Summit Analysts Comment On KLA-Tencor's Earnings Miss

Shares of KLA-Tencor KLAC were down almost five percent following a seven percent earnings miss.

“After the typical seasonal binge of orders in Jun Q for KLAC, there is a hangover period in CQ3 and KLAC will likely guide down (only once in last 10 years has the Sep Q been up). Industry watchers should know what we are talking about, as this has happened too many times in the past,” said Summit analyst Srini Sundararajan, looking beyond Thursday’s quarterly report. The ‘binge’ in small orders falls in this quarter due to the company’s sales bonus set up.

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Sundararajan cites the sales mix as reason for the miss.

“The reason would appear to be weaker GM (55.9%) in June Q, which we think is due to a higher proportion (22%) of service orders and not due to weaker tool ASPs. For the Jun. Q foundry orders at 68%, memory at 23% and logic at 9% rounded out the mix.”

Despite a moderately disappointing quarter, Summit did not change its rating or price target on the stock. Sundararajan said this is because the stock is no longer a play on semiconductor equipment, but a more stable cash return position.

Shares of KLA-Tencor were last trading at $70.83, a 2.9 percent drop.