KLA Corporation (NASDAQ:KLAC) Beats Q4 Sales Targets, Guides For Strong Sales Next Quarter

Radek Strnad /
2022/07/28 4:13 pm EDT

Maker of equipment for semiconductor manufacturing, KLA Corporation (NASDAQ:KLAC) reported Q4 FY2022 results beating Wall St's expectations, with revenue up 29.1% year on year to $2.48 billion. Guidance for next quarter's revenue was $2.6 billion at the midpoint, 4.8% above the average of analyst estimates. KLA Corporation made a GAAP profit of $805.3 million, improving on its profit of $633 million, in the same quarter last year.

Is now the time to buy KLA Corporation? Access our full analysis of the earnings results here, it's free.

KLA Corporation (KLAC) Q4 FY2022 Highlights:

  • Revenue: $2.48 billion vs analyst estimates of $2.42 billion (2.72% beat)
  • EPS (non-GAAP): $5.81 vs analyst estimates of $5.49 (5.89% beat)
  • Revenue guidance for Q1 2023 is $2.6 billion at the midpoint, above analyst estimates of $2.48 billion
  • Free cash flow of $746 million, roughly flat from previous quarter
  • Inventory Days Outstanding: 200, down from 202 previous quarter
  • Gross Margin (GAAP): 60.6%, up from 59.8% same quarter last year

"KLA's June quarter results and September quarter outlook once again demonstrate sustainable outperformance, highlighting the critical nature of KLA's products and services in enabling digital transformation in how we live and work," commented Rick Wallace, president and chief executive officer of KLA Corporation.

Formed by the 1997 merger of the two leading semiconductor yield management companies, KLA Corporation (NASDAQ:KLAC) is the leading supplier of equipment used to measure and inspect semiconductor chips.

The semiconductor industry is driven by demand for advanced electronic products like smartphones, PCs, servers and data storage. The growth of data and technologies like artificial intelligence, 5G networks and smart cars are also creating a next wave of growth for the industry. To keep up with ever changing customer needs requires new tools that can design, fabricate and test at ever smaller sizes and more complex architectures, and that is driving the demand for semiconductor capital manufacturing equipment.

Sales Growth

KLA Corporation's revenue growth over the last three years has been strong, averaging 26.7% annually. And as you can see below, last year has been especially strong, with quarterly revenue growing from $1.92 billion to $2.48 billion. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

KLA Corporation Total Revenue

This was a good quarter for KLA Corporation as revenues grew 29.1%, topping analyst estimates by 2.72%.

KLA Corporation believes the growth is set to continue, and is guiding for revenue to grow 24.7% YoY next quarter, and Wall St analysts are estimating growth 10.5% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.

KLA Corporation Inventory Days Outstanding

This quarter, KLA Corporation’s inventory days came in at 200, 2 days below the five year average, showing no indication of an excessive inventory buildup at the moment.

Key Takeaways from KLA Corporation's Q4 Results

Sporting a market capitalization of $53.8 billion, more than $2.7 billion in cash and with positive free cash flow over the last twelve months, we're confident that KLA Corporation has the resources it needs to pursue a high growth business strategy.

We were very impressed by the strong improvements in KLA Corporation’s operating margin this quarter. And we were also excited to see that earnings outperformed Wall St’s expectations. Overall, we think this was a strong quarter, that should leave shareholders feeling positive. But the market was likely expecting more and the company is down 0.72% on the results and currently trades at $367.5 per share.

KLA Corporation may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.