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Teradata (TDC) Up 3.7% Since Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Teradata CorporationTDC . Shares have added about 3.7% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is TDC due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

Teradata reported adjusted earnings of 58 cents per share, which declined 17.1% year over year. However, the figure beat the Zacks Consensus Estimate of 50 cents.

Total revenues of $626 million beat the Zacks Consensus Estimate of $610 million. However, the figure was flat on a year-over-year basis. Revenues were adversely impacted by the company's ongoing business transformation.

Products and Cloud revenues decreased 7.3% year over year to $243 million. Services revenues increased 5.2% on a year-over-year basis to $383 million.

Revenues from Americas Data and Analytics decreased 8.1% year over year (8% at constant currency), while that from International Data and Analytics increased 14% (8% at constant currency) from the year-ago quarter.

Moreover, recurring revenues increased 7% on a constant currency (cc) basis. Consulting services also rose 2% at cc. However, perpetual software licenses and hardware revenues declined 17% at cc.

Operating Details

Non-GAAP gross margin contracted 190 basis points (bps) from the year-ago quarter to 51.8%. Total product & cloud gross margin contracted 160 bps, which was partially offset by 20 bps expansion in services gross margin.

As a percentage of revenues, selling, general & administrative (SG&A) expenses increased 190 bps to 27.3%. Moreover, research & development (R&D) expenses jumped 290 bps from the year-ago quarter to 12.1%.

Non-GAAP operating margin contracted 640 bps on a year-over-year basis to 14.5%, primarily due to lower revenues, shrinking gross margin and higher operating expenses to support the company's strategic initiatives.

Balance Sheet & Share Repurchase

As of Dec 31, 2017, Teradata had cash and cash equivalents of $1.089 billion, compared with $1.025 billion as of Sep 30, 2017. The company exited the quarter with total debt (including current portion) of $538 million compared with $546 million at the end of the previous quarter.

On Feb 5, 2018, Teradata's board of directors authorized an additional $310 million to repurchase shares. The company has approximately $500 million authorized for share repurchases.

Guidance

For 2018, Teradata expects revenues between $2.15 billion and $2.20 billion. Non-GAAP earnings are projected between 67 cents and 77 cents.

For first-quarter of 2018, revenues are projected in the range of $490-$500 million. Non-GAAP earnings are estimated between 13 cents and 16 cents per share.

How Have Estimates Been Moving Since Then?

In the past month , investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter.

Teradata Corporation Price and Consensus

Teradata Corporation Price and Consensus | Teradata Corporation Quote

VGM Scores

At this time, TDC has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was also 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 D. 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.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, TDC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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 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.

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