Markets

Teradata (TDC) Q4 Earnings Lag, Sales Surpass Estimates

Teradata Corp.TDC reported fourth quarter adjusted earnings per share (including stock-based compensation expense but excluding other items) of 63 cents, missing the Zacks Consensus Estimate of 65 cents and also falling short of the year-ago earnings of 84 cents.

The company reported non-GAAP earnings of 70 cents a share, down 23.1% on a year-over-year basis.

Revenues of $719 million came in ahead of the Zacks Consensus Estimate of $707 million but declined 6% year over year.

Quarterly Segment Details

Products revenues decreased 11% year over year to $320 million.

Services revenues remained flat on a year-over-year basis at $399 million. Consulting revenues were down 2% from the year-ago quarter to $220 million while Maintenance services increased 2% year over year to $179 million.

Margin

Adjusted gross margin (including stock-based compensation expense but excluding other items) contracted 490 basis points (bps) from the year-ago quarter to 51.6% due to unfavorable deal mix and currency headwinds.

Non-GAAP operating income was $134 million, down from $187 million in the prior-year quarter.

Balance Sheet

Teradata exited the year with $839 million in cash and cash equivalents compared with $834 million as on Dec 31, 2014. Teradata had long-term debt of $780 million at the end of the year.

In 2015, Teradata generated cash flow from operations of $401 million compared with $680 million in the previous year. Free cash flow generated in 2015 was $281 million compared with $551 million in the previous year.

Guidance

Teradata provided guidance for 2016.

Revenues are expected to be in the range of $2.315 billion to $2.360 billion, a decrease of 7% to 8% from 2015 and down 5% to 7% on a constant currency basis. This guidance excludes revenues from the Marketing Applications business. The company expects to exit most of its Marketing Applications business by the first quarter of 2016, during which it expects revenues of approximately $40 million from the division. In 2015, it generated about $152 million in revenues from its Marketing Applications business.

Non-GAAP earnings per share in 2016 are expected in the range of $2.35 - $2.50 per share. This excludes an after-tax loss of 7 million from Teradata's Marketing Applications business in the first quarter of 2016 and stock-based compensation expense of approximately 38 cents a share.

To Conclude

Teradata is a leading provider of data warehousing and enterprise analytics. The company is well positioned to benefit from the robust growth in data warehousing market based on a strong product portfolio, customer wins, strategic partnerships and accretive acquisitions.

We believe that customer wins and strengthening relationships with large vendors will be the primary revenue drivers. Teradata's international expansion, improved traction from sales force expansion, new products and alliances, market share gains and a growing database analytics market should be another set of positives for the company.

Last quarter, the company declared its plans to exit its Marketing Application business to build up its capabilities in the growing Data and Analytics business. Simultaneously, the company is also working to optimize its cost structure and streamline its operations, which are expected to benefit the company's financials in this year itself.

However, restructuring related costs, a sluggish spending environment in the domestic market and increasing competition from peers like EMC Corporation EMC , Oracle ORCL and IBM Corporation IBM can weigh on its financials.

Currently, Teradata has a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

EMC CORP -MASS (EMC): Free Stock Analysis Report

TERADATA CORP (TDC): Free Stock Analysis Report

INTL BUS MACH (IBM): Free Stock Analysis Report

ORACLE CORP (ORCL): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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


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

In This Story

ORCL IBM TDC

Other Topics

Earnings Stocks