Why KLA-Tencor's Shares Powered Up

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of KLA-Tencor (NASDAQ: KLAC  ) were up about 9% this morning after reporting its earnings last night. The company trounced analyst expectations on the top line and also offered a solid beat on the bottom line.

So what: For the fiscal second quarter, KLA-Tencor's revenue came in at $673 million against the $634 million analysts had expected. This was better than the year-ago quarter's $643 million result, but represented a slight decline from the prior quarter. Earnings per share of $0.63 also bested the consensus forecast of $0.57, but this was a decline from both the year-ago and prior quarters. Low expectations lead to a bounce in this case.

Now what: The semiconductor equipment maker noted in its conference call that although the largest chip foundry -- no doubt referring to Taiwan Semiconductor -- is planning an increase in capital expenditures for 2013, overall foundry spending is expected to be lower this year than it was in 2012 by about 5% to 10%.

Guidance for the current quarter was given in the range of $690 million to $750 million, which comes in ahead of the consensus $714 million estimate, but EPS guidance of between $0.70 and $0.90 averages out to roughly the $0.81 analysts had expected. With a weak sales environment looming, today probably isn't the best day to buy in, regardless of KLA's highly affordable 13.8 P/E and appealing 3.1% dividend yield. However, I'd certainly keep my eye on this important link in the semiconductor chain throughout the year if you're the least bit interested in investing in this critical industry.

Want more news and updates? Add KLA-Tencor to your Watchlist now.


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