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KLA-Tencor (KLAC) Beats Earnings And Revenue Estimates In Q3

Published 04/27/2017, 11:26 PM
Updated 07/09/2023, 06:31 AM

KLA-Tencor Corporation (NASDAQ:KLAC) reported third-quarter fiscal 2017 earnings of $1.62 per share, beating the Zacks Consensus Estimate by 8 cents. Earnings were in line with the top end of management’s guided range. Earnings per share (EPS) surged 43.8% from the year-ago quarter and 5.9% sequentially driven by strong top-line growth.

Revenues increased 28.4% from the year-ago quarter and 4.2% sequentially to $913.8 million. The figure was above the Zacks Consensus Estimate of $894 million and close to the high end of management’s guided range of $860–$920 million.

However, shares were down almost 3% in after-hour trading following the results. We note that KLA has underperformed the Zacks Semiconductor Equipment - Wafer Fabrication industry in the past one-year. While the company’s shares returned 42.7%, the industry gained 67.2% in the same period.



Quarter Details

Products (almost 79% of total revenue) increased 35.9% year over year and 5.5% quarter over quarter to $721 million. Services revenues (21.1% of total revenue) increased 6.5% from the year-ago but remained almost flat at $192.8 million. KLA noted strength across inspection and metrology portfolio during the quarter.

KLA-Tencor Corporation Price, Consensus and EPS Surprise

KLA-Tencor Corporation Price, Consensus and EPS Surprise | KLA-Tencor Corporation Quote

Shipments in the third quarter were $909 million, up sequentially and within the guided range of $850–$930 million. Total backlog was $1.7 billion at the end of the quarter.

Order contribution by segment was as follows: foundry customers accounted for 54% of new semiconductor system orders, memory 42% and logic 4%.

KLA’s gross margin shrank 130 basis points (bps) sequentially but expanded 100 bps on a year-over-year basis to 62.5%. The year-over-year growth was driven by favorable product mix and operating leverage. However, the sequential contraction was primarily due to unfavorable product mix.

Operating expense as percentage of revenues declined 70 bps on a sequential basis and 350 bps from the year-ago quarter.

As a result, operating margin contracted 70 bps sequentially but expanded 470 bps from the year-ago quarter to 37.7%.

Balance Sheet

KLA ended the quarter with cash and short-term investments balance of $2.70 billion, up $111 million from the previous quarter. Cash from operations was $225 million in the quarter and free cash flow was $215 million.

Guidance

For fourth-quarter fiscal 2017, KLA expects shipments of $890–$970 million. Revenues are expected between $885 million and $945 million. Non-GAAP EPS is expected in the range of $1.46–$1.66, the mid-point above the Zacks Consensus Estimate of $1.48.

Management expects foundry orders to be approximately 50% of the total orders in the fourth quarter. Memory orders are anticipated to be 40%, with NAND representing 60% of the mix. Logic is currently projected to be almost 10% of the total order.

For the fourth quarter, KLA expects gross margin to be in the range of 62.5% and 63.5%, up almost 50 bps at the midpoint on a sequential basis. Operating expense is projected in the range of $234–$238 million.

For 2017, KLA expects operating expenses to be around $950 million due to additional investments on 3D NAND and EUV inspection, and metrology prospects as well as higher variable compensation expense.

Zacks Rank & Other Key Picks

Currently, KLA-Tencor carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sectors are Texas Instruments (NASDAQ:TXN) , Lam Research (NASDAQ:LRCX) and Broadcom (NASDAQ:AVGO) . All the three-stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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Broadcom Limited (AVGO): Free Stock Analysis Report

Texas Instruments Incorporated (TXN): Free Stock Analysis Report

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Lam Research Corporation (LRCX): Free Stock Analysis Report

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