Lam Research Corporation LRCX reported third-quarter fiscal 2023 non-GAAP earnings of $6.99 per share, which surpassed the Zacks Consensus Estimate by 7.04%. The figure decreased 5.5% from the year-ago fiscal quarter’s reading.
Revenues of $3.87 billion beat the Zacks Consensus Estimate of $3.82 billion. The figure declined 4.7% year over year. This was attributed to weakness in the systems business due to sluggish memory spending.
Strength in foundry systems and leading edge and specialty technologies was a positive. Improving customer support business also contributed well.
Lam Research’s system revenues were $2.3 billion (58.3% of the total revenues), down 14.9% from the year-ago fiscal quarter’s figure.
In the Customer Support Business Group, revenues for the reported quarter were $1.6 billion (41.7%), up 14.5% from the year-ago fiscal quarter’s number.
Lam Research’s proper execution, expanding and diversifying global footprints and growing installed base remain positives. The company remains optimistic about its technological advancements with a focus on technology inflections, especially in foundry-logic devices, strength in ‘dry resist’ technology and solid momentum in etch and deposition solutions.
The weak outlook for 2023 wafer fabrication equipment (WFE) spending remains a concern. For 2023, WFE spending is expected to be in the low- to mid-$70 billion range.
Coming to price performance, Lam Research has gained 16.1% year to date, underperforming the industry’s growth of 16.8%.
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 22%, 22% and 18% of Lam Research’s total revenues for the fiscal third quarter, respectively. Additionally, Japan, Southeast Asia, the United States and Europe accounted for 10%, 4%, 16% and 8%, respectively.
The non-GAAP gross margin was 44%, which contracted 70 basis points (bps) from the year-ago fiscal quarter’s level.
Non-GAAP operating expenses were $607.6 million, down 2.1% from the prior-year fiscal quarter’s reading. As a percentage of revenues, the figure expanded 40 bps from the year-earlier fiscal quarter’s level to 15.7%.
The non-GAAP operating margin was 28.3%, contracting 110 bps from the year-ago fiscal quarter’s level.
Balance Sheet & Cash Flow
As of Mar 26, 2023, cash and cash equivalents and short-term investments increased to $5.31 billion from $4.59 billion as of Dec 25, 2022.
Cash flow from operating activities was $1.73 billion for the reported quarter, up from $1.14 billion in the previous fiscal quarter. Capital expenditure was $119 million in third-quarter fiscal 2023 compared with $163 million in second-quarter fiscal 2023.
In the reported quarter, Lam Research paid out dividends of $234 million and repurchased shares worth $582 million.
For fourth-quarter fiscal 2023, LRCX expects revenues of $3.1 billion (+/- $300 million). The mid-point of the expected range is below the Zacks Consensus Estimate of $3.44 billion.
The non-GAAP gross margin is projected at 44% (+/-1%), while the non-GAAP operating margin is expected to be 25.5% (+/-1%).
Non-GAAP earnings are projected to be $5.00 (+/- 75 cents) per share on a diluted share count of 134 million. The mid-point of the range is below the Zacks Consensus Estimate of $5.64 per share.
Zacks Rank and Stocks to Consider
Currently, Lam Research carries a Zacks Rank #4 (Sell).
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Salesforce CRM, Arista Networks ANET and Analog Devices ADI. While Salesforce sports a Zacks Rank #1 (Strong Buy), Arista Networks and Analog Devices each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Salesforce’s shares have risen 6.6% in the past year. CRM’s long-term earnings growth rate is currently projected at 16.75%.
Arista Networks’ shares have risen 28% in the past year. The long-term earnings growth rate for ANET is currently projected at 14.17%.
Analog Devices’ shares have rallied 17.5% in the past year. The long-term earnings growth rate for ADI is currently projected at 10.5%.
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