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Teradyne (TER) Beats Earnings and Revenue Estimates in Q1

Teradyne Inc. TER reported first-quarter 2016 earnings of 31 cents per share, surpassing the Zacks Consensus Estimate of 27 cents. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.
 

Following the results, Teradyne shares gained more than 1%. Solid revenue and earnings guidance for the upcoming quarter led to the rally.

Revenues

Revenues of $431.0 million increased 35.3% sequentially and 25.9% year over year. Also, the figure came above the Zacks Consensus Estimate of $426.0 million and on the high end of management’s guided range of $410–$440 million.

Approximately 79% of revenues came from semiconductor testing platforms, 13% from system test business, wireless test accounted for 5% while Industrial Automation brought in the remaining 3%.

Bookings

Total orders amounted to $389.0 million, down 34.2% sequentially. On a sequential basis, Semiconductor Test orders were down 25.0% to $408.0 million; Systems Test orders were down 30.3% to $46.0 million; Wireless Test Group orders decreased 33.3% to $20 million and Industrial Automation orders remained flat at $18 million.

Margins

Pro-forma gross margin was 53.4%, up 131 basis points (bps) sequentially but down 276 bps year over year. The sequential increase was backed by higher revenues and a favorable mix.

Total adjusted operating expenses of $152.6 million increased 1.3% sequentially and 6.4% year over year. As a percentage of sales, both engineering & development, and selling & administrative expenses decreased. Adjusted operating margin came in at 18.0%, up 1,321 bps sequentially and 374 bps year over year.
 
GAAP net income of $50.0 million was better than $32.8 million a year ago. Excluding special items but including stock-based compensation expense, non-GAAP net income came in at $64.4 million or 31 cents per share compared with $37.6 million or 17 cents in the year-ago quarter.

Balance Sheet

Teradyne ended the quarter with cash and cash equivalents and marketable securities balance of $729.4 million, down from $742.4 million in the prior quarter. Trade receivables were $254.0 million, up from $211.3 million in the last quarter.

Cash flow from operations was $26.7 million compared with $40.7 million in the previous quarter. Capex was $20.3 million against $23.2 million in the fourth quarter.

Share Repurchase/Dividend

In the quarter, Teradyne paid $28.0 million for share repurchases and $12.3 million as dividends.

Guidance

Management expects second-quarter revenues in the $510–$540 million range, up 21.8% sequentially at the mid-point. The Zacks Consensus Estimate is pegged at $532.0 million.

Non-GAAP earnings per share from continuing operations are likely to range within 46 cents to 53 cents. The Zacks Consensus Estimate for the upcoming quarter is pegged at 57 cents. GAAP earnings are expected in the range of 38–45 cents.

Conclusion

Teradyne is a leading provider of automated test equipment. The company reported decent first-quarter results, with both the top line and the bottom line outperforming the respective Zacks Consensus Estimate.

Given the popularity of its products, the Universal Robots acquisition and the continuous design win momentum, we are optimistic about Teradyne’s long-term prospects. However, weakness in the wireless test market could be a concern in the near term.

Stocks to Consider

Currently, Teradyne has a Zacks Rank #2 (Buy). Investors may also consider stocks such as Advanced Micro Devices AMD, Mercadolibre, Inc. MELI and Broadcom Limited AVGO. Each of these stocks carries the same Zacks Rank as Teradyne.

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MERCADOLIBRE IN (MELI): Free Stock Analysis Report
 
BROADCOM LTD (AVGO): Free Stock Analysis Report
 
ADV MICRO DEV (AMD): Free Stock Analysis Report
 
TERADYNE INC (TER): Free Stock Analysis Report
 
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