It has been about a month since the last earnings report for Teradyne, Inc.TER . Shares have lost about 7.7% in that time frame.
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 Q1
Teradyne Inc. reported first-quarter 2018 earnings of 45 cents per share, surpassing the Zacks Consensus Estimate by 42 cents. Earnings decreased 3% sequentially but increased 3% 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 of $487.5 million increased 1.7% sequentially and 6.7% year over year. Also, the figure came in above the Zacks Consensus Estimate of $476 million and within management's guided range of $460-$490 million.
Approximately 76% of the revenues came from semiconductor Testing platforms, 10% from Industrial Automation, 9% from system Test business and the remaining 5% from wireless Test business.
During the quarter, Memory Test sales were up 210% from the year-ago quarter, while the same from Universal Robots were up 34% year over year.
According to the press release, pro-forma gross margin was 55.3%, down 120 basis points (bps) sequentially and 270 bps from the prior-year quarter. The decrease was due to unfavorable mix.
Total adjusted operating expenses of $164.9 million increased 2.6% year over year. As a percentage of sales, selling & administrative expenses remained flat, while the same from engineering & development decreased. As a result, adjusted operating margin came in at 21.5%, down 170 bps sequentially and 130 bps from the year-ago quarter.
Teradyne ended the quarter with Trade receivables of $414 million, up from $272.8 million last quarter.
Cash flow from operations was ($81.9) million compared with $147.5 million in the previous quarter. Capex was $34.8 million compared with $32.1 million in the fourth quarter.
In the reported quarter, Teradyne spent $134.3 million on share repurchases and paid $17.6 million as dividend.
Management expects second-quarter revenues in the range of $490-$520 million, increasing 4% sequentially at the midpoint.
Non-GAAP earnings per share from continuing operations are likely to be in the range of 45-52 cents.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been five revisions lower for the current quarter.
Teradyne, Inc. Price and Consensus
Teradyne, Inc. Price and Consensus | Teradyne, Inc. Quote
At this time, TER has a poor Growth Score of F, a grade with the same score on the momentum front. The stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Our style scores indicate investors will probably be better served looking elsewhere.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise TER has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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