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Why Is Teradyne (TER) Up 1.2% Since Last Earnings Report?

Zacks Equity Research
·3 mins read

A month has gone by since the last earnings report for Teradyne (TER). Shares have added about 1.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Teradyne due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Teradyne Q1 Earnings & Revenues Surpass Estimates

Teradyne Inc. reported first-quarter 2020 earnings of $1 per share, surpassing the Zacks Consensus Estimate of 86 cents. The figure also increased 85.2% year over year and 13.6% sequentially.

Moreover, revenues of $704.4 million increased 43% year over year. The figure surpassed the Zacks Consensus Estimate by 5.8% and came within the guided range of $670-$710 million.

Inside the Headlines

Approximately 69% of revenues came from semiconductor testing platforms, 17% from the System Test business, 9% from Industrial Automation and the remaining 5% from the Wireless Test business.

The increase in total revenues was driven by strength in Semiconductor Test and System Test businesses. However, headwinds from COVID-19-related impacts on global manufacturing activity impacted the Industrial Automation segment.

Teradyne’s Industrial Automation segment declined 9% year over year in the first quarter due to manufacturing sector headwinds on a global basis.

Margins

Pro-forma gross margin was 57.6%, down 60 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 $196.5 million increased 9.9% 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 29.3%, up 1,050 bps from the year-ago quarter.

Balance Sheet

At the end of the first quarter, Teradyne’s cash and cash equivalents were $593.5 million, lower than $773.9 million in the prior quarter.

During the quarter, the company repurchased $79 million of its common stock and paid $16.7 million as dividends.

Guidance

Management expects second-quarter 2020 revenues in the band of $690-$800 million. Non-GAAP earnings per share from continuing operations are likely to be in the range of 86 cents to $1.16.

The Zacks Consensus Estimate for second-quarter revenues and earnings per share is pegged at $617.9 million and 71 cents, respectively.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 42.33% due to these changes.

VGM Scores

Currently, Teradyne has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Teradyne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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