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Lam Research (LRCX) Q1 Earnings & Revenues Beat Estimates

Lam Research Corporation LRCX reported first-quarter fiscal 2021 non-GAAP earnings of $5.67 per share, which surpassed the Zacks Consensus Estimate of $5.17. Also, the figure increased 19% sequentially.

Adjusted revenues increased 14% sequentially and 46.5% year over year to $3.18 billion. The reported revenues also outpaced the Zacks Consensus Estimate by 2.5%.

The increase was driven by increased investments across varied sectors such as data centers, 5G networks, smartphones, gaming consoles and personal computers.

During the quarter, the company witnessed strong demand in key electronic categories, including PCs, storage and networking. Also, the company saw broad-based strength in Foundry-Logic spending, including leading-edge nodes. In addition, it saw an increase in NAND demand related to 5G migration, video and new game consoles. It also witnessed persistent Foundry strength in the quarter.

WFE spending for 2020 is estimated in the mid- to high-$50 billion range. Moreover, growing spend across NAND, DRAM and Foundry/Logic supported by demand fundamentals is expected to further drive WFE strength in 2021.

Lam Research Corporation Price, Consensus and EPS Surprise

Lam Research Corporation Price, Consensus and EPS Surprise
Lam Research Corporation Price, Consensus and EPS Surprise

Lam Research Corporation price-consensus-eps-surprise-chart | Lam Research Corporation Quote

Top Line in Detail

China, Korea and Taiwan accounted for 37%, 24% and 14% of the company’s total fiscal first-quarter revenues, respectively. On the contrary, Japan, the United States, Southeast Asia and Europe accounted for 12%, 7%, 4% and 2%, respectively.

Operating Details

Non-GAAP gross margin came in at 47.5%, which expanded 140 basis points (bps) sequentially.

Non-GAAP operating expenses were $523.1 million, reflecting an increase of 6.1% sequentially. However, as a percentage of revenues, the figure contracted 120 bps sequentially to 16.5%.

Adjusted operating margin was 31.1%, up 260 bps sequentially.

Balance Sheet & Cash Flow

At fiscal first quarter-end, cash and cash equivalents, as well as short-term investments decreased to $6.6 billion from $6.7 billion in fiscal fourth-quarter 2020.

Cash flow from operating activities was $642.5 million, down from $813 million in the fiscal fourth quarter. Capital expenditures were $62.8 million, up from $50.6 million in the fiscal fourth quarter.

During the quarter, Lam Research paid dividends of $167.1 million.

Guidance

For second-quarter fiscal 2021, Lam Research projects revenues to be $3.3 billion (+/- $200 million). The Zacks Consensus Estimate for the same is pegged at $3.08 billion.

Non-GAAP gross margin is projected at 46% (+/-1%) and non-GAAP operating margin is expected to be 29.5% (+/-1%).

Non-GAAP earnings are projected at $5.60 (+/- 40 cents) per share on a share count of 146 million. The Zacks Consensus Estimate for non-GAAP earnings per share is pegged at $5.09.

Zacks Rank & Stocks to Consider

Currently, Lam Research has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the broader technology sector include AMETEK, Inc. AME, Intuit Inc. INTU and Alibaba Group Holding Limited BABA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for AMETEK, Intuit, and Alibaba is currently projected at 7.2%, 14.5% and 18.9%, respectively.

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