Earnings Preview: KLA-Tencor

Jul.28.11 | About: KLA-Tencor Corporation (KLAC)

KLA-Tencor (NASDAQ:KLAC) is expected to report Q4 earnings after the market close on Thursday, July 28, with a conference call scheduled for 5:00 pm ET.

Guidance

The consensus estimate is $1.37 for EPS and $872.69M for revenue, according to First Call. Citigroup is modeling Q4 EPS/revenue at $1.48/$890M, in-line with updated guidance from management of "at the top of the original range," and higher than Street's lagging estimates. Management provided this guidance at the Semicon West trade show just two weeks ago.

Analyst Views

Citigroup sees orders at approximately $850MM, flat quarter-over-quarter, and in-line with KLA's pre-release attributed to: 1) less impact from memory pushouts; 2) off-cycle orders for many of the inspection tools such as reticle inspection; and 3) pull-ins for the traditionally strong fiscal year-end. Given the company's update at Semicon, Citigroup does not expect much surprise from the call. However, with the latest capex views from Intel (NASDAQ:INTC) and Samsung in the last week, Citigroup thinks we could see management turning incrementally more positive in the outlook.

For Q1: Citigroup is modeling $815M and $1.28, ahead of Street's $801.5M/$1.17 benefiting from its $1.4B backlog. The firm sees orders guided down 15%-25% quarter-over-quarter at the $650M level which should not be seen as overly controversial given the strong bookings in 1H, traditionally soft Q1, and sharp decline in foundry orders. Key items for the conference call: An updated view on 2H given the latest signs of increasing spending in logic mentioned by Intel and memory mentioned by Samsung, the status of yield challenge at leading edge nodes, potential revenue opportunities for KLAC's inspection/metrology products, and lastly, an update on progress in back-end inspection and non-semi products.