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Can Strong Memory Aid Lam Research (LRCX) in Q2 Earnings?

Zacks Equity Research

Lam Research Corporation LRCX is slated to report second-quarter fiscal 2019 results on Jan 23. In the last reported quarter, the company delivered a positive earnings surprise of 4.67%.

Lam Research’s surprise history has been pretty impressive. The company surpassed estimates in each of the trailing four quarters, with the average being 9.70%.

Shares of Lam Research have lost 31% in the past year compared with its industry’s decline of 28.5%.

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

Factors to Consider

Lam Research has a high exposure in the memory segment, which is likely to witness notable growth in the coming quarters, driven by cloud computing, big data, mobile devices and IoT.

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The company is doing well of late and expects to flourish in areas such as device architecture, process flow and advanced packaging technology inflections.

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 the top line of the company.

For the quarter to be reported, the company expects revenues to be approximately $2.5 billion (+/- $150 million). The Zacks Consensus Estimate for the same is pegged at $2.50 billion.

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

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

Lam Research Corporation Price and EPS Surprise

 

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

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 (Sell).

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

Stocks to Consider

You may consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

Amazon.com Inc. AMZN has an Earnings ESP of +0.68% and carries a Zacks Rank #2.

KeyCorp KEY has an Earnings ESP of +0.80% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Waters Corporation WAT has an Earnings ESP of +2.45% and holds a Zacks Rank #3.

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Waters Corporation (WAT) : Free Stock Analysis Report
 
Lam Research Corporation (LRCX) : Free Stock Analysis Report
 
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Zacks Investment Research