What's in Store for Teradyne (TER) This Earnings Season?

Teradyne Inc. TER is slated to report second-quarter 2020 results on Jul 21. In the last reported quarter, it delivered a positive earnings surprise of 16.3%.

The stock outperformed earnings estimates in all the trailing four quarters, with the average surprise being 11.03%.

Trend in Estimate Revision

For the second quarter, the Zacks Consensus Estimate for earnings has remained stable at $1.02 per share over the past 30 days. This indicates an increase of 54.6% from the year-ago reported figure.

The consensus mark for revenues is pegged at $749.4 million, implying an increase of 32.8% from the year-ago reported figure.

Let’s see how things have shaped up for this announcement.

Teradyne, Inc. Price and EPS Surprise


Teradyne, Inc. Price and EPS Surprise

Teradyne, Inc. price-eps-surprise | Teradyne, Inc. Quote

Factors to Note

Teradyne’s demand for test equipment in the second quarter is expected to have been low due to the COVID-19 pandemic.

Nevertheless, semiconductor Test revenues are likely to have got a boost in second-quarter 2020 owing to persistent growth in 5G infrastructure, strengthening of mobility, strong networking and growing memory test spending. The Zacks Consensus Estimate for Semiconductor Test revenues is currently pegged at $539 million, indicating a 11.4% year-over-year increase.

Markedly, the Industrial Automation business saw a decline in the last reported quarter. The trend is expected to have continued in the to-be-reported quarter as Europe and North American manufacturing remains impacted by coronavirus-led shutdowns.

The Zacks Consensus Estimate for Industrial Automation revenues is currently pegged at $55 million, suggesting a 8.3% year-over-year decline.

Increasing complexity of processors and technologies, popularity of its products, growing demand for millimeter wave test capabilities — both in Semi Test and at LitePoint — and continued design wins are expected to have driven Teradyne’s performance in the to-be-reported quarter.

However, weakness in a few end markets served by the company could have been a headwind during the quarter. Also, increasing headwinds due to the COVID-19 pandemic may impact the results for the quarter to be reported.

For the to-be-reported quarter, management expects total revenues in the range of $690-$800 million. Non-GAAP earnings per share from continuing operations are likely to be in the range of 86 cents to $1.16.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Teradyne this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Teradyne has a Zacks Rank #2.

Stocks to Consider

Here are a few stocks that you may want to consider, as our model shows that these have the right combination of elements to post a positive earnings surprise in the quarter to be reported.

NXP Semiconductors N.V. NXPI has an Earnings ESP of +11.90% and holds a Zacks Rank of 2.

Netflix, Inc. NFLX has an Earnings ESP of +2.27% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Expedia EXPE has an Earnings ESP of +12.98% and a Zacks Rank #3.

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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.

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