Teradyne Beats on Q4 Earnings, Revs

Zacks

Teradyne Inc. (TER) reported fourth-quarter 2013 earnings of 7 cents per share, beating the Zacks Consensus Estimate of 4 cents. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.

Revenues

Revenues of $285.3 million were down 34.2% sequentially but up 14.9% year over year. Revenues exceeded the Zacks Consensus Estimate of $276 million and were slightly above management’s guided range of $260.0 million–$285.0 million.

Around 75.4% of revenues in the quarter came from semiconductor testing platforms, 15.4% from system testing and the remaining 9.2% from wireless testing business.

Bookings

Total bookings in the quarter amounted to $290.0 million, of which $225.0 million were in Semiconductor Test, $47.0 million in Wireless Test and $18.0 million in the Systems Test Group.

Total orders improved sequentially in the fourth quarter, consistent with seasonal patterns.

Margins

Reported gross margin for the quarter was 56.0%, down 270 basis points (bps) sequentially but up 550 bps year over year. The sequential decrease was due to unfavorable mix.

Total operating expenses of $153.0 million were up 2.0% from $150.0 million in the year-ago quarter. Both engineering and development (E&D) expenses and selling and administrative (S&A) expenses decreased as a percentage of sales.

As a result, the reported operating margin was 2.4% versus (9.9%) in the year-ago quarter.

The quarter’s GAAP net income was $22.3 million or earnings of 9 cents per share, up from net loss of $16.5 million or loss of 9 cents in the comparable quarter last year. Excluding special items but including stock-based compensation expense, non-GAAP net income was $13.2 million or 7 cents per share compared with $12.6 million or 7 cents a share in the year-ago quarter.

Balance Sheet

The company ended the fourth quarter with cash and cash equivalents, and marketable securities balance of $928.5 million, down from $957.2 million in the prior quarter. Trade receivables were $157.6 million, down from $209.4 million in the prior quarter.

The net cash at quarter-end was $741.9 million (excluding $186.7 million in short-term debt).

Cash flow from operations was $43.7 million versus $154.5 million in the prior quarter. Capex was $23.6 million versus $32.1 million in the prior quarter.

During the quarter, the company initiated a quarterly cash dividend of 6 cents per share, with the initial quarterly dividend payable on Jun 2, 2014, to shareholders of record as of the close of business on May 9, 2014.

Guidance

Management provided guidance for the first quarter of 2014. Revenues are expected in the range of $300 million–$330 million, up 10.4% sequentially at the mid-point. Non-GAAP earnings from continuing operations are expected in the range of 2 cents to 9 cents a share and GAAP earnings are expected to be (9) cents to (3) cents per share.

Conclusion

Teradyne’s fourth-quarter earnings exceeded the Zacks Consensus Estimate on lower-than-expected operating expenses.

The company reported improving orders and also provided modest first-quarter revenue guidance, indicating increasing demand for Teradyne products in the future. The announcement of dividend initiation is quite encouraging as it reflects the company’s strong cash generation capabilities and its commitment to return value to shareholders.

However, we expect the shares to remain under pressure due to weakness in key end markets.

Currently, Teradyne has a Zacks Rank #4 (Sell). Other stocks that have been performing well and are worth a look include Melco Crown Entertainment Ltd (MPEL), Kemper Corp. (KMPR) and Ametek Inc. (AME). All these stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on TER
Read the Full Research Report on KMPR
Read the Full Research Report on AME
Read the Full Research Report on MPEL


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