Time New York: Mon 24 Jun 23:23 pm  |  Save 15% on H&R Block Online


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


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.

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.

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.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.
<-- You can share this post with your network,
or give us your opinion and leave a comment.
Be sure to check our RSS feeds for updates.