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What Makes Keysight (KEYS) a Solid Investment Proposition?

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·5 min read
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Earnings estimates for the current fiscal for Keysight Technologies, Inc. KEYS have increased 7.6% over the past year, implying modest inherent growth potential. With healthy fundamentals, this Zacks Rank #1 (Strong Buy) stock appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Growth Drivers

Based in Santa Rosa, CA, Keysight is a leading provider of electronic design and test instrumentation systems. It aids customers with end-to-end scalable model solutions loaded with robust test and measurement know-how to reduce time-to-market and enhance efficiency in a cost-effective manner. Keysight’s suite of connected car test solutions includes Virtual Drive Test Toolset, which facilitates automakers to build virtual test routes in the lab by integrating network and channel emulation capabilities and combining data captured in the field. The company is also evolving its expertise in software test automation capabilities.

Electronic devices form the very fulcrum of Internet of Things (IoT) services, wireless devices, data centers and 5G technologies. The rapid adoption of these devices is increasing the demand for electronics testing equipment. Further, technical advancements in mobile communications, semiconductors and automotive markets are likely to drive growth. Moreover, the rising demand for power management applications is a key catalyst. Sturdy efforts toward the modification of the Internet infrastructure and evolution of smart cars & autonomous-driving vehicles bode well. Additionally, medical devices and pharmaceutical markets hold immense potential, thanks to the growing usage of electronics-based testing equipment.

Keysight boasts a robust 5G portfolio. The company’s 5G product design validation solutions ranging from Layer 1 to 7 enable telecom and semiconductor companies to accelerate their 5G initiatives. Further, Keysight’s 5G network emulation solutions facilitate end-to-end processes from development to deployment, accelerating the 5G device architecture. It has upgraded its 5G Network Emulation Solution that leverages its proprietary UXM 5G Wireless Test Platform, an integrated and compact signaling test platform that emulates a 5G NR network. The UXM 5G platform supports protocol compliance and functional key performance analytics across both sub-6GHz and mmWave spectra. The improved design features will offer extended frequency range coverage, flexible use of wider bandwidth resources, increased processing power to support more carrier aggregation and superior uplink capabilities for comprehensive multi-SIM support for 5G/4G network combinations.

It recently secured the industry’s first accreditation for 5G new radio (NR) test cases that support Release 16 (Rel-16) specifications from PTCRB. The approval strengthens Keysight’s leading position in the 5G validation tools segment. It unlocks the potential for vendors to accelerate their design verification processes for smart city, smart factory and autonomous vehicles.

Keysight is reportedly the first test equipment vendor to offer 5G device test solutions for all phases of 5G development – from early 5G research projects through support for pre-5G commercialization to the first-to-market solutions for the trial of the 3GPP 5G NR standards. It works closely with all the key chipset makers and has gained key insights into varied 5G device test platforms and solutions, making it an ideal choice for all 5G device testing metrics for the industry.

Apart from strength in the 5G domain, Keysight’s efforts in other emerging growth markets like IoT and high-speed data centers bode well for the top line. Particularly, management’s focus on Automotive and Energy, and Aerospace and Defense domains augur well in the long haul. The company is expected to benefit from the growing proliferation of electronic content in vehicles, momentum in space and satellite applications, and rising adoption of driver-assistance systems globally.

KEYS recently announced that Scania will deploy its Scienlab test systems as part of its concerted efforts to shift to e-mobility for commercial vehicles. The comprehensive test solutions will likely help accelerate the development and improvement of battery cells for electric vehicles for customized battery life optimization and key actionable insights. In addition to Keysight’s Energy Storage Discover Software for test and control, Scania has deployed its PathWave Lab Operations for Battery Test, which is an integrated, web-based lab management platform to optimize workflow, test throughput and data management. This will enable the vehicle manufacturer to better manage its resources such as lab personnel, test systems and devices under test to optimize the planning and coordination of its battery laboratory.

The stock has a long-term earnings growth expectation of 9%. It delivered an earnings surprise of 8%, on average, in the trailing four quarters. With a VGM Score of B, Keysight currently appears to be an enticing investment option in this volatile market.

Other Key Picks

Sierra Wireless, Inc. SWIR carries a Zacks Rank #2 (Buy). It has a long-term earnings growth expectation of 15% and delivered an earnings surprise of 223.7%, on average, in the trailing four quarters.

Over the past year, Sierra Wireless has gained 20.1%. Earnings estimates for the current year for the stock have moved up 157.5% since July 2021. The company continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.

Qualcomm Incorporated QCOM, carrying a Zacks Rank #2, is another key pick for investors. It has a long-term earnings growth expectation of 16.1% and delivered an earnings surprise of 12.2%, on average, in the trailing four quarters.

Earnings estimates for the current year for the stock have moved up 32.1% over the past year. Qualcomm is likely to benefit in the long run from solid 5G traction and a surge in demand for essential products that are the building blocks of digital transformation in the cloud economy.

TESSCO Technologies Incorporated TESS, carrying a Zacks Rank #2, delivered an earnings surprise of 61.9%, on average, in the trailing four quarters. Earnings estimates for TESSCO for the current year have moved up 35.4% since July 2021.

TESSCO offers products to the industry’s top manufacturers in mobile communications, Wi-Fi, wireless backhaul and related products. With more than three decades of experience, it delivers complete end-to-end solutions to the wireless industry.


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