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Teradyne (TER) Q3 Earnings & Revenues Surpass Estimates

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Teradyne Inc. TER reported third-quarter 2020 earnings of $1.18 per share, which surpassed the Zacks Consensus Estimate of $1.11. The figure increased 53.2% year over year but decreased 11.3% sequentially.

Revenues of $819.5 million increased 40.8% year over year. The figure also surpassed the Zacks Consensus Estimate by 4.3%.

Following strong third-quarter results and encouraging fourth-quarter guidance, its share price rose 1.5%.

Inside the Headlines

Approximately 72% of revenues came from semiconductor testing platforms, 15% from the System Test business, 8% from Industrial Automation and the remaining 5% from the Wireless Test business.

The increase in total revenues was driven by strong test revenues, which grew 46% year over year on Memory and Storage test shipments. Also, stronger-than-expected System on a Chip test shipments — driven by increased demand for mobility-related test capacity — aided revenue growth.

Teradyne’s Industrial Automation revenues were up 17% sequentially but flat with the year-ago quarter on improving global manufacturing conditions and new products.

Teradyne, Inc. Price, Consensus and EPS Surprise

Teradyne, Inc. Price, Consensus and EPS Surprise
Teradyne, Inc. Price, Consensus and EPS Surprise

Teradyne, Inc. price-consensus-eps-surprise-chart | Teradyne, Inc. Quote

Margins

Pro-forma gross margin was 56%, down 330 basis points (bps) from the prior-year quarter. The decrease was due to an unfavorable product mix.

Total operating expenses (selling and administrative & engineering and development) of $210.7 million increased 12.7% year over year. As a percentage of sales, both selling & administrative expenses and engineering & development costs decreased from the year-ago quarter.

Operating margin came in at 30.3%, up 280 bps from the year-ago quarter.

Balance Sheet

At third quarter-end, Teradyne’s cash and cash equivalents (including marketable securities) were $1.23 billion, higher than $958.1 million in the prior quarter.

Net cash provided by operating activities was $342.5 million for the third quarter versus $225.8 million in the prior quarter.

During the quarter, the company paid $16.6 million as dividends.

Guidance

Management expects fourth-quarter 2020 revenues in the band of $680-$740 million. Non-GAAP earnings per share from continuing operations are likely to be in the range of $0.90-$1.06.

Management provided encouraging fourth-quarter guidance, reflecting strength in the company’s test businesses.

The Zacks Consensus Estimate for fourth-quarter revenues and earnings per share is pegged at $516.50 million and 45 cents, respectively.

For full-year 2020, management expects sales to grow more than 33% on a year-over-year basis to $3.0 billion. GAAP earnings per share are expected to be $4.12, indicating 58% year-over-year growth and non-GAAP earnings are projected at $4.50, suggesting 57% improvement from a year ago.

The Zacks Consensus Estimate for full-year revenues and earnings per share is pegged at $2.85 million and $3.87, respectively.

Zacks Rank and Other Key Picks

Currently, Teradyne carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include AMETEK, Inc. AME, Intuit Inc. INTU and Alibaba Group Holding Limited BABA, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for AMETEK, Intuit, and Alibaba is currently projected at 7.2%, 14.5% and 18.9%, respectively.

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