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Bear of the Day

Teradyne, Inc. (TER) is a leading provider of automated test equipment. The company's second quarter earnings beat the Zacks Consensus, although revenue growth was sluggish. Forward guidance indicates slack demand, particularly for back-end testing equipment.

While there could be pockets of strength, we think that the negative mix of business, relatively lower exposure to the memory segment and the uncertainty at semiconductor manufacturers will impact results in the next few quarters. As a result, we think that investors are likely to discount the product lineup, leaner cost structure and strong balance sheet.

The company is expected to return earnings growth of 11.9% compared to the peer group average of 12.6%. We believe there is further downside to the shares and we are therefore downgrading the shares to Sell. Our price target also moves from $17 to $12 (10.3X P/E).

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