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A month has gone by since the last earnings report for Teradyne (TER). Shares have lost about 2.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Teradyne due for a breakout? 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 Top Estimates, Rise Y/Y
Teradyne reported first-quarter 2021 earnings of $1.11 per share, which surpassed the Zacks Consensus Estimate by 6.7% and increased 11.1% year over year.
Revenues of $781.6 million surpassed the Zacks Consensus Estimate by 2.9% and also beat management’s guidance of $720-$780 million.
The figure increased 11% year over year driven by strong performances from the Test and Industrial Automation (“IA”) businesses.
Revenues from Semiconductor Test platforms, System Test business, IA and Wireless Test business were $528 million, $133 million, $80 million and $41 million, respectively.
Test demand for automotive, industrial, memory and mobility remain strong in the reported quarter. Moreover, IA revenues increased 33% year over year.
Non-GAAP gross margin was 59.1%, expanding 150 basis points (bps) year over year.
GAAP operating expenses increased 15% year over year to $228.6 million. As percentage of revenues, GAAP operating expenses increased 100 bps year over year to 29.2%.
Strong growth in operating expenses was driven by selling and administrative (S&A) expenses, as well as engineering and development (E&D) expenses. S&A grew 16.5% year over year to $129.8 million. E&D increased 17.9% year over year to $100.4 million.
As percentage of revenues, both S&A and E&D increased 80 bps year over year.
Consequently, operating margin was at 29.6%, down 10 bps from the year-ago quarter.
Balance Sheet & Cash Flow
As of Apr 4, 2021, Teradyne’s cash and cash equivalents (including marketable securities) were $1.31 billion, lower than $1.44 billion as of Dec 31, 2020.
Net cash provided by operating activities was $38.1 million for the first quarter versus $260.4 million in the prior quarter.
For the second quarter of 2021, Teradyne expects revenues between $1.01 billion and $1.09 billion.
Strengthening test demand, continuous recovery in automotive-related semiconductor test shipments and robust IA business are major tailwinds. Teradyne expects to generate more than 30% IA revenue growth in 2021.
Non-GAAP earnings are expected between $1.62 and $1.83 per share for second-quarter 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 29.69% due to these changes.
Currently, Teradyne has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Teradyne has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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