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Lam Research Beats Expectations Again on Wave of Semiconductor Demand

GuruFocus.com
·2 min read

- By Margaret Moran

After the markets closed on Jan. 27, semiconductor processing equipment developer Lam Research Corp. (NASDAQ:LRCX) reported earnings results for its second quarter of fiscal 2021.

The company recorded yet another quarter that surpassed analyst estimates, causing the stock to pop in after-hours trading following the news.

Earnings results


For the quarter, GAAP earnings per share came in at $5.96, while adjusted earnings were $5.67 and revenue totaled $3.45 billion. Wall Street analysts had been expecting adjusted earnings of $5.64 per share and revenue of $3.33 billion.

The company noted that it benefited strongly from record demand for semiconductors, with system revenue increasing 7% sequentially compared to the September quarter and 32% compared to the year-ago quarter. Meanwhile, customer support and related revenue improved 11% sequentially and 37% year over year.

At the end of the quarter, cash and cash equivalents stood at $6.3 billion, down from $6.9 billion at the end of the September quarter due primarily to share repurchases and (to a lesser extent) dividends. Long-term debt and finance lease obligations were roughly flat at $4.99 billion.

"Lam's December quarter closed out the most successful year in our 40-year history," Tim Archer, president and CEO, said. "In calendar 2020, our global teams displayed resiliency amid the pandemic, leading the company to set new financial records and deliver ground-breaking new products that enable key technology advances. With strong secular demand for semiconductors driving increased wafer fabrication equipment spending, Lam enters 2021 with solid momentum for continued growth and expanded leadership across our markets."

Valuation

Going forward, Lam Research expects demand for its products to continue growing on tailwinds like the rollout of 5G and the ever-growing shift to the cloud. As a leading provider and servicer of wafer processing equipment, the company stands to benefit regardless of which chip developers come out on top.

The current price-earnings ratio of 29.19 is near the median for the semiconductor industry, but is an improvement over the company's own 10-year average. This is a name that will likely need to continue its solid growth streak in order to maintain its valuation, but given its history of growing earnings without sacrificing financial strength in a high-growth industry, the stock has gained the confidence of 16 of the gurus followed by GuruFocus, with more buying the stock than selling it in recent quarters:

Lam Research Beats Expectations Again on Wave of Semiconductor Demand
Lam Research Beats Expectations Again on Wave of Semiconductor Demand

Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.

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This article first appeared on GuruFocus.