Lam Research (LRCX) Q3 Earnings & Revenues Beat Estimates

Lam Research Corporation (NASDAQ:LRCX) reported third-quarter fiscal 2019 non-GAAP earnings of $3.70 per share, which beat the Zacks Consensus Estimate by 32 cents. However, the figure decreased 4.4% sequentially and 22.8% year over year.

Moreover, adjusted revenues decreased 3.3% sequentially and 15.7% year over year to $2.44 billion. However, the reported revenues surpassed the Zacks Consensus Estimate by 1.51%.

Management remains positive about both etch and deposition technologies, which in turn will continue to expand its serviceable addressable market.

Shares of Lam Research have gained 8.7% in the past 12 months compared with its industry’s 5.3% growth.

Top Line in Detail

In the quarter, Korea and Taiwan accounted for 25% and 23% of the company’s total revenues, respectively, while Japan and China contributed 17% each. On the contrary, United States, Southeast Asia and Europe accounted for 9%, 5% and 4%, respectively.

Operating Details

Non-GAAP gross margin came in at 45.1%, which contracted 120 basis points (bps) sequentially.

Non-GAAP operating expenses were $488.4 million, reflecting an increase of 11% sequentially. As a percentage of sales, both research & development and selling, general & administrative expenses marked an increase.

Adjusted operating margin was 25.1%, down 370 bps sequentially. The decrease was primarily due to higher expenses.

Balance Sheet & Cash Flow

At the end of the fiscal third quarter, cash and cash equivalents and short-term investments increased to $6.1 billion from $3.6 billion in the fiscal second quarter.

Cash flow from operating activities was $932.8million, up from $642 billion in the fiscal second quarter. Capital expenditures were $75.5 million, down from $106 million in the fiscal second quarter.

During the quarter, Lam Research paid dividends of $171.2 million.

Guidance

For fourth-quarter fiscal 2019, Lam Research projects revenues to be $2.35 billion (+/- $150 million). The Zacks Consensus Estimate for the same is pegged at $2.32 billion.

Gross margin is projected at around 45.5% (+/-1%) and operating margin is expected to be 26% (+/-1%).

Non-GAAP earnings are projected at $3.40 (+/- 20 cents) per share on a share count of nearly 155 million. The corresponding Zacks Consensus Estimate is pegged at $3.28 per share.

Zacks Rank & Stocks to Consider

Currently, Lam Research carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader technology sector include Amazon (NASDAQ:AMZN) , Ctrip.com International, Ltd. (NASDAQ:CTRP) and Square (NYSE:SQ) , 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 Amazon, Ctrip.com and Square is currently projected at 31.2%, 23% and 25%, respectively.

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