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KLA-Tencor (KLAC) to Post Q3 Earnings: What's in the Cards?

Zacks Equity Research

KLA-Tencor Corporation KLAC is set to report third-quarter fiscal 2019 results on May 6.

The company topped the Zacks Consensus Estimate in the trailing four quarters, with average of 7.12%.

KLA-Tencor delivered a positive earnings surprise of 10.91% in the last reported quarter. Earnings of $2.44 per share increased 23.8% from the year-ago quarter.

The company recently updated its third-quarter guidance post the Orbotech buyout on Feb 20.

The company now expects fiscal third-quarter revenues in the range of $1.025-$1.115 billion versus previous expectation of $880-$960 million. Orbotech is likely to contribute approximately $145-$155 million revenues for the stub period, following the completion of its acquisition.

Non-GAAP earnings are expected in the range of $1.45-$1.79 per share.

Strong Product Portfolio — Key Catalyst

KLA-Tencor’s robust product portfolio has been catering to the increasing demand for wafer products, which is a positive for the to-be-reported quarter. The company is expected to witness improved end-market results, especially in China.

The addition of new capacity by wafer manufacturers bodes well for the quarter to be reported, given increasing demand for its new wafer products. KLA’s strong efforts in bringing EUV lithography technology to the market via collaborating with every EUV customer remain a positive.

Shipment Forecast

For third-quarter fiscal 2019, KLA-Tencor expects shipments within $860-$940 million. Memory is expected to be approximately 40% of shipments in the quarter. Foundry and Logic are expected to be around 50% and 10% of the total shipments, respectively.

The reduction in memory capacity investment due to weakness in mobile demand and a lull in data center might impact shipments. However, weakness in China could be an overhang for the to-be-reported quarter.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: KLA-Tencor has an Earnings ESP of 0.00%.

Zacks Rank: It currently carries a Zacks Rank #2.

Though a Zacks Rank #2 increases the predictive power of ESP, an ESP of 0.00% makes surprise prediction difficult. Hence, KLA-Tencor is unlikely to beat estimates this earnings season.

KLA-Tencor Corporation Price and EPS Surprise


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

Stocks That Warrant a Look

Here are a few stocks worth considering, as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

Teleflex Incorporated TFX has an Earnings ESP of +1.65% and holds a Zacks Rank #2.

Advanced Energy Industries, Inc. AEIS has an Earnings ESP of +4.60% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Expedia Group, Inc. EXPE has an Earnings ESP of +19.25% and holds a Zacks Rank #3.

Zacks' Top 10 Stocks for 2019

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