Lam Research and UPS shares gain 6% as Q3 reports topped Wall Street estimates 📈

Shares of semiconductor manufacturing services and equipment company Lam Research (LAM.US) and UPS (UPS.US), the largest U.S. logistics company, are gaining nearly 6% today before the U.S. market opens. In the former case, Lam shares are trying to break a fatal downward streak that has lasted since July, while in the latter they are 'saying goodbye' to multi-year lows and are likely to test the 200-session moving average today.

Lam Reserach (LAM.US)

• Earnings per share were $0.86 vs. $0.81 forecast, revenue was $4.17 billion vs. $4.05 billion expected

• Revenue rose 8% quarter-on-quarter and 20% YoY, and operating profit margin improved 1.2% to 30.3%. The company's cash position stands at $6.1 billion, compared to $5.9 billion in Q2

• Company expects Q4 earnings per share in range of $0.77 to $0.97, expectations suggested $0.85; estimates Q4 revenue in range of $4 to $4.6 billion, Wall Street expected $4.22 billion
• Lam expects its gross margin to decline from 48.2% now (47.9% a year earlier) to 46.9% in Q4; between Q2 and Q3, the company's gross margin fell 30 bps. China accounts for as much as 37% of revenue; Taiwan and South Korea account for 15 and 18%, respectively. However, Lam expects that China revenue will be at just 30% in Q4
• Revenue from China declined -8.6% YoY, but revenues from such markets like Taiwan, South Korea Southeast Asia increased YoY by 157%, 37% and 52% respectively
• Revenue in China declined, but company sees catalysts from advanced packaging and manufacturing markets; CAPEX came in at $110 million vs $77 million in Q3 2023
• Foundry, Memory, and Logic/IDM segment revenue came in at US$2.39 billion (16% growth year over year), slightly below estimates of $2.45 billion
• Customer support revenue and other categories saw a 25% YoY growth, reaching US$1.78 billion, surpassing the estimated US$1.6 billion.
• CEO, Tim Archer claimed that Lam's 'investments in key technology inflections position the company to outperform wafer fabrication equipment growth in 2025 and beyond'
• Company sees future catalyst in NAND, GAA as well as selective etch and atomic layer deposition (ALD) tools, signalling that is well positioned to become beneficiary of future technological shifts amid semiconductors industry

Despite the strength of the business, the large exposure to China has not served the company well in recent times. In addition, part of Lam's solutions are related to the non-artificial intelligence chip sector, where a slowdown is still evident. Nevertheless, the results turned out to be very solid, and the expected decline in gross margins did not spook investors as the company is well positioned for the future.

United Parcel Service (UPS.US)

• Earnings per share rose to $1.80 per share vs. $1.31 in Q3 2023 (net $1.54 billion vs. $1.13 billion); Wall Street expected $1.63 (12% y/y increase)

• Revenue exceeded expectations for the first time in 2 years, domestic US business performed strongly. Sales rose 5.6% year over year to $22.25 billion, vs. consensus of $22.1 billion 

• Margins in the U.S. domestic market sector fell slightly to 6.2% but operating profit rose 47.8% year-on-year
• U.S. shipment volumes rose 6.5% year-on-year, in the international sector revenue per shipment increased 2.5% year-on-year 
• Revenues from the company's largest segment, the shipping and logistics sector operating in the US, rose 5.8% y/y to $14.45 billion vs. $14.27 billion forecasts
• The company lowered annual revenue expectations to $91.1 billion from $93 billion previously, but investors liked the improved profitability; the change was prompted by the sale of Coyote Logistics

UPS's strong performance is 'further evidence' of the continued strength of the overall U.S. economy and the average consumer. Significant aspects are the increase in shipment volumes in Q3 and the sizable increase in profit. 

Lam Reserach and UPS charts (D1)

Source: xStation5Source: xStation5