) reported earnings of 56 cents per share in the first quarter of
2012, exceeding the Zacks Consensus Estimate by four cents.
Earnings (including stock-based compensation of four cents but
excluding amortization and one-time related cost of 3 cents) surged
27.3% from 44 cents reported in the year-ago quarter.
Revenue increased 21.1% year over year to $613.0 million,
surpassing the Zacks Consensus Estimate of $584.0 million. This
improvement was primarily driven by a 31.1% growth in product
revenue (software and hardware) and a 12.5% upside in services
Region wise, Teradata achieved strong growth from the Americas
in the quarter. Revenue increased 26.0% year over year to $388.0
million on a reported basis. Teradata witnessed 9.0% year-over-year
growth in the Europe, Middle East and Africa (EMEA) region to
$136.0 million, while Asia-Pacific/Japan revenue leaped 20.0% year
over year to $89.0 million.
During the quarter, gross profit jumped 20.8% year over year to
$343.0 million. Operating expenses climbed 14.7% year over year to
$211.0 million. The upside was attributable to higher selling,
general and administrative expense (SG&A), which increased
10.0% year over year to $165.0 million. Research and development
expense also surged 35.3% year over year to $46.0 million.
Despite incurring higher operating expenses, the company
witnessed a 27.0% rise in non-GAAP operating income to $136.0
million in the quarter. Operating margin stood at 22.2%, up 110 bps
year over year, based on strong revenue growth in the quarter.
Teradata exited the quarter with $978.0 million in cash versus
$772.0 million in the previous quarter. As of December 31, 2011,
Teradata had total debt of $286.0 million.
For fiscal 2012, Teradata expects year-over-year revenue growth
of 12.0% to 14.0% (prior guidance 10.0% to 12.0%). Earnings are
expected in the range of $2.60 to $2.70 (prior guidance $2.56 to
$2.66) per share. The Zacks Consensus Estimate for fiscal 2012 was
pegged at $2.48 per share when the company released its
We believe that new customer wins and strengthening
relationships with large vendors will be the primary revenue
drivers as well as profits over the long term. We expect long-term
growth to come from new strategic partnerships as well.
We believe that Teradata will continue to benefit from its
international expansion, improved traction from sales force
expansion, new products and alliances, market share gains and a
growing database analytics market.
However, increased investment in sales, higher R&D expenses
and an increase in the number of competing products from big names
) are resulting in continued pricing pressure that will likely
limit margin expansion going forward.
We maintain our Neutral recommendation on the stock over the
long term (6-12 months). Currently, Teradata has a Zacks #2 Rank,
which implies a Buy rating on a short-term basis (1-3 months).
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