Teradyne Beats, Guides Cautiously - Analyst Blog

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Teradyne Inc's ( TER ) has reported second-quarter 2012 earnings of 77 cents per share, beating the Zacks Consensus Estimate of 58 cents. The adjusted earnings per share exclude one-time items, but include stock-based compensation expense.

Revenue

Revenue of $548.3 million was up 38.2% sequentially, 33.6% year over year and above management's guidance of $490-$530 million. Around 66.6% of revenue came from semiconductor testing platforms, with 20.4% contribution from the newly acquired LitePoint wireless testing business and 13% from system testing.

Management also expressed optimism about the newly acquired LitePoint wireless testing business and continued strength for the UltraFLEX in high performance System-on-a-Chip test.

Bookings

Total Bookings in the quarter were $592 million, of which $358 million were in Semiconductor Test, $189 million in LitePoint Wireless Test and $45 million in the Systems Test Group.

Margins

Reported gross margin for the quarter was 56.4%, up 830 basis points (bps) sequentially and 410 bps year over year. A favorable mix led to gross margin improvement in the quarter.

Operating expenses of $152.1 million increased 32.5% year over year. Despite this increase, the reported operating margin expanded 430 bps year over year. E&D expenses increased year over year as a percentage of sales, with S&A declining. Moreover, higher gross margins led to the increase in the operating margin.

The quarter's GAAP net income was $111.4 million or earnings per share of 49 cents, down from $87.3 million or 38 cents earned in the comparable quarter last year. Excluding special items but including stock-based compensation expense, non-GAAP net income was $156.3 million or earnings per share of 77 cents compared with $103.9 million or 51 cents a share in the year-ago quarter.


Balance Sheet

The company has a fairly strong balance sheet, with cash and cash equivalents, and marketable securities of $695.0 million, up $74.4 million from the prior quarter. Trade receivables were $346.1 million, up from $129.3 million in the prior quarter.

Cash flow from operations was $102.1 million versus $102.0 million in the year-ago quarter. Capex was $30.7 million versus $22.3 million in the year-ago quarter.

Guidance

Management provided guidance for the third quarter of fiscal 2012. Accordingly, revenue is expected to come in at around $420-$460 million. Non-GAAP earnings from continuing operations are expected in the range of 41 cents to 51 cents a share and GAAP earnings per share is projected between 22 cents and 29 cents.

Conclusion

Teradyne reported a good second quarter, with LitePoint experiencing record orders and revenue. We believe the addition of LitePoint is a big positive, given the significant opportunities unfolding in the high-growth wireless market. It also appears that the company is seeing much higher demand across several markets, helping both semiconductor and systems test businesses to grow.

However, the company announced a conservative guidance, reflecting seasonally slower industry trends.

We remain optimistic about Teradyne in the longer term, given the popularity of its products, the LitePoint acquisition that further rounds out its portfolio and design win momentum that is expected to continue.

Currently, Teradyne has a Zacks #3 Rank, implying a short-term Hold recommendation.


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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