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Why Is Teradyne (TER) Up 18.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for Teradyne (TER - Free Report) . Shares have added about 18.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Teradyne due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Teradyne Beats Earnings and Revenue Estimates in Q3

Teradyne Inc. reported third-quarter 2018 earnings of 71 cents per share, surpassing the Zacks Consensus Estimate by 8 cents.

Revenues of $567 million increased 12.6% sequentially and 7.8% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $555 million and came in within management’s guided range of $540-$570 million.

Approximately 73% of the revenues came from semiconductor Testing platforms, 12% from Industrial Automation, 9% from system Test business and the remaining 6% from wireless Test business.

Margins

According to the press release, pro-forma gross margin was 58.9%, up 30 basis points (bps) from the prior-year quarter. The increase was due to a favorable mix.

Total adjusted operating expenses of $177.2 million increased 8.7% year over year. As a percentage of sales, selling & administrative expenses increased from the year-ago quarter, while engineering & development decreased.  As a result, adjusted operating margin came in at 25.3%, down 40 bps from the year-ago quarter.

Balance Sheet

Teradyne ended the third quarter with trade receivables of $352.5 million, down from $454.1 million recorded in the last quarter.

Q4 Guidance

Management expects fourth-quarter revenues in the band of $480-$410 million. Non-GAAP earnings per share from continuing operations are likely to be in the range of 46-54 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 19.05% due to these changes.

VGM Scores

At this time, Teradyne 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, Teradyne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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