In Like a Lam and Out Like a Lion (LRCX)

Shareholders can bag a handsome reward when they own stock in a company whose earnings beat the expectations of investment research analysts. After the market closed on Wednesday, Lam Research (NASDAQ: LRCX) announced its first-quarter 2013 financial results that roared past the projections of Wall Street’s crystal ball. In the quarter, the company realized revenues of $906 million and a profit of $0.53 per share, which easily surpassed the predictions of analysts who, on average, envisioned a top line of $903 million and a per share profit of $0.41. Though the earnings beat expectations, they were light of the results posted during the same period last year when the company earned $0.58 per share. In the conference call following the earnings release, the company guided second quarter expectations lower. Lam Research now sees an earnings per share between $0.38 and $0.52 on revenues in a range from $820 to $880 million for the coming quarter versus forecasts calling for $0.48 and $906 million.

Martin Anstice, CEO of Lam Research, stated that the company achieved strong results in an uncertain industry environment. He then sounded a word of caution when he commented about the softening semiconductor demand in the near-term. Going forward, Anstice said the company would strike a balance between proper cost management and investment into next generation solutions for customers.

Investors and traders went to bed last night trying to decide between the good, the not so good and the not bad.

The morning saw eager buyers at the ready to purchase shares of Lam Research. The stock gapped up over 40 cents on the opening bell to begin the session at $34.00. The stock briefly declined in the first 30 minutes of the trading to an intraday low of $33.75. Share prices then sprinted higher to a peak of $36.72 around the lunch hour on the east coast. Traders took some profits in the afternoon hours, but the stock closed with a gain of over 7% for the day. Lam Research shares ended the session up $2.43 at a price of $36.01.

Investors have to wonder if the trading action today, including the first positive gap in months, marks the end of a nearly seven-month decline in share prices. At the end of April, Lam Research announced what would become a series of earning guidance warnings. Since then, the stock has acted like a slinky going down a long staircase, dropping 45% from $44.91 to an annual low of $31.17. Share prices hit a 52-week high last November when the stock traded for $45.48.

Nineteen analysts cover the stock with an average rating of “overweight”. The consensus view has a price target of $41.38 on Lam Research shares. For the fiscal year 2013, analysts expect the company to earn $2.34 per share.

Lam Research supplies wafer fabrication equipment to the semiconductor industry. The company also manufactures and sells equipment used in LED manufacturing plus other industrial applications. The company serves customers in North America, Taiwan, South Korea, Japan and Europe. The Fremont, California-based company was founded in 1980.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).

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