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KLA Corp. (KLAC) Beats Q3 Earnings and Revenue Estimates
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KLA Corporation (KLAC - Free Report) reported third-quarter fiscal 2020 earnings per share of $2.47, beating the Zacks Consensus Estimate of $2.35. The figure was up 37.2% year over year but down 7.1% sequentially.
Revenues increased 29.8% from the year-ago quarter but decreased 5.6% sequentially to $1.42 billion, surpassing the Zacks Consensus Estimate by 0.6%. The figure was at the midpoint of the company’s guided range of $1.325-$1.525 billion.
Following the better-than-expected fiscal third-quarter results, the share price rose 1.5% in after-hours trading.
During the quarter, the company witnessed record shipments driven by strong demand in Semiconductor Process Control systems.
It also saw increased Semiconductor device demand for enterprise and cloud applications due work from home surge and a strengthening gaming market, partially offset by a decline in some consumer-facing end markets.
Management continues to expect overall process control intensity to grow in 2020, driven by expanding value of inspection and measurement in addressing critical customer problems.
Demand for advanced logic nodes is expected to remain healthy through 2020 and in 2021, driven by investment in EUV, competitive dynamics, as well as capacity additions.
Foundry and logic is expected to continue performing well in 2020. The optimistic outlook is driven by next-generation technology development, capacity additions at leading-edge nodes, increasing competitive dynamics and investment in EUV infrastructure.
Products revenues (accounting for almost 74% of total revenues) increased 32.5% year over year to $1.05 billion.
Services revenues (26% of total revenues) increased 22.6% from the year-ago quarter to $372.9 million.
In terms of reportable segments, Semiconductor Process Control revenues increased 28.8% year over year to $1.18 billion, driven by continued strength in foundry and logic.
Specialty Semiconductor Process revenues were $85.1 million, up 0.8% year over year, driven by strength in RF, MEMS and advance packaging.
The segment is expected to further benefit from expanding RF demand to support 5G infrastructure investment, particularly in China.
PCB, Display and component inspection revenues increased exponentially from a year ago to $160.4 million. Other revenues were $0.469 million.
KLA Corp. continues to experience strong growth for Wafer Inspection solutions. Management stated that new capacity addition by Wafer manufacturers and the adoption of more complex architectures by IC customers are driving demand for bare wafer products. These are needed to support more stringent wafer flatness and process tool cleanliness specifications in advanced technologies.
Operating Details
Non-GAAP gross margin was 61.2% versus 60.8% in the prior quarter. The gross margin was at the upper end of the guided range of 59.5-61.5%. The increase was driven by a favorable product mix.
Total operating expenses increased 9.3% year over year to $401.2 million. As a percentage of sales, research and development as well as selling, general and administrative costs slightly decreased from the prior-year quarter.
Non-GAAP operating margin was 34.6% versus 34% in the prior quarter.
Balance Sheet
KLA Corp. ended the quarter with cash, cash equivalents and a marketable securities balance of $1.63 billion compared with $1.68 billion in the fiscal second quarter.
Cash from operations was $442 million in the fiscal third quarter versus $387.7 million in the prior quarter.
Fiscal Fourth-Quarter 2020 Guidance
For fourth-quarter fiscal 2020, revenues are expected between $1.26 billion and $1.54 billion. The Zacks Consensus Estimate for revenues is pegged at $1.42 billion.
Memory is expected to be 39% of system revenues in the fiscal fourth quarter. Foundry is expected to constitute 51% of total shipments and Logic is anticipated to account for 10% of semi-process control system revenues.
The company expects gross margin in the range of 59-61% and non-GAAP EPS within $1.81-$2.87. The Zacks Consensus Estimate for non-GAAP EPS is pegged at $2.41.
Long-term earnings growth for Akamai, Inuvo, and Shopify is currently projected at 12.3%, 30% and 25.8%, respectively.
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KLA Corp. (KLAC) Beats Q3 Earnings and Revenue Estimates
KLA Corporation (KLAC - Free Report) reported third-quarter fiscal 2020 earnings per share of $2.47, beating the Zacks Consensus Estimate of $2.35. The figure was up 37.2% year over year but down 7.1% sequentially.
Revenues increased 29.8% from the year-ago quarter but decreased 5.6% sequentially to $1.42 billion, surpassing the Zacks Consensus Estimate by 0.6%. The figure was at the midpoint of the company’s guided range of $1.325-$1.525 billion.
Following the better-than-expected fiscal third-quarter results, the share price rose 1.5% in after-hours trading.
During the quarter, the company witnessed record shipments driven by strong demand in Semiconductor Process Control systems.
It also saw increased Semiconductor device demand for enterprise and cloud applications due work from home surge and a strengthening gaming market, partially offset by a decline in some consumer-facing end markets.
Management continues to expect overall process control intensity to grow in 2020, driven by expanding value of inspection and measurement in addressing critical customer problems.
Demand for advanced logic nodes is expected to remain healthy through 2020 and in 2021, driven by investment in EUV, competitive dynamics, as well as capacity additions.
Foundry and logic is expected to continue performing well in 2020. The optimistic outlook is driven by next-generation technology development, capacity additions at leading-edge nodes, increasing competitive dynamics and investment in EUV infrastructure.
KLA Corporation Price, Consensus and EPS Surprise
KLA Corporation price-consensus-eps-surprise-chart | KLA Corporation Quote
Top-Line Details
Products revenues (accounting for almost 74% of total revenues) increased 32.5% year over year to $1.05 billion.
Services revenues (26% of total revenues) increased 22.6% from the year-ago quarter to $372.9 million.
In terms of reportable segments, Semiconductor Process Control revenues increased 28.8% year over year to $1.18 billion, driven by continued strength in foundry and logic.
Specialty Semiconductor Process revenues were $85.1 million, up 0.8% year over year, driven by strength in RF, MEMS and advance packaging.
The segment is expected to further benefit from expanding RF demand to support 5G infrastructure investment, particularly in China.
PCB, Display and component inspection revenues increased exponentially from a year ago to $160.4 million. Other revenues were $0.469 million.
KLA Corp. continues to experience strong growth for Wafer Inspection solutions. Management stated that new capacity addition by Wafer manufacturers and the adoption of more complex architectures by IC customers are driving demand for bare wafer products. These are needed to support more stringent wafer flatness and process tool cleanliness specifications in advanced technologies.
Operating Details
Non-GAAP gross margin was 61.2% versus 60.8% in the prior quarter. The gross margin was at the upper end of the guided range of 59.5-61.5%. The increase was driven by a favorable product mix.
Total operating expenses increased 9.3% year over year to $401.2 million. As a percentage of sales, research and development as well as selling, general and administrative costs slightly decreased from the prior-year quarter.
Non-GAAP operating margin was 34.6% versus 34% in the prior quarter.
Balance Sheet
KLA Corp. ended the quarter with cash, cash equivalents and a marketable securities balance of $1.63 billion compared with $1.68 billion in the fiscal second quarter.
Cash from operations was $442 million in the fiscal third quarter versus $387.7 million in the prior quarter.
Fiscal Fourth-Quarter 2020 Guidance
For fourth-quarter fiscal 2020, revenues are expected between $1.26 billion and $1.54 billion. The Zacks Consensus Estimate for revenues is pegged at $1.42 billion.
Memory is expected to be 39% of system revenues in the fiscal fourth quarter. Foundry is expected to constitute 51% of total shipments and Logic is anticipated to account for 10% of semi-process control system revenues.
The company expects gross margin in the range of 59-61% and non-GAAP EPS within $1.81-$2.87. The Zacks Consensus Estimate for non-GAAP EPS is pegged at $2.41.
GAAP EPS is projected within $1.58-$2.64.
Zacks Rank & Key Picks
KLA Corp. currently has a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader technology sector include Akamai Technologies, Inc. (AKAM - Free Report) , Inuvo, Inc. (INUV - Free Report) and Shopify Inc. (SHOP - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth for Akamai, Inuvo, and Shopify is currently projected at 12.3%, 30% and 25.8%, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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