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Factors Setting the Tone for Keysight's (KEYS) Q1 Earnings

Zacks Equity Research

Keysight Technologies Inc. KEYS is slated to report first-quarter fiscal 2020 results on Feb 24.

For first-quarter fiscal 2020, the company expects GAAP revenues to be in the range of $1.045 billion to $1.065 billion.

The Zacks Consensus Estimate for revenues is pegged at $1.06 billion, indicating an improvement of 5.4% from the year-ago quarter.

Keysight projects non-GAAP earnings per share in the range of $1.04 to $1.10 for the fiscal first quarter. We note that the Zacks Consensus Estimate for earnings has been steady at $1.08 per share over the past 30 days, suggesting growth of 16.1% from the year-ago reported figure.

Notably, the company surpassed earnings estimates in the trailing four quarters, the average surprise being 19.4%.

Keysight Technologies Inc. Price and EPS Surprise

Keysight Technologies Inc. Price and EPS Surprise

Keysight Technologies Inc. price-eps-surprise | Keysight Technologies Inc. Quote

Factors Likely to Influence Q1 Results

Robust adoption of the company’s 5G, design software, and network visibility solutions is expected to have driven fiscal first-quarter top line.

Moreover, synergies from the acquisition of Ixia, which have enriched Keysight’s 5G solutions portfolio, are likely to get reflected in fiscal first-quarter revenues. Notably, the buyout has been enabling the company to offer comprehensive solutions across end-to-end communications workflow.

Notably, the company’s Ixia Solutions Group (ISG) segment delivered double-digit order growth and 15% revenue growth year over year in the fiscal fourth quarter and this momentum is expected to have continued in the to-be-reported quarter.

The collaboration with Qualcomm QCOM is also expected to have benefited the company in expanding business in the 5G network emulation market. Moreover, the latest 5G network emulation deal win from Bureau Veritas BVRDF is expected to have driven revenues in the fiscal first quarter.

Further, robust demand for products catering to general electric market and semiconductor solutions, as well as continued investment in next-gen auto technology are likely to have driven growth of Electronic Industrial Solutions Group (EISG) segmental revenues.

However, Huawei’s blacklisting and imposition of tariffs owing to the U.S.-China trade war are anticipated to have limited the fiscal first-quarter top line.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Keysight has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stock to Consider

Here is a company, which, per our model, has the right combination of elements to post an earnings beat this quarter:

Applied Optoelectronics, Inc. AAOI has an Earnings ESP of +8.12% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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