Lam Research notes fresh supply-chain issues, hurting stock and casting pall over chip-equipment sector

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.
AMAT,
+1.95%
falling 3% and KLA Corp.
KLAC,
+2.83%
declining more than 2.7% ahead of its own earnings report, scheduled for Thursday.

In-depth: Chips may be sold out for 2022 thanks to shortage, but investors are worried about the end of the party

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
SOX,
+1.68%,
a 15% gain by the S&P 500 index 
SPX,
-0.15%,
and a 2% advance in the tech-heavy Nasdaq Composite Index
COMP,
+0.02%.