Lam Research (LRCX) Q3 Earnings Miss, Revenues Rise Y/Y
Lam Research Corporation LRCX reported third-quarter fiscal 2022 non-GAAP earnings of $7.40 per share, which missed the Zacks Consensus Estimate by 1.1%. The figure declined 1.2% year over year.
Revenues improved 5.5% year over year to $4.06 billion.
However, the figure lagged the Zacks Consensus Estimate of $4.25 billion.
The company was negatively impacted by supply-chain disruptions, component shortages and COVID-19 lockdowns.
Nevertheless, it witnessed strong momentum in both systems and customer support businesses, which led to year-over-year top-line growth.
In the reported quarter, the company’s foundry and logic segment performed well, owing to the growing traction among etch and deposition technologies. Strong wins for conductor etch and selective etch applications were positives. Deposition wins at the leading node for critical spacer applications were other positives. The solid momentum in both ALD metals and dielectrics deposition solutions contributed well.
All these drove growth in the company’s system revenues, which were $2.65 billion (65.3% of the total revenues), up 4.1% from the year-ago quarter.
In the Customer Support Business Group, the company’s large contract wins were the major positives. Customer support-related revenues and others for the reported quarter were $1.41 billion (34.7%), up 8.2% year over year.
For 2022, WFE spending is estimated to be in the $100 billion range. Supply challenges are expected to prevail.
Nevertheless, increasing device complexity, along with the rising semiconductor content, remains a tailwind.
Lam Research Corporation Price, Consensus and EPS Surprise
Lam Research Corporation price-consensus-eps-surprise-chart | Lam Research Corporation Quote
Regions in Detail
China, Korea and Taiwan accounted for 31%, 24% and 16% of the company’s total fiscal third-quarter revenues, respectively. Then again, Japan, Southeast Asia, the United States and Europe accounted for 9%, 9%, 8% and 3%, respectively.
Operating Details
The non-GAAP gross margin was 44.7%, which contracted 160 basis points (bps) year over year.
Non-GAAP operating expenses were $620.6 million, reflecting an increase of 9.6% from the prior-year quarter. Further, as a percentage of revenues, the figure expanded 60 bps year over year to 15.3%.
The non-GAAP operating margin was 29.4%, contracting 220 bps from the year-ago quarter.
Balance Sheet & Cash Flow
As of Mar 27, 2022, cash and cash equivalents, and short-term investments decreased to $4.35 billion from $5.33 billion as of Dec 26, 2021.
Cash flow from operating activities was $757.7 million for the reported quarter, down from $1.4 billion in the previous quarter. Capital expenditure was $145 million in third-quarter fiscal 2022, up from $138.5 million in second-quarter fiscal 2022.
In the reported quarter, Lam Research paid out dividends of $211 million and repurchased shares worth $1.2 billion.
Guidance
For fourth-quarter fiscal 2022, the company expects revenues of $4.2 billion (+/- $300 million). The Zacks Consensus Estimate for the same is pegged at $4.44 billion.
The non-GAAP gross margin is projected to be 44.5% (+/-1%) and the non-GAAP operating margin is expected to be 29.5% (+/-1%).
Non-GAAP earnings are projected to be $7.25 (+/- 75 cents) per share on a diluted share count of 139 million. The Zacks Consensus Estimate for non-GAAP earnings per share is pegged at $8.06.
Zacks Rank and Stocks to Consider
Currently, Lam Research carries a Zacks Rank #3 (Hold).
Investors interested in the broader technology sector can consider better-ranked stocks like Broadcom AVGO, Analog Devices ADI and Intuit INTU, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Broadcom has gained 31.4% in the past year. AVGO’s long-term earnings growth rate is currently projected at 14.5%.
Analog Devices has gained 3.9% in the past year. The long-term earnings growth rate for ADI is currently projected at 12.3%.
Intuit has gained 18.4% in the past year. The long-term earnings growth rate for INTU is currently projected at 15.4%.
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