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Teradyne (TER) Q3 Earnings & Revenues Surpass Estimates

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Teradyne Inc. (TER - Free Report) reported third-quarter 2020 earnings of $1.18 per share, which surpassed the Zacks Consensus Estimate of $1.11. The figure increased 53.2% year over year but decreased 11.3% sequentially.

Revenues of $819.5 million increased 40.8% year over year. The figure also surpassed the Zacks Consensus Estimate by 4.3%.

Following strong third-quarter results and encouraging fourth-quarter guidance, its share price rose 1.5%.

Inside the Headlines

Approximately 72% of revenues came from semiconductor testing platforms, 15% from the System Test business, 8% from Industrial Automation and the remaining 5% from the Wireless Test business.

The increase in total revenues was driven by strong test revenues, which grew 46% year over year on Memory and Storage test shipments. Also, stronger-than-expected System on a Chip test shipments — driven by increased demand for mobility-related test capacity — aided revenue growth.

Teradyne’s Industrial Automation revenues were up 17% sequentially but flat with the year-ago quarter on improving global manufacturing conditions and new products.

Teradyne, Inc. Price, Consensus and EPS Surprise

Teradyne, Inc. Price, Consensus and EPS Surprise

Teradyne, Inc. price-consensus-eps-surprise-chart | Teradyne, Inc. Quote

Margins

Pro-forma gross margin was 56%, down 330 basis points (bps) from the prior-year quarter. The decrease was due to an unfavorable product mix.

Total operating expenses (selling and administrative & engineering and development) of $210.7 million increased 12.7% year over year. As a percentage of sales, both selling & administrative expenses and engineering & development costs decreased from the year-ago quarter.

Operating margin came in at 30.3%, up 280 bps from the year-ago quarter.

Balance Sheet

At third quarter-end, Teradyne’s cash and cash equivalents (including marketable securities) were $1.23 billion, higher than $958.1 million in the prior quarter.

Net cash provided by operating activities was $342.5 million for the third quarter versus $225.8 million in the prior quarter.

During the quarter, the company paid $16.6 million as dividends.

Guidance

Management expects fourth-quarter 2020 revenues in the band of $680-$740 million. Non-GAAP earnings per share from continuing operations are likely to be in the range of $0.90-$1.06.

Management provided encouraging fourth-quarter guidance, reflecting strength in the company’s test businesses.

The Zacks Consensus Estimate for fourth-quarter revenues and earnings per share is pegged at $516.50 million and 45 cents, respectively.

For full-year 2020, management expects sales to grow more than 33% on a year-over-year basis to $3.0 billion. GAAP earnings per share are expected to be $4.12, indicating 58% year-over-year growth and non-GAAP earnings are projected at $4.50, suggesting 57% improvement from a year ago.

The Zacks Consensus Estimate for full-year revenues and earnings per share is pegged at $2.85 million and $3.87, respectively.

Zacks Rank and Other Key Picks

Currently, Teradyne carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the broader technology sector include AMETEK, Inc. (AME - Free Report) , Intuit Inc. (INTU - Free Report) and Alibaba Group Holding Limited (BABA - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for AMETEK, Intuit, and Alibaba is currently projected at 7.2%, 14.5% and 18.9%, respectively.

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