA’s gross margin expanded 60 basis points (bps) on a year-over-year basis to 63.7%. The year-over-year growth was driven by favorable product mix and operating leverage. Operating expenses, as percentage of revenues, declined 330 bps from the year-ago quarter to 26%. As a result, operating margin expanded 390 bps to 37.8%.
Balance Sheet
KLA ended the quarter with cash and short-term investments balance of $3.06 billion, up $39.7 million from the previous quarter. Cash from operations was $374 million in the quarter and free cash flow was $358 million.
Guidance
For second-quarter fiscal 2018, KLA expects shipments of $945 million to $1.025 billion. Revenues are expected between $930 million and $990 million. Management expects foundry orders to be approximately 20% of shipments in the second quarter. Memory shipments are anticipated to be 60%, with NAND representing 55% of the mix. Logic is currently projected to be 14% of the shipment. KLA expects gross margin in the range of 63% and 64%. Operating expenses are expected to be $260 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
VGM Scores
At this time, KLA-Tencor's stock has a nice Growth Score of B, though it is lagging a bit on the momentum front with C. 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.
Based on our scores, the stock is more suitable for growth investors than momentum and value investors.
Outlook
The stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock's in the next few months.
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Why Is KLA-Tencor (KLAC) Down 3.5% Since the Last Earnings Report?
About a month has gone by since the last earnings report for KLA-Tencor Corporation (KLAC - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 catalysts.
KLA-Tencor Beats Earnings and Revenue Estimates in Q1
KLA-Tencor Corporation reported first-quarter fiscal 2018 earnings of $1.80 per share, beating the Zacks Consensus Estimate by 17 cents. The figure surged 55.2% from the year-ago quarter
Revenues increased 29.2% from the year-ago quarter to $969.6 million, which comfortably surpassed the Zacks Consensus Estimate of $943 million. The figure was almost in line with the high end of management’s guidance of $910-$970 million.
Products revenues (almost 78.5% of total revenues) increased 35.4% year over year to $760.8 million. The figure was better than the consensus estimate of $740 million.
Services revenues (21.5% of total revenues) increased 10.5% from the year-ago quarter to $208.8 million, which was also better than the consensus estimate of $202 million.
Stable Shipments Drove Top Line
Shipments in the first quarter were $977 million, up 0.6% sequentially and within the guidance of $945 million to $1.025 billion. New orders totaled approximately $3 billion on a year-to-date basis in 2017. Foundry customers accounted for 40% (as compared with guidance of 42%) of shipments, 46% of memory (as compared with guidance of 46%) and 14% of logic.
In terms of end market, Wafer Inspection, Service, Non semi (includes back-end component inspection business) and Patterning (includes shipments from reticle inspection business) contributed 46%, 21%, 3% and 30% of shipments, respectively. KLA continues to experience strong growth for its Wafer Inspection solutions. Management stated that new capacity addition by Wafer manufacturers and adoption of more complex architectures by IC customers are driving demand for new bare wafer products. These are needed to support more stringent wafer flatness and process tool cleanliness specifications in advanced technologies.
Moreover, Gen 5 broadband plasma wafer inspection platform continues to gain momentum in the marketplace. Management expects the solution to continue to support customers in development of 7-nanometer (nm) technology. It is also expected to have a larger role on the development and ramp of the 5-nm, node.
Geographically, Korea, the United States and Taiwan contributed 34%, 19% and 17% to shipments, respectively. China accounted for 10% of shipments in the quarter. Management noted that China was strong both in terms of both process control adoption and market share gains.
Operating Details
KLA’s gross margin expanded 60 basis points (bps) on a year-over-year basis to 63.7%. The year-over-year growth was driven by favorable product mix and operating leverage. Operating expenses, as percentage of revenues, declined 330 bps from the year-ago quarter to 26%. As a result, operating margin expanded 390 bps to 37.8%.
Balance Sheet
KLA ended the quarter with cash and short-term investments balance of $3.06 billion, up $39.7 million from the previous quarter. Cash from operations was $374 million in the quarter and free cash flow was $358 million.
Guidance
For second-quarter fiscal 2018, KLA expects shipments of $945 million to $1.025 billion. Revenues are expected between $930 million and $990 million. Management expects foundry orders to be approximately 20% of shipments in the second quarter. Memory shipments are anticipated to be 60%, with NAND representing 55% of the mix. Logic is currently projected to be 14% of the shipment. KLA expects gross margin in the range of 63% and 64%. Operating expenses are expected to be $260 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
VGM Scores
At this time, KLA-Tencor's stock has a nice Growth Score of B, though it is lagging a bit on the momentum front with C. 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.
Based on our scores, the stock is more suitable for growth investors than momentum and value investors.
Outlook
The stock has a Zacks Rank #1 (Strong Buy). We are expecting an above average return from the stock's in the next few months.