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Keysight (KEYS) Q3 Earnings & Revenues Surpass Estimates

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Keysight Technologies Inc. KEYS delivered third-quarter fiscal 2018 non-GAAP earnings of 89 cents per share beating the Zacks Consensus Estimate of 80 cents. Further, the figure increased 45.9% from the year-ago quarter.

Net revenues surged 21% from the year-ago quarter to $1.004 billion and outpaced the Zacks Consensus Estimate of $959 million. Non-GAAP core revenues (excluding the impact of currency and revenues from acquisitions completed within the last 12 months) increased 15% year over year.

Orders grew 15% year over year to surpass $1 billion during the quarter. Notably, core orders grew 12%. Management was positive about tapping key growth segments of a number of end markets. The company’s focus on launching new solutions for growth markets like 5G, Internet of Things (IoT), next-generation wireless, high-speed datacenters and automotive & energy are key catalysts.

Notably, robust demand along with higher investments in emerging technologies drove order growth during the quarter in markets such as solutions and commercial communications, aerospace, defense and semiconductor and services.

Keysight Technologies Inc. Revenue (Quarterly)

 

Keysight Technologies Inc. Revenue (Quarterly) | Keysight Technologies Inc. Quote

Quarter Details

Communications Solutions Group (“CSG”) includes commercial communications (“CC”) and aerospace, defense & government (“ADG”) end markets. Revenues climbed 23% to $515 million.

CC revenues increased year over year driven by research and development (R&D) solutions related to technologies like 5G, 400G LTE-Advanced and Wi-Fi testing. ADG revenues grew 22% for the third consecutive quarter.

Keysight stated that orders for 5G solutions recorded tripple-digit growth year over year for the quarter. The company’s acquisitions of Anite and AT4 Wireless have enriched the company’s 5G solutions portfolio.

Electronic Industrial Solutions Group (“EISG”) revenues increased 19% to $258 million. Automotive and Energy was the key catalyst for this segment.

Ixia Solutions Group (“ISG”) reported revenues of $119 million on the back of strong demand for the company’s high-speed Ethernet based testing solutions as well as its security and application solutions.

Services Solutions Group (“SSG”) revenues were $116 million, up 9%. Calibration services and increased sales of remarketed solutions drove year-over-year growth.

Gross margin during the reported quarter came in at 61.2%, on the back of favorable product mix and addition of Ixia. Operating margin expanded 90 bps quarter over quarter to 21.3%.

Balance Sheet & Cash Flow

Keysight ended the quarter with cash & cash equivalents of $1.34 billion, up from the previous quarter of $784 million. Long-term debt came in at $1.79 billion. Cash flow from operations during the quarter came in at $38 million, while free cash flow was ($2) million.

During the quarter, the company repurchased approximately 668,000 shares for a total of $40 million.

Guidance

For the fourth-quarter of fiscal 2018, the company expects non-GAAP revenues to be in the range of $1-$1.2 billion. The Zacks Consensus Estimate for revenues is pegged at $967.5 million.

Non-GAAP earnings per share for fourth-quarter fiscal 2018 are projected in the range of 85-91 cents per share. The Zacks Consensus Estimate for revenues is pegged at 85 cents per share.

Zacks Rank and Stock to Consider

Keysight carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include Cypress Semiconductor Corporation CY, Xilinx, Inc. XLNX and NetApp, Inc. NTAP, all sporting a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

Cypress, Xilinx and NetApp have a long-term expected EPS growth rate of 16.14%, 9.5% and 14.13%, respectively.

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