EMC’s Fiscal 3Q15 Earnings Miss Analysts’ Reduced Estimates
3Q15 Earnings: EMC, Texas Instruments, Lam Research, and KLA-Tencor
Earnings update
On October 20, 2015, EMC (EMC), Texas Instruments (TXN), Lam Research (LRCX), and KLA-Tencor (KLAC), released their quarterly earnings. Moreover, Lam Research announced its acquisition of KLA-Tencor.
While Texas Instruments and Lam Research beat analysts’ earnings estimates, KLA-Tencor reported flat earnings and EMC reported weak earnings. In this series, we’ll look at the quarterly performances of these four companies.
EMC misses analysts’ reduced estimates
EMC’s revenue rose 1% YoY (year-over-year) to $6.1 billion, and its EPS (earnings per share) fell from $0.44 in fiscal 3Q14 to $0.43 in fiscal 3Q15. This was below analysts’ reduced estimates of $6.2 billion in revenue and $0.44 EPS. Analysts had lowered their estimates after EMC released a weaker preliminary earnings report on October 12, 2015, the same day it announced its merger with Dell.
After the earnings release, EMC’s shares fell 6.3% to close at $25.76 on October 21, 2015.
Profitability, cash position, and guidance
On a YoY basis, EMC’s operating income fell 27% to $690 million, and its net income fell 18% to $480 million. The fall was due to a ~7% YoY increase in R&D (research and development) and SG&A (selling, general, and administrative) expenses.
EMC’s operating cash flow stood at $1.4 billion. As of September 30, 2015, the company’s cash reserves totaled $14.3 billion.
EMC did not give any guidance for fiscal 4Q15 or fiscal 2015 amid its ongoing merger with Dell. Meanwhile, analysts estimate that the company will post a 2% growth in revenue for fiscal 2015.
New cloud company
EMC has been hit by the increasing shift toward cloud technology that has been eating up demand for its traditional storage products. To expand in the cloud space, the company recently announced plans to launch a new cloud company called Virtustream in a 50/50 joint venture with VMware. This has created further ambiguity in an already complex merger, downgrading analysts’ ratings for VMware.
You can invest in the semiconductor market through the PowerShares QQQ Trust, Series 1 ETF (QQQ). The ETF has 1.0% exposure to Texas Instruments, 0.23% exposure to Lam Research, and 0.20% exposure to KLA-Tencor.
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