It has been about a month since the last earnings report for Teradyne, Inc. (NYSE:) . Shares have added about 5.4% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Teradyne (TER) Beats Earnings and Revenue Estimates in Q4
Teradyne Inc. reported fourth-quarter 2016 earnings of 32 cents per share, surpassing the Zacks Consensus Estimate of 21 cents. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.
Following better-than-expected results, share price gained more than 1%.
Over the past one year, shares of Teradyne underperformed the Zacks categorized Electronic Testing Equipment industry. While the industry gained 40.60%, the stock returned only 38.26%.
Revenues
Revenues of $380.0 million decreased 7.4% sequentially but increased 19.3% year over year. However, the figure came above the Zacks Consensus Estimate of $345.0 million and management’s guided range of $330–$360 million.
Approximately 71% of revenues came from semiconductor testing platforms, 13% from system test business, 7% from wireless test, and the remaining 9% from Industrial Automation.
Bookings
Total orders amounted to $628.0 million, up 66.1% sequentially. On a sequential basis, Semiconductor Test orders were up 109.6% to $524.0 million and Industrial Automation orders were up 41.7% to $34.0 million. However, Systems Test orders decreased 38.2% to $47 million and Wireless Test Group orders decreased 4.2% to $23 million.
Margins
Pro-forma gross margin was 57.4%, up 194 basis points (bps) sequentially and 529 bpsyear over year. The increase was due to higher revenues and a favorable mix.
Total adjusted operating expenses of $148.3 million decreased 0.8% sequentially and 1.6% year over year. As a percentage of sales, both engineering & development expenses and selling & administrative expenses decreased. As a result, adjusted operating margin came in at 18.4%, down 69 bps sequentially but up1,357 bps year over year.
GAAP net income was $66.3 million in the fourth quarter against net loss of $641.0 million in the year-ago quarter. Excluding special items but including stock-based compensation expense, non-GAAP net income came in at $64.9 million or 32 cents per share compared with $26.7 million or 13 cents in the year-ago quarter.
Balance Sheet
Teradyne ended the quarter with cash and cash equivalents and marketable securities balance of $1.18 billion, up from $896.4 million in the prior quarter. Trade receivables were $192.4 million, up from $163.2 million last quarter.
Cash flow from operations was $36.4 million compared with $203.8 million in the previous quarter. Capex was $19.0 million compared with $19.7 million in the third quarter.
Share Repurchase/Dividend
In the reported quarter, Teradyne spent $61.2 million on share repurchases and paid out $12.1 million as dividend.
During the quarter, management also said that it plans to repurchase a minimum of $200 million in 2017 and increase the dividend to 7 cents per quarter.
Q1 Guidance
Management expects first-quarter revenues in the $420–$450 million range, up 14.5% sequentially at the mid-point. The Zacks Consensus Estimate is pegged at $397.3 million.
Non-GAAP earnings per share from continuing operations are likely to range within 33 cents to 40 cents. The Zacks Consensus Estimate is pegged at 27 cents. GAAP earnings are expected in the range of 28–34 cents.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
VGM Scores
At this time, Teradyne's stock has a nice score of 'B' on growth and momentum front. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% 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.
Our style scores indicate that the stock is more suitable for growth and momentum investors than value investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
Teradyne, Inc. (TER): Free Stock Analysis ReportOriginal postZacks Investment Research
