Upgrades kick Lam's earnings drive into high-gear

Lam Research Inc. (Nasdaq: LRCX) soared 15 percent Friday morning on the back of upgrades that trumpeted the company's strong fourth quarter results.

Shares in the company, which makes wafer fabrication equipment, rose 7 1/16 to 53 7/16. It's just one of many surging chip-related stocks

Advest Inc upgraded Lam from "market perform" to "buy," Goldman Sachs lifted it from "market outperform" to its "recommended list," and Warburg Dillon Read changed its call from "buy" to "strong buy."

The upgrades come after the Fremont, California-based company raked in more than twice as much as analysts expected for the company's fiscal fourth quarter. After five consecutive quarters of losses, Lam reported net income of $11.3 million, or 28 cents per share. First Call's survey of 19 analysts predicted a per-share profit of 12 cents.

Analyst Byron Walker from Warburg Dillon Read also lifted earnings estimates for the first quarter of 2000 from 25 to 51 cents a share, and the fiscal 2000 estimate from $1.70 to $2.61 a share.

Ahead of the analyst herd, ABN AMRO said Wednesday it had reiterated a buy recommendation on Lam Research Corp., and had raised its 12-month price target on the stock to $55 from $45. Analyst David Wu said in the report he believes the wafer processing equipment industry is starting a three-year upturn.

Fourth quarter revenues for the company increased 38 percent sequentially to $210.9 million. Asian sales not including Japan led the way with a 39 percent gain, followed by North America with 38 percent growth. The company also said lower materials costs and improved economies of scale boosted Lam's gross margin to 38.8 percent, compared to 35.5 percent in March. New orders also rose from the previous quarter, giving Lam a book to bill ratio better than 1 to 2.

Reuters contributed to this report.