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What's in the Offing for Keysight (KEYS) in Q1 Earnings?

Keysight Technologies Inc . KEYS is scheduled to release first-quarter fiscal 2019 results on Feb 21.

Notably, the company has surpassed earnings estimates in three of the trailing four quarters, recording average beat of 13.3%.

In fourth-quarter fiscal 2018, the company delivered non-GAAP earnings of $1.01 per share beating the Zacks Consensus Estimate of 91 cents per share. Further, the figure surged 42.3% from the year-ago quarter.

Revenues advanced 19% from the year-ago quarter to $1.047 billion and outpaced the Zacks Consensus Estimate of $1.017 billion. Non-GAAP core revenues (excluding the impact of currency and revenues from acquisitions completed within the last 12 months) increased 17% year over year.

Notably, Keysight stock has returned 75.2% in the past year, outperforming the industry 's rally of 50.1%.

Guidance & Estimates

For the first quarter of fiscal 2019, Keysight envisions GAAP and non-GAAP revenues to be in the range of $962-$982 million and $965-$985 million, respectively. The Zacks Consensus Estimate for revenues is pegged at $978.2 million, indicating growth of approximately 16.9% from the year-ago quarter.

Non-GAAP earnings per share for first-quarter fiscal 2019 are projected in the range of 76-82 cents per share.

We note that the Zacks Consensus Estimate for earnings has remained stable in the past week. The Zacks Consensus Estimate for the quarter under review is pegged at 79 cents per share, representing growth of approximately 54.9% from the year-ago quarter.

Let's see how things are shaping up prior to this announcement.

Factors at Play

Keysight's continuous focus on launching new solutions for growth markets like 5G, Internet of Things (IoT), next-generation wireless, high-speed datacenters and automotive & energy bodes well for the topline.

Focus on 5G Key Catalyst

Strength in Keysight's comprehensive test and measurement solutions bodes well. The company's 5G product design validation solutions ranging from Layer 1 to 7 enable telecom and semiconductor companies to accelerate their 5G initiatives.

Moreover, Keysight's 5G network emulation solutions facilitate end-to-end processes from development to deployment, accelerating the 5G device architecture. The solutions offer cost-efficient test techniques with high flexibility and control capabilities, reducing time to market.

Additionally, the acquisitions of Ixia, Anite and AT4 Wireless have enriched the company's 5G solutions portfolio. In fact, Keysight stated that orders for 5G solutions recorded triple-digit growth year over year in the las t report ed quarter.

In the to-be-reported quarter, Keysight's collaborations with the likes of Softbank, MediaTek, SK Telecom, China Telecom and Qualcomm Technologies, Inc., a subsidiary of Qualcomm QCOM are anticipated to aid it in achieving 5G commercialization related milestones.

Strength in Automotive Domain Holds Promise

Growing clout of radar technologies for autonomous driving, and high-power devices and applications are driving demand for the Keysight's solutions in this end market.

The growing demand for electric and hybrid cars also bode well for the company's product portfolio, which was enhanced by Scienlab acquisition. In fact, management noted double-digit growth in automotive and energy verticals in the last reported quarter.

The company's latest high frequency Keysight E8740A automotive radar test solution is anticipated to generate incremental revenues, going forward. The new solution assists radar-driven, advanced driver assistance systems ("ADAS") to identify and alleviate collision risks on a real-time basis.

Keysight Technologies Inc. Price and EPS Surprise

Keysight Technologies Inc. Price and EPS Surprise | Keysight Technologies Inc. Quote

Other Factors

Keysight's buyout of Melbourne, Australia-based Thales Calibration Services, a subsidiary of Thales Group is likely to expand the company's current electrical portfolio, particularly in the defense and security space.

We believe that the company's focus on expanding software portfolio on the back of strong demand for its solutions is likely to fuel growth.

Moreover, rapid adoption of the company's high-speed Ethernet based testing solutions, and security and application solutions are anticipated to bolster Ixia Solutions Group ("ISG") segment revenues.

However, competition from Rohde & Schwarz GmbH & Co. KG, Anritsu Corporation, and Fortive Corporation, is a headwind.

Furthermore, uncertain macroeconomic conditions and imposition of tariff owing to trade war between the United States and China is a major concern.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP . Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Keysight has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Stocks that Warrant a Look

Here are some stocks you may consider, as our proven model shows that these have the right combination of elements to post an earnings beat this quarter.

Warrior Met Coal, Inc. HCC has an Earnings ESP of +4.97% and a Zacks Rank #1. The company is slated to report fourth-quarter 2018 earnings on Feb 21. You can see the complete list of today's Zacks #1 Rank stocks here .

Live Nation Entertainment, Inc. LYV has an Earnings ESP of +3.77% and a Zacks Rank #1.The company is scheduled to report fourth-quarter 2018 earnings on Feb 26.

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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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