A month has gone by since the last earnings report for Keysight (KEYS Quick QuoteKEYS - Free Report) . Shares have added about 7.9% in that time frame, outperforming the S&P 500.

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

Keysight Q3 Earnings & Revenues Beat Estimates, Up Y/Y

Keysight reported third-quarter fiscal 2021 non-GAAP earnings of $1.54 per share, outpacing the Zacks Consensus Estimate by 6.9% and increasing 29.4% year over year.

Revenues increased 23% year over year to $1.25 billion, surpassing the Zacks Consensus Estimate by 2%. The upside can be attributed to double-digit growth across segments as well as geographies served.

Core revenues (excluding the impact of currency and revenues from acquisitions in a year’s time) rose 21% on a year-over-year basis to $1.22 billion.

Top Line in Detail

Orders increased 23% on a year-over-year basis (20% on a core basis) to $1.31 billion in the reported quarter.

Communications Solutions Group (“CSG”) revenues were $875 million, up 15% year over year (up 13% on a core basis). The increase was driven by continued investments in global 5G deployments, the roll-out of new 5G chipsets and devices, 400G and 800G ethernet for data centers, as well as early 6G research, space, electromagnetic spectrum operations, and satellite applications.

Electronic Industrial Solutions Group (“EISG”) revenues increased 48% year over year (up 44% on a core basis) to $371 million. Solid demand for the company’s semiconductor, general electronics, automotive and energy solutions drove top-line growth.

In terms of end-markets, Aerospace, Defense and Government (“ADG”) revenues jumped 39% year over year to $280 million. Commercial Communications (“CC”) revenues climbed 6% year over year to $595 million. Electronic Industrial (“EI”) revenues were $371 million, up 48% year over year.

In terms of geography, revenues from Americas were $499 million, up 37% (up 34% on a core basis) year over year, driven by strength in EI, ADG and CC.

Revenues from Europe increased 27% (up 20% on a core basis) on a year-over-year basis to $201 million.

Revenues from Asia Pacific increased 12% (up 11% on a core basis) on a year-over-year basis to $546 million. CC revenues suffered due to trade restrictions.

Operating Details

Keysight reported non-GAAP gross margin of 65.1% that expanded 60 basis points (bps) in the fiscal third quarter. CSG gross margin of 65.7% expanded 50 bps while EISG’s gross margin of 63.7% expanded 130 bps on a year-over-year basis.

Non-GAAP operating expenses were $472 million in the fiscal third quarter of 2021, up 21.6% year over year.

Non-GAAP operating margin expanded 110 bps to 27.2%. While CSG operating margin contracted 30 bps, EISG’s operating margin expanded 450 bps on a year-over-year basis.

Balance Sheet & Cash Flow

As of Jul 31, 2021, Keysight had cash & cash equivalents of $2.15 billion compared with $1.99 billion as of Apr 30, 2021.

Long-term debt, as of Jul 31, was $1.79 billion, unchanged from Apr 30.

Cash flow from operations in the quarter was $257 million compared with $402 million reported in the prior quarter.

Free cash flow was $217 million compared with the previous quarter’s $369 million.

Guidance

For fourth-quarter fiscal 2021, Keysight anticipates revenues in the range of $1.25-$1.27 billion. Non-GAAP earnings are projected between $1.59 and $1.65 per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 10.49% due to these changes.

VGM Scores

At this time, Keysight has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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. It comes with little surprise Keysight has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.