By Wallace Witkowski
Lam Research Corp. shares sank 6% in late trading Wednesday after the chip-equipment supplier reported worse-than-expected fiscal second-quarter revenue and third-quarter guidance, which the chief executive attributed to “supply-chain conditions.”
Lam Research /zigman2/quotes/208077897/composite LRCX +4.28% reported second-quarter net income of $1.2 billion, or $8.44 a share, compared with $869.2 million, or $5.96 a share, in the year-ago period. Adjusted earnings, which exclude amortization and other items, were $8.53 a share, compared with $6.03 a share in the year-ago period.
Revenue rose to $4.23 billion from $3.46 billion in the year-ago quarter, but came in lower than analysts’ consensus estimate amid a global semiconductor shortage. Analysts surveyed by FactSet had forecast adjusted earnings of $8.52 a share on revenue of $4.41 billion, based on Lam’s forecast of $7.95 to $8.95 a share on revenue of $4.15 billion to $4.65 billion.
“While supply-chain conditions worsened in late December and are causing near-term impacts to our results, we expect wafer fabrication equipment investments to again increase in calendar-year 2022, leading to another strong growth year for Lam,” Chief Executive Tim Archer said in a statement.
Shares initially dove more than 10% in after-hours trading immediately following the release of the results, but recovered back a bit as the extended trading session continued. Other chip-equipment stocks joined in the after-hours downturn, with Applied Materials Inc. /zigman2/quotes/209393259/composite AMAT +3.83% falling 3% and KLA Corp. /zigman2/quotes/209248041/composite KLAC +5.09% declining more than 2.7% ahead of its own earnings report, scheduled for Thursday.
Archer offered more detail about the issues in both the completed quarter and moving forward in a conference call later in the afternoon.
“In the December quarter, unexpected shipment delays, primarily for components from a critical supplier, surfaced in the last two weeks of the quarter, leaving us with insufficient time for full recovery despite the diligent efforts of our supplier and our global operations team,” he said. “The resulting shipment delays caused revenues to come in below the midpoint of our guidance range.”
Archer also discussed the 2022 outlook after providing a forecast that did not meet expectations. Lam forecast fiscal third-quarter adjusted earnings of $6.70 to $8.20 a share on sales of $3.95 billion to $4.55 billion. Analysts on average were projecting earnings of $8.72 a share on revenue of $4.49 billion heading into the report, according to FactSet.
“Looking into the first weeks of 2022, we see that supply challenges have broadened, with the COVID omicron surge adding further disruption to freight and logistics operations, as well as exacerbating skilled labor shortages,” Archer said. “We also continue to encounter significant scarcity of certain components and parts, including semiconductors. As a result, our March-quarter revenue levels will be limited by the output constraints of our global supply chain.”
Lam shares have gained 10% over the past 12 months, compared with a 15% rise in the PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX +4.03% , a 15% gain by the S&P 500 index /zigman2/quotes/210599714/realtime SPX +2.47% , and a 2% advance in the tech-heavy Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +3.33% .