Will Lam Research (LRCX) Disappoint on Earnings? - Analyst Blog

Lam Research Corporation LRCX is set to report third-quarter fiscal 2014 results on Apr 23. Last quarter, it posted a 6.8% positive surprise. Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Lam Research posted decent fiscal second quarter 2014 results with both the top and bottom lines beating the Zacks Consensus Estimate. The year-over-year revenue growth of 29.6% was attributable to persistent strength in the foundry segment. Also, its memory business reflected a strong performance in the quarter.

The company's advanced packaging segment is also experiencing growth due to several design wins in advanced wafer-level packaging applications.

Moreover, Lam Research's non-GAAP gross profit of $510.8 million was up from $456.7 million in the prior quarter. Higher revenues coupled with favorable customer mix were the main reasons for the margin increase.

Furthermore, the company expects modest improvement in semiconductor spending in the near term. The company believes that its continuous investment in next-generation products and technologies to combat the fierce competition from companies like Applied Materials, Inc. AMAT will boost growth and profitability going forward.

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 $1.16. 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:

Advanced Energy Industries, Inc. AEIS, with Earnings ESP of +10.00% and a Zacks Rank #1 (Strong Buy).

E-Commerce China Dangdang Inc. DANG, with Earnings ESP of +33.33% and a Zacks Rank #1.