A month has gone by since the last earnings report for Lam Research (LRCX). Shares have lost about 5.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Lam Research due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Lam Research reported second-quarter fiscal 2025 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate. It reported second-quarter fiscal 2025 non-GAAP earnings of 91 cents per share, which beat the Zacks Consensus Estimate by 4.6%. The bottom line increased 7% on a year-over-year basis, primarily driven by higher revenues due to robust demand in DRAM and Foundry Logic and disciplined cost and operational management.
In the second quarter of fiscal 2025, LRCX reported revenues of $4.38 billion, which surpassed the consensus mark by 1.6%. The top line increased 5% from the year-ago quarter’s $4.17 billion.
Lam Research’s System revenues were $2.63 billion (60% of the total revenues), up 9.7% from the previous quarter. System revenues grew 14.2% year over year. The reported figure missed the Zacks Consensus Estimate of $2.69 billion.
In the Customer Support Business Group, revenues for the reported quarter were $1.75 billion (40% of the total revenues), down 1.4% from the previous quarter and up 20% year over year. The figure beat the consensus mark of $1.61 billion.
China, Korea and Taiwan accounted for 31%, 25% and 17% of Lam Research’s total revenues, respectively, for the fiscal second quarter. Japan, Southeast Asia, the United States and Europe accounted for 8%, 7%, 9% and 3% of total revenues, respectively.
The non-GAAP gross margin was 47.5%, which contracted 70 basis points (bps) from the previous quarter.
Non-GAAP operating expenses were $735 million, up 1.8% from the previous quarter. The non-GAAP operating margin was 30.7%, contracting 20 bps from the previous quarter’s 30.9%.
As of Dec. 29, 2024, cash and cash equivalents were $5.67 billion compared with $6.08 billion as of Sept. 29, 2024.
Cash flow from operating activities was $742 million for the reported quarter, down from $1.57 billion in the previous quarter.
In the reported quarter, Lam Research paid out dividends of $297.6 million and repurchased shares worth $650 million.
For third-quarter fiscal 2025, LRCX expects its revenues to be $4.65 billion (+/- $300 million). The non-GAAP gross margin is projected at 48% (+/-1%), whereas the non-GAAP operating margin is expected to be 32% (+/-1%). Non-GAAP earnings per share are projected to be $1 (+/- 10 cents) on a diluted share count of 1.3 billion.
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 14.58% due to these changes.
Currently, Lam Research has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Lam Research has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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This article originally published on Zacks Investment Research (zacks.com).
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