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Can Strong Memory Aid Lam Research (LRCX) in Q1 Earnings?

Zacks Equity Research
Updated

Lam Research Corporation LRCX is slated to report first-quarter fiscal 2019 results on Oct 16. In the last reported quarter, the company delivered a positive earnings surprise of 6.63%.

Lam Research’s surprise history has been pretty impressive. The company surpassed estimates in each of the trailing four quarters, with an average of 9.98%.

Shares of Lam Research have lost 24% on a year-to-date basis compared with the industry’s decline of 14.2%.

 

 

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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In the fiscal fourth quarter, total system shipments were $3.03 billion during the fourth quarter, down 3% sequentially. The Zacks Consensus Estimate for the to-be-reported quarter is pegged at $2.31 billion.

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 could positively impact the topline of the company.

For the quarter to be reported, its revenues are expected at approximately $2.3 billion (+/- $150 million). The Zacks Consensus Estimate for the same is pegged at $2.30 billion.

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

Also, 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 -0.07%. 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 #3 (Hold).

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 to Consider

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

eBay Inc. EBAY has an Earnings ESP of +0.91% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

PayPal Holdings, Inc. PYPL has an Earnings ESP of +0.54 and carries a Zacks Rank #2.

Netflix, Inc. NFLX has an Earnings ESP of +0.74% and a Zacks Rank #3.

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