Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Teradata Corp (TDC - Analyst Report) reported earnings of 70 cents per share in the second quarter of 2013, which comfortably beat the Zacks Consensus Estimate of 63 cents. However, earnings per share declined 4.1% from the year-ago quarter primarily due to modest revenue base and margin contraction.

Quarter Details

Revenues inched up 0.8% from the year-ago quarter (up 2.0% on constant currency) to $670.0 million and were slightly short of the Zacks Consensus Estimate of $675.0 million. Revenue shortfall was primarily due to weak product sales, which decreased 5.6% year over year to $303.0 million.

Services revenues increased 6.7% from the year-ago quarter to $367.0 million, driven by strong consulting (up 7.3% year over year) and maintenance revenues (up 6.0% year over year) in the quarter.

Region wise, America’s revenues climbed 1.8% year over year to $405.0 million. America comprised 60.4% of total revenue in the second quarter. International accounted for 39.6% of revenues and decreased 0.7% from the year-ago quarter to $265.0 million.

Gross margin (including stock-based compensation expense but excluding other one-time items) contracted 220 basis points (“bps”) from the year-ago quarter to 56.6% in the quarter, primarily due to unfavorable business mix.

Product gross margin declined 150 bps from the year-ago quarter, which was partially offset by a 170 bps improvement in services gross margin.

Selling, general and administrative expense (“SG&A”) as a percentage of revenues increased 70 bps on a year-over-year basis to 27.6%. Research and development (“R&D”) expense climbed 50 bps from the year-ago quarter to 7.0%.

Operating margin (including stock-based compensation expense but excluding other one-time items) plunged to 23.9% from 26.8% in the year-ago quarter due to lower gross margin base and higher expenses.

Net income as a percentage of revenues (including stock-based compensation expense but excluding other one-time items) was 17.3% compared with 18.9% in the year-ago quarter.

Teradata exited the quarter with $826.0 million in cash versus $853.0 million in the previous quarter. As of Jun 30, 2013, Teradata had total long-term debt of $263.0 million compared with $271.0 million as of Mar 31, 2013.

Teradata generated cash flow from operations of $140.0 million in the quarter compared with $243.0 million in the previous quarter. Free cash flow generated in the quarter was $102.0 million compared with $216.0 million in the previous quarter.

Guidance

Teradata now expects revenues to increase at the lower end of its previously announced guidance range of 6%-10% increase on a year-over-year basis. Moreover, the company expects earnings per share to be at the lower end of its earlier guidance range of $3.05-$3.20.

Recommendation

We believe that new customer wins and strengthening relationships with large vendors will be the primary revenue drivers going forward. We believe that Teradata will continue to benefit from its international expansion, improved traction from sales force expansion, new products and alliances, market share gains and a growing database analytics market.

However, increased investment in sales, sluggish spending environment in the domestic market and increasing competition from EMC Corp (EMC - Analyst Report), NetApp (NTAP - Snapshot Report) and Fusion-IO (FIO - Snapshot Report) are resulting in continued pricing pressure that will likely limit margin expansion going forward.

Currently, Teradata has a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%