A Grand Slam Quarter For KLA Corporation
We have been fond of KLA Corporation (NASDAQ: KLAC) for several years. The company is fundamental to the microchip industry as a manufacturer and servicer of the equipment with which microchip wafers are made and that can be seen in the quarterly results. The company just released its fiscal 2021 Q4 results and absolutely knocked the ball right out of the park. The global shortage of microchips has caused a massive, systemic upcycle in microchip production that begins and ends with wafers and companies like KLA Corporation.
KLA Corporation Beat The Consensus
KLA Corporation had an absolutely stunning fourth quarter. The company reported $1.93 billion in net consolidated revenue for a gain of 32.2% over last year. This figure beat the consensus by 260 basis points and is up more than 53% from 2019. Moving down the report, the results only get better as margins widened due to cost leverage and drove solid earnings. The company reports $4.10 in GAAP EPs and $4.43 in adjusted earnings both beating the consensus targets by wide margins. The adjusted earnings beat by $0.43 and is 1000 basis points better than expected.
KLA Corporation Guides The Market Higher
KLA Corporation also offered solid guidance in which we can only find one fault. While the guidance brackets the consensus in a range with the consensus at the very low end of the range, the range for both earnings and revenue is quite wide. This opens the door for flat to slightly lower sequential results at the lower end of the range but also for a solid double-digit gain at the high end. The $1.92 billion to $2.12 billion in expected revenue is slightly ahead of the $1.91 billion expected by the analysts while adjusted earnings are expected to be $4.01 to $4.89 versus a $4.14 consensus. The takeaway is that revenue and earnings are still strong and driven by solid global demand so we expect to see results in the high end of the range if not above it.
KLA Corporation Raises The Dividend By Double Digits
KLA Corporation is a very solid dividend payer if one with a low 1% yield. That aside, the payout is incredibly safe and comes with very high expectations for future increases even with the increase that was just passed. The board of directors approved a 16.7% increase in quarterly payout and we expect there to be significantly large increases at the end of the year as well. The company is only paying out about 15% of its earnings which leaves plenty of room in the cash flow to increase the dividend as well as invest in future growth.
KLA Corporation Approves A New Buy Back
KLA Corporation compensates for its below-average dividend yield by actively buying back shares and it's just approved a new buyback plan. The new buyback is worth $2 billion for shareholders or about 3.7% of the market cap. This is compounded by a strong balance sheet so no worry the buybacks or dividends will be suspended.
The Analysts Really Like KLA Corporation
At least six major sell-side analysts
have come out in the wake of the KLA Corporation Q4 earnings report with notes to investors. All six issued bullish statements including one upgrade from hold to buy. Needham upgraded the stock from hold to buy citing a global wafer fabrication upcycle and issuing a price target of $390. This compares to the consensus price target of $339 which is up 1500 basis points over the past 90 days. Based on this most recent activity, we expect to see the consensus target continue to rise. The consensus of the six most recent analysts is in the range of $390. Shares of KLAC popped more than 10% on the news and Are on the verge of a major bullish breakout.
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