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Teradyne (TER) Surpasses Q3 Earnings & Revenue Estimates

Zacks Equity Research

Teradyne Inc. TER reported third-quarter 2019 earnings of 77 cents per share, surpassing the Zacks Consensus Estimate by 7 cents. The figure also increased 8.5% year over year.

Moreover, revenues of $582 million increased 2% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $567.9 million and came ahead of the guided range of $540-$580 million.

Its share price was up more than 5% in the after-hour trading session, following better-than-expected third-quarter results.

Approximately 68% of revenues came from semiconductor testing platforms, 12% from Industrial Automation, 13% from the System Test business and the remaining 7% from the Wireless Test business.

Teradyne, Inc. Price, Consensus and EPS Surprise

 

Teradyne, Inc. Price, Consensus and EPS Surprise

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

Inside the Headlines

The increase in total revenues was driven by escalating demand for the System Test business. Continued growth in 5G infrastructure and flash memory test spending aided revenue growth in the quarter. Moreover, memory test shipments grew 23% sequentially on strong Flash demand.

Teradyne’s Industrial Automation segment recorded 4% year-over-year growth in the third quarter. The growth was driven by strength in Universal Robots and improvement in mobile robot demand at MiR. However, overall demand was lower than expected due to weakness in the manufacturing sector in the United States and Europe.

Margins

Pro-forma gross margin was 59.3%, up 40 basis points (bps) from the prior-year quarter. The increase was due to favorable product mix.

Total operating expenses (selling and administrative &engineering and development) of $187 million increased 5.5% year over year. As a percentage of sales, selling & administrative expenses increased, while engineering & development costs decreased from the year-ago quarter.

Operating margin came in at 26.6%, up 130 bps from the year-ago quarter.

Balance Sheet

At the end of the third quarter, Teradyne’s cash and cash equivalents were $593.9 million, higher than $495.1 million in the corresponding period of 2018.

During the quarter, the company repurchased $121.6 million of its common stock and paid $15.3 million as dividends.

Guidance

Management expects fourth-quarter 2019 revenues in the band of $590-$630 million. Non-GAAP earnings per share from continuing operations are likely to be in the range of 73-84 cents.

The Zacks Consensus Estimate for fourth-quarter revenues and earnings per share is pegged at $532.2 million and 61 cents, respectively.

For the full year of 2019, management expects sales to grow nearly 7% year over year to more than $2.2 billion. Non-GAAP earnings per share arealso expected to grow 16% from the year-ago quarter.

Zacks Rank and Key Picks

Currently, Teradyne carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Itron, Inc. ITRI, Booking Holdings Inc. BKNG and Ambarella, Inc. AMBA. While Itron sports a Zacks Rank #1 (Strong Buy), Booking Holdings and Ambarella carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Itron, Booking Holdings and Ambarella is currently projected at 25%, 13.08% and 11.18%, respectively.

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