Taking a look at the headline numbers, KLAC generated EPS of $2.22, up 35% year/year, eclipsing the $2.12 consensus. This marked the fifteenth straight quarter in which KLAC has exceeded analysts' earnings expectations. Helping to push the upside earnings result was that gross margin came in at 64.8%, at the high end of its guidance range, mainly driven by favorable product mix. Furthermore, the company expects gross margin to remain in the 64-65% range into the September quarter.
On the top line, revenue jumped by 14% year/year to $1.07 bln, also edging the $1.045 bln consensus. The 14% increase is also an acceleration from Q3 and Q2's 11% performance. During the conference call last night, management noted that the memory WFE industry continues to perform at a high level and that it is bullish about the prospects for continued strength as it begins 2H18.
Secondly, KLAC commented that it is experiencing near record levels of demand for its mask inspection equipment, driven by semiconductor OEMs investments in EUV lithography.
Turning to its guidance, the company is expecting 1Q19 Adjusted EPS of $2.04-$2.36 ($2.20 at the mid-point) versus the $2.06 consensus, on revenue of $1.03-$1.10 bln ($1.07 bln at the mid-point) vs. the $1.04 bln consensus. In addition to the catalysts mentioned above, management is particularly excited about its prospects in China, which it says is the next major inflection point for WFE spending. EUV (extreme ultra-violet) lithography figures to be another prominent growth area for KLAC in the quarters ahead with the company already positioned as the market leader in mask and wafer inspection.
All in all, KLAC turned in another impressive quarterly performance. With multiple catalysts ahead and with a forward P/E of about 12.5x, investors are gravitating to the stock as an attractive GARP (growth at a reasonable price) play.