KLA-Tencor Corporation KLAC is set to report fiscal third-quarter 2015 results on Apr 23. Last quarter, it posted a 33.33% positive surprise. Let’s see how things are shaping up for this announcement.
Factors at Play
KLA-Tencor delivered strong fiscal second quarter 2015 results with both the top and bottom lines beating the Zacks Consensus Estimate. Moreover, while earnings were within management’s guided range, revenues for the quarter exceeded the same.
New orders in the quarter were $865 million, up 52.6% sequentially and 18.8% year over year and above the guided range. The main drivers of order growth were the sub-20nm investments at foundry and logic customers and 20nm conversions in DRAM.
However, the company witnessed some order push outs. Some sub-20nm orders expected in the quarter got delayed due to yield and process stability issues.
The company is seeing favorable growth trends, growth in product lines and improved demand for leading edge devices. However, Intel’s decision to significantly cut its capital expenditure might hurt KLA-Tencor as it might affect its equipment revenues in the coming times.
For the third quarter of fiscal 2015, KLA-Tencor expects orders of $500-700 million, quarterly revenues between $685 million and $765 million, gross margin of 56.5-57.5% and opex in a range of $227-229 million. The tax rate is expected to be 22%, yielding non-GAAP EPS in the range of 63 cents – 87 cents, an extremely wide range. The Zacks Consensus Estimate is pegged at 76 cents.
Earnings Whispers?
Our proven model does not conclusively show that KLA-Tencor will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 76 cents. Therefore, the Earnings ESP for the stock is 0.00%.
Zacks Rank #4 (Sell): KLA-Tencor carries a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement.
Other Stocks to Consider
You can consider the following stocks with a favorable combination of a positive Earnings ESP and Zacks Rank #1, 2 or 3:
Broadcom Corp. BRCM, with Earnings ESP of +5.00% and a Zacks Rank #1 (Strong Buy)
Infinera Corporation INFN, with Earnings ESP of +20.00% and a Zacks Rank #1
Cognex Corporation CGNX, with Earnings ESP of +4.35% and a Zacks Rank #1
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