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Keysight (KEYS) Announces Pricing of Senior Notes Worth $500M

Zacks Equity Research

Keysight Technologies, Inc. KEYS recently announced an underwritten public offering of senior notes aggregating $500 million. The notes carry an interest rate of 3.00% and are scheduled to mature on October 2029.

Barclays Capital Inc., Credit Suisse Securities (USA) LLC and BNP Paribas Securities Corp. are acting as book-running managers for the offering. Meanwhile, BofA Securities, Inc., Wells Fargo Securities and Citigroup Global Markets Inc. will act as joint lead book-running managers. In this regard, the company has filed for automatic registration under the Securities and Exchange Commission.

The offering, subject to fulfillment of customary closing conditions, is expected to close on Oct 22, 2019.

Keysight stated that the net proceeds from the planned offering and available cash will be utilized to fund the redemption of its outstanding senior notes worth $500 million due on Oct 30, 2019. These notes carry an interest rate of 3.30%.

Coming to the price performance, shares of Keysight have returned 47.3% year to date outperforming the industry’s rally of 37.3%.

Cash Position

At the end of fiscal third-quarter 2019, Keysight’s cash & cash equivalents of $1.394 billion, up from the previous quarter’s $1.277 billion. The company reported total debt (short-term plus long-term) of $1.79 billion, flat sequentially.

Cash flow from operations during the last reported quarter came in at $274 million compared with the previous quarter’s $221 million. Free cash flow was $244 million compared with the previous quarter’s $192 million.

Notably, the public stock offering is expected to boost financial flexibility and help the company meet financial obligations efficiently. Moreover, it provides ample scope to deploy capital for long-term growth opportunities and rewarding higher returns to stockholders at the same time.

Bottom Line

Keysight has been securing notable customer wins on the back of its strength in the 5G product portfolio, comprising a comprehensive set of test and design solutions. Its solutions enable telecom companies in accelerating 5G deployment.

Keysight’s sustained focus on launching solutions for growth markets like 5G, IoT and high-speed datacenters augurs well for the top line. The collaborations to develop of Open RAN 5G network with companies like AT&T T, Xilinx XLNX, to name a few,  is likely to enable the company in penetrating the 5G space. Alliance with Qualcomm Technologies, Inc., a subsidiary of Qualcomm QCOM remains noteworthy.

Additionally, acquisitions of Ixia, Anite and AT4 Wireless have improved the company’s 5G solutions portfolio.

However, Keysight derives a significant proportion of revenues from outside the United States rendering it susceptible to exchange rate volatility thanks to sluggishness in China and trade-war concerns.

Zacks Rank

Currently, Keysight sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

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