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Teradyne Inc (TER - Analyst Report) reported fourth-quarter 2012 earnings of 7 cents per share, beating the Zacks Consensus Estimate of 1 cent. Adjusted earnings per share exclude one-time items, but include stock-based compensation expense.

Revenues

Revenues of $248.4 million were down 46.4% sequentially and 16.4% year over year and within management’s guidance of $235–$260 million. The sequential decline was due to seasonality and a weak macro-economic environment.

Around 74.1% of revenues in the quarter came from semiconductor testing platforms, 16.2% from system testing and the remaining 9.7% from LitePoint wireless testing business.

Bookings

Total bookings in the quarter amounted to $273 million, of which $183 million were from Semiconductor Test, $64 million from Systems Test Group and $26 million came from Wireless Test.

Though sales in the quarter were down sequentially, orders were up 18% sequentially, indicating improving demand.

Margins

Reported gross margin for the quarter was 50.5%, down 570 basis points (bps) sequentially but up 540 bps year over year. Lower volumes impacted gross margins in the quarter.

Operating expenses of $132.1 million were up 8.9% from $121.3 million in the year-ago quarter. The reported operating margin was (9.9%), down significantly from the year-ago quarter. Both engineering and development (E&D) expenses and selling and administrative (S&A) expenses increased as a percentage of sales.

The quarter’s GAAP net loss was $16.5 million or loss per share of 9 cents, down from a net income of $127.3 million or 57 cents in the comparable quarter last year. Excluding special items but including stock-based compensation expense, non-GAAP net income was $12.6 million or 7 cents per share compared with $32.3 million or 16 cents a share in the year-ago quarter.

Balance Sheet

The company has a fairly strong balance sheet, with cash and cash equivalents, and marketable securities of $770.4 million, down from $830.5 million in the prior quarter. Trade receivables were $153.4 million, down from $205.5 million in the prior quarter.

Cash flow from operations was $42.3 million versus $59.2 million in the year-ago quarter. Capex was $27.9 million versus $19.5 million in the year-ago quarter.

Guidance

Management provided guidance for the first quarter of 2013. Accordingly, revenue is expected to come in at around $260–$280 million, up 9.1% sequentially. Non-GAAP earnings (loss) from continuing operations are expected to be (1) to 5 cents a share and GAAP loss per share is expected to be 6 to 1 cents.

Conclusion

Teradyne is a leading provider of automated test equipment. The company reported a decent quarter, with earnings beating the Zacks Consensus Estimate.

In the last quarter, the company reported higher orders and also announced first quarter guidance, indicating improved demand for Teradyne products in the future.

We also believe the addition of LitePoint is a big positive going forward, given the significant opportunities unfolding in the high-growth wireless market. We remain optimistic about Teradyne over the long term, given the popularity of its products, the LitePoint acquisition that further rounds out its portfolio and design win momentum that should continue.

Currently, Teradyne has a Zacks Rank #2 (Buy).

Investors should look out for some more stocks that are slated to report this earnings season with positive Zacks Rank and Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method).

Yahoo Inc. (YHOO - Analyst Report) has a Zacks Rank #1 (Strong Buy) with an ESP of +14.82%. Interdigital Inc. (IDCC - Snapshot Report) has a Zacks Rank #2 (Buy) with an ESP of +350.0%, while Broadcom Corp. (BRCM - Analyst Report) has a Zacks Rank #2 (Buy) with an ESP of +1.9%. .
 

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