A month has gone by since the last earnings report for Teradyne, Inc. (NYSE:TER) . Shares have lost about 1.8% in the past month, outperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is TER 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 Beats Earnings and Revenue Estimates in Q4
Teradyne reported fourth-quarter 2017 earnings of 46 cents per share, surpassing the Zacks Consensus Estimate by 12 cents. Earnings decreased 15% sequentially but increased 44% year over year.
Given the popularity of its products, acquisition of Universal Robots and continuous design wins, we are optimistic about Teradyne’s performance in the long run. However, weakness in the wireless Test market could be a near-term concern.
Revenues
Revenues of $479.4 million decreased 4.8% sequentially but increased 26.2% year over year. Also, the figure came in above the Zacks Consensus Estimate of $437.9 million and above management’s guided range of $420-$450 million.
Approximately 66% of the revenues came from semiconductor Testing platforms, 11% from Industrial Automation, 17% from system Test business and the remaining 6% from wireless Test business.
Booking
Total orders amounted to $560 million, increasing 36.6% sequentially but decreasing 10.8% from the year-ago quarter.
On a sequential basis, only Wireless Test orders were down 27.3% to $24 million, while all others increased. Systems Test orders were up 64.3% year over year, Semiconductor Test orders increased 39%, while Industrial Automation orders were up 40%.
Margins
According to the press release, pro forma gross margin was 56.5%, down 210 basis points (bps) sequentially and 90 bps year over year. The decrease was due to unfavorable mix.
Total adjusted operating expenses of $158.6 million increased 8.4% 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 23.1%, down 300 bps sequentially but up 450 bps year over year.
GAAP net loss was $105.9 million in the fourth quarter against net income of $66.3 million in the year-ago quarter. Excluding special items but including stock-based compensation expense, non-GAAP net income came in at $91.4 million or 46 cents per share compared with $64.6 million or 32 cents in the year-ago quarter.
Balance Sheet
Teradyne ended the quarter with cash and cash equivalents and marketable securities balance of $1.78 billion, up from $1.64 billion in the prior quarter. Trade receivables were $272.8 million, up from $268.1 million last quarter.
Cash flow from operations was $147.5 million compared with $309.8 million in the previous quarter. Capex was $32.1 million compared with $27.3 million in the third quarter.
Share Repurchase/Dividend
In the reported quarter, Teradyne spent $48.5 million on share repurchases and paid $13.7 million as dividend.
During the quarter, the company approved a new share repurchase program up to $1.5 billion through open market purchases or private transactions. The $1.5 billion authorization replaces the company’s existing $500 million repurchase authorization announced in December 2016.
Q1 Guidance
Management expects first-quarter revenues in the range of $460-$490 million, decreasing 1% sequentially at the mid-point.
Non-GAAP earnings per share from continuing operations are likely to be in the range of 38-45 cents. GAAP earnings are expected in the range of 32-39 cents.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There have been two revisions higher for the current quarter compared to two lower.
VGM Scores
At this time, TER has an average Growth Score of C, though it is lagging a bit on the momentum front with a D. Charting a somewhat similar path, the stock was also allocated a grade of F on the value side, putting it in the lowest quintile 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.
The company's stock is suitable solely for growth based on our style scores.
Outlook
TER has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Teradyne, Inc. (TER): Free Stock Analysis Report
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