A month has gone by since the last earnings report for Teradata (TDC). Shares have added about 10.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Teradata due for a pullback? 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 catalysts.
Teradata Q2 Earnings Beat Estimates, Revenues Fall Y/Y
Teradata reported second-quarter 2024 non-GAAP earnings of 64 cents per share, which beat the Zacks Consensus Estimate by 33.33%. The bottom line increased 33.3% year over year.
Revenues of $436 million missed the Zacks Consensus Estimate by 2.59%. The figure declined 6% year over year on a reported basis and 3% on a constant-currency (cc) basis.
Total annual recurring revenues (ARR) at the second-quarter end declined 4% year over year to $1.46 billion. The figure fell 3% at cc.
Public cloud ARR rallied 31% on a reported basis and 32% at cc year over year to $542 million. The cloud net expansion rate was 123%.
The Top Line in Detail
Recurring revenues (contributing 84.4% to revenues) dropped 1% year over year on a reported basis (increased 2% at cc) to $368 million, surpassing the Zacks Consensus Estimate by 1.26%.
Perpetual software license and hardware revenues (1.1% of revenues) were down 62% year over year (down 58% at cc) to $5 million, missing the Zacks Consensus Estimate by 47%.
Consulting services’ revenues (14.4% of revenues) fell 19% year over year (down 15% at cc) to $63 million, missing the Zacks Consensus Estimate by 16.06%.
Revenues from the Americas declined 7% year over year on a reported basis (down 4% at cc) to $250 million. EMEA revenues inched down 2% year over year (up 2% at cc) to $116 million.
Revenues from the APJ region were down 8% year over year (down 4% at cc) to $70 million.
Operating Details
The gross margin on a non-GAAP basis was 62.2%, expanding 150 basis points (bps) year over year.
Selling, general & administrative (SG&A) expenses declined 21.6% year over year to $131 million. Research & development (R&D) expenses were $68 million, down 5.6% year over year.
As a percentage of revenues, SG&A contracted 610 bps year over year to 30%, whereas R&D was flat year over year to 15.6%.
The non-GAAP operating margin was 22%, up 640 bps year over year.
Balance Sheet
As of Jun 30, 2024, Teradata had cash and cash equivalents of $301 million compared with $337 million as of Mar 31, 2024.
Long-term debt as of Jun 30, 2024, was $467 million compared with $474 million as of Mar 31, 2024.
In the second quarter, TDC generated $43 million in cash from operating activities compared with the previous quarter’s $27 million.
The company generated a free cash flow of $39 million in the reported quarter.
Guidance
For third-quarter 2024, non-GAAP earnings are expected to be between 54 and 58 cents per share.
For 2024, TDC expects non-GAAP earnings between $2.20 and $2.26 per share.
Public cloud ARR growth is projected between 28% and 32% on a year-over-year basis.
Total ARR is expected to decline 2-4% from 2023 levels.
Teradata expects recurring revenues to remain flat at a loss of 2% year over year.
The company expects total revenues to be down 2-4% from the year-ago reported figure.
Cash flow from operations is expected to be between $290 million and $310 million. Free cash flow is anticipated to be in the $270-$290 million range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 51.15% due to these changes.
VGM Scores
Currently, Teradata has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Teradata has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Teradata is part of the Zacks Computer- Storage Devices industry. Over the past month, Western Digital (WDC), a stock from the same industry, has gained 9.9%. The company reported its results for the quarter ended June 2024 more than a month ago.
Western Digital reported revenues of $3.76 billion in the last reported quarter, representing a year-over-year change of +40.9%. EPS of $1.44 for the same period compares with -$1.98 a year ago.
For the current quarter, Western Digital is expected to post earnings of $1.72 per share, indicating a change of +197.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.7% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Western Digital. Also, the stock has a VGM Score of C.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>Teradata Corporation (TDC) : Free Stock Analysis Report
Western Digital Corporation (WDC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
