KLA – Tencor Corp Earnings: Increased Costs Strains Margins as Profit Drops

S&P 500 (NYSE:SPY) component KLA – Tencor Corporation (NASDAQ:KLAC) reported its results for the third quarter. KLA-Tencor is a company that designs, manufactures, and markets process control and yield management solutions for the semiconductor and related nanoelectronics industries. Its primary offerings include wafer and integrated circuit defect monitoring.

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KLA – Tencor Earnings Cheat Sheet for the Third Quarter

Results: Net income for KLA – Tencor Corporation fell to $205.3 million ($1.21 per share) vs. $209.8 million ($1.22 per share) a year earlier. This is a decline of 2.1% from the year-earlier quarter.

Revenue: Rose 0.8% to $840.5 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: KLA – Tencor Corporation reported adjusted net income of $1.27 per share. By that measure, the company beat the mean estimate of $1.09 per share. It beat the average revenue estimate of $802 million.

Quoting Management: “Fueled by rapid growth in demand for mobile electronics, KLA-Tencor’s strong third quarter results reflect sustained high levels of process control adoption and demonstrate our ability to consistently deliver indispensable solutions to our customers,” said Rick Wallace, president and chief executive officer of KLA-Tencor. “As we look ahead to the second half of 2012, we are optimistic as the forces propelling KLA-Tencor’s growth remain solid, and the innovation required by our customers at the leading edge is driving growth in our core process control markets.”

Key Stats:

Gross margin shrank three percentage points to 57.7%. The contraction appeared to be driven by increased costs, which rose 8.4% from the year earlier quarter while revenue rose 0.8%.

The company’s net income has fallen for two quarters in a row. In the second quarter, net income fell 40.3% from the year-earlier quarter.

The company has now beaten estimates the last two quarters. In the second quarter, it topped expectations with net income of 72 cents versus a mean estimate of net income of 66 cents per share.

Over the last five quarters, revenue has increased 27.1% on average year-over-year. The biggest increase came in the third quarter of the last fiscal year, when revenue rose 74.4% from the year-earlier quarter.

Looking Forward: Expectations for the company’s next-quarter performance are higher than they were ninety days ago. Over the past three months, the average estimate for the fourth quarter has risen to $1.24 per share from 94 cents. For the fiscal year, the average estimate has moved up from $3.58 a share to $4.21 over the last ninety days.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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