Lam Research Corporation (LRCX) is set to report fourth-quarter fiscal 2014 results on Jul 30. Last quarter, it posted an 8.6% positive surprise. Let’s see how things are shaping up for this announcement.
Growth Factors this Past Quarter
Lam Research delivered encouraging fiscal third quarter 2014 results with both the top and bottom lines beating the Zacks Consensus Estimate. The sequential increase of 10.0% was primarily driven by an increase in market share in the memory space. Also, its foundries business reflected a strong performance in the quarter.
Lam Research’s product mix including multi-patterning, 3D device and advanced packaging industry transitions will boost growth and profitability going forward.
Further, the company provided strong fourth quarter guidance, reflecting modest improvement in semiconductor spending. But management expects a slowdown in shipments by mid-2014. This might be due to doubts over the extent and timing of investments in next generation products.
It expects revenues of approximately 1.24 billion (+/- 50 million). Shipments are expected to be roughly $1.15 billion (+/- 50 million). Gross margin is expected to be approximately 45% (+/-1%) while operating margin is expected to be around 17% (+/-1%). Earnings per share are projected to be 98 cents (+/- 7 cents) on a share count of $172.0 million. The Zacks consensus earnings estimate for the upcoming quarter is pegged at $1.22.
Earnings Whispers?
Our proven model does not conclusively show that Lam Research 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 $1.22. Hence, the difference is 0.00%.
Zacks Rank: Lam Research’s Zacks Rank #3 (Hold), when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Charter Communications, Inc. (CHTR), with Earnings ESP of +375.00% and a Zacks Rank #1 (Strong Buy)
Synaptics Inc. (SYNA), with Earnings ESP of +4.07% and a Zacks Rank #1
TIM Participacoes S.A. (TSU), with Earnings ESP of +16.67% and a Zacks Rank #1
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