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Memory Weakness to Hurt Lam Research (LRCX) in Q3 Earnings

Zacks Equity Research

Lam Research Corporation LRCX is slated to report third-quarter fiscal 2019 results on Jan 24. In the last reported quarter, the company delivered a positive earnings surprise of 5.45%.

Lam Research’s surprise history has been pretty impressive. The company surpassed estimates in each of the trailing four quarters, with the average being 6.65%.

Shares of Lam Research have lost 8.3% in the past year compared with its industry’s 9.1% decline.

Let’s see how things are shaping up for this announcement.

Factors to Consider

Lam Research, which is doing well of late, expects to flourish in areas such as device architecture, process flow and advanced packaging technology inflections. It expects non-memory segments to grow in 2019, driven by continued rise in 3D architectures, and technology innovation for transistor, interconnect and packaging applications.

It continues to witness increased adoption rates for 3D NAND technology, FinFETs and multi-patterning. The company has undertaken cost-reduction activities as well as density scaling for 3D NAND, and new memory technologies. All these factors are likely to positively impact its top line.

For the quarter to be reported, the company expects revenues to be approximately $2.4 billion (+/- $150 million). The Zacks Consensus Estimate for the same is pegged at $2.40 billion.

Capital expenditure cuts by memory chip companies may impact Lam Research's revenue growth in the near term.

Also, volatility in the PC market remains a major concern. Weakness in PCs may offset the expansion in the 3D NAND, impacting its fiscal third-quarter results.

The company faces significant competition in all its product and service categories in the semiconductor capital equipment market.

Earnings Whispers

Our proven model shows that Lam Research is unlikely to beat estimates in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Lam Research has a Zacks Rank #4.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Lam Research Corporation Price and EPS Surprise


Lam Research Corporation Price and EPS Surprise | Lam Research Corporation Quote

Stocks That Warrant a Look

Here are a couple of stocks that you may want to consider, as our model shows that these have the right combination of elements to post a positive earnings surprise in the quarter to be reported.

Xilinx, Inc. XLNX has an Earnings ESP of +1.75% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Verizon Communications Inc. VZ has an Earnings ESP of +0.02% and a Zacks Rank #3.

Waters Corporation WAT has an Earnings ESP of +1.23% and holds a Zacks Rank #3.

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Verizon Communications Inc. (VZ) : Free Stock Analysis Report
Waters Corporation (WAT) : Free Stock Analysis Report
Xilinx, Inc. (XLNX) : Free Stock Analysis Report
Lam Research Corporation (LRCX) : Free Stock Analysis Report
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