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Here's Why You Should Add Keysight to Your Portfolio Now

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A successful investor understands the importance of adding well-performing stocks to the portfolio at the right time. Keysight Technologies Inc. (KEYS - Free Report) is one such technology stock that has been on a healthy growth trajectory of late.

Moreover, the stock has been clocking solid returns of 6% in the past three months, outperforming the industry's growth of 5.5%.

The stock has a market cap of $7.83 billion. With solid prospects, this Zacks Rank #1 (Strong Buy) stock is an attractive pick at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stellar Performance in Q4

Keysight reported non-GAAP earnings of 71 cents per share that increased 10.9% from the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate of 65 cents per share.

Non-GAAP revenues surged 20.1% from the year-ago quarter to $902 million. Core revenues (excluding the impact of currency and revenue from acquisitions completed within the last 12 months) increased 3% year over year and were in line with management’s expectation.

The company’s focus on launching new solutions for growth markets like 5G, Internet of Things (IoT), next-generation wireless, high-speed datacenters and automotive & energy are key catalysts.

Estimates Northbound

Estimates for Keysight have moved up in the past 30 days, reflecting the optimistic outlook of analysts. Earnings estimate for fiscal 2018 have jumped 3.3% to $2.79 per share.

The Zacks Consensus Estimate for revenues is $3.61 billion for fiscal 2018, displaying 12.2% year-over-year growth. For the fiscal 2018, the Zacks Consensus Estimate for earnings is pegged at $2.79, depicting year-over-year growth of 10.4%.

Valuation

Moreover, the stock looks very attractive from a valuation perspective as it currently trades significantly lower than the industry average based on a forward earnings estimate, which signifies a huge upward potential. Keysight currently trades at a forward P/E of 15.40x as against the industry group average of 23.20x.

Positive Earnings Surprise History

Keysight has an impressive earnings surprise history. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 5.8%.

Growth Drivers

Keysight stated that orders for 5G solutions recorded 50% year-over-year growth in the last reported quarter. The company’s partnerships with the likes of Verizon Communications Inc (VZ - Free Report) and Qualcomm Technologies, Inc., a subsidiary of Qualcomm Incorporated (QCOM - Free Report) are helping it to achieve 5G commercialization related milestones. Additionally, the acquisitions of Anite and AT4 Wireless have enhanced the company’s 5G solutions portfolio.

Additionally, the company also released the latest version of its SystemVue electronic system level (“ESL”) software aimed at providing designers with the first-of-its-kind 5G design and verification process.

Moreover, IoT also presents significant growth opportunity based on the company’s broad and diverse portfolio that effectively addresses the needs of customers related to power consumption, RF performance, interoperability and conformance testing.

Management noted that growing demand for electric and hybrid cars bodes well for the company’s product portfolio, which was recently enhanced with the acquisition of Scienlab. Further, increasing electronic content in vehicles, radar technologies for autonomous driving and high-power devices and applications are driving demand for the company’s solutions in this end market. The company’s Detroit based Automotive Solution Center that was opened last month is another positive.

Conclusion

We expect these factors to help the company sustain strong momentum and stay afloat amid difficult times. Consequently, we suggest that investors buy the stock for the time being.

Another better-ranked stock in the technology sector is Intel Corporation (INTC - Free Report) , sporting a Zacks Rank #1.

Long-term earnings growth rate for Intel is projected to be 8.4%.

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