Earnings Preview: KLA-Tencor Corp.

Jan.28.10 | About: KLA-Tencor Corporation (KLAC)

KLA-Tencor Corp.(NASDAQ:KLAC) is expected to report Q2 earnings after the market close on Thursday, January 28, with a conference call scheduled for 5 pm ET.

Guidance

The consensus estimate is 27c for EPS and $437.88M for revenue, according to First Call. Over the past few weeks KLA-Tencor shares have been hovering around $36 and lower. Traders are apparently concerned that the stock has stalled as there have been a chunk of institutional put buying in the company's options.

Analyst Views

Shares of chip equipment makers also tumbled on January 22 after Citigroup downgraded their rating on seven companies in the sector to Sell from Hold on concerns that an emerging rebound in demand won't be enough to meet a buildup in manufacturing capacity. Stifel expects KLA Tencor to meet and likely exceed their estimates of $440.4M in revenue and pro-forma EPS of 36c, excluding options, or 25c including options. The firm believes KLA experienced continued strength in the foundries, while seeing the early pickup of memory orders. Stifel believes KLA has seen better-than-expected strength in recent quarters due to foundry capacity additions, as well as needs by Taiwan Semiconductor (TSM) to enhance its 40/45nm production yields, which has proved to be a boon for KLA-Tencor. Stifel's checks suggest that much like its industry peers, KLA-Tencor is likely to benefit from the improving memory spending over the next few quarters. The firm believes Samsung, Micron (NASDAQ:MU) and Hynix could place sizable equipment orders with KLA-Tencor in March. Given Stifel's continued bullish outlook for the industry and its stronger business model, the firm remain positively inclined towards KLA-Tencor, maintaining a Buy rating and $45 target price.