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Lam Research Q3 earnings preview: What to expect?

Lam Research (NASDAQ: LRCX) is scheduled to report its third-quarter earnings results on Wednesday after the market closes. The bottom line will be hurt by higher costs and expenses related to the intangible assets acquired through business combinations, note discounts, and associated tax charge.

The top line is likely to be hurt by lower deferred revenue as the company remained cautioned about the near-term market trends. However, the long term remained bright as Lam Research expressed confidence in the growth of the installed-based business and the company’s focus on Deposition and Etch technology.

Image Courtesy: Lam Research / Facebook page

The company has experienced higher adoption rates for 3D NAND technology, FinFETs, and multi-patterning. Along with this, the company’s results could be benefited by cost-reduction activities, 3D NAND density scaling, and new memory technologies. However, in the near term, capital expenditures remained a major concern for Lam Research, which is likely to shed out the top line growth.

Analysts expect Lam Research’s earnings to plunge by 29.40% to $3.38 per share and revenue to fall by 16.90% to $2.4 billion for the third quarter. In comparison, during the previous year quarter, the company posted a profit of $4.79 per share on revenue of $2.89 billion.

The company has surprised the investors in the past four quarters as it has beat analysts’ expectations all the time. Traders also expect Lam Research to surprise the market by exceeding the consensus. Majority of the analysts recommended a “strong buy” or “buy” rating while expecting the stock to reach $200.47 per share in the next 52 weeks.

Also read: Lockheed Martin Q1 earnings

For the second quarter, Lam Research reported a profit compared to a loss last year, helped by lower income tax expense despite a decline in the revenue. Japan topped the geographic revenue distribution for the December 2018 quarter. However, China dropped to the fourth position with 14% in the recently ended quarter from the second position in the previous quarter.

For the third quarter, the company had expected earnings to be $3.21 per share, plus or minus 20 cents on a GAAP basis and $3.40 per share, plus or minus 20 cents on a non-GAAP basis. Revenue was predicted to be $2.4 billion, plus or minus $150 million. Gross margin was anticipated to be 43.6%, plus or minus 1%, and operating margin of 23.6%, plus or minus 1%.

The investors were concerned about the volatility in the PC market, which could stand as a hurdle to Lam Research’s growth for the third quarter. Also, competition has been brewing stiff in the semiconductor capital equipment market and the company faces tough rivalry for all of its product and service categories.

Shares of Lam Research opened lower on Tuesday and is trading in the red territory. The stock has risen over 1% in the past year and over 39% in the past three months.

 

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Tags: Nasdaq
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