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Keysight (KEYS) Up 4.1% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Keysight (KEYS - Free Report) . Shares have added about 4.1% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Keysight Q2 Earnings Beat Estimates on Solid Revenues
Keysight reported healthy second-quarter fiscal 2023 results, with the bottom and the top line beating Zacks Consensus Estimates.
Despite macroeconomic challenges, solid demand trends in several verticals such as automotive, semiconductor, aerospace, defense and increased investment in O-RAN, 5G and 6G research and AI-ML data centers led to year-over-year top line expansion.
Net Income
GAAP net income increased to $283 million or $1.58 per share from $258 million or $1.41 per share in the year-ago quarter. The upside can be attributed to higher interest income and growth in net sales.
Non-GAAP net income in the reported quarter was $380 million or $2.12 per share compared with $334 million or $1.83 per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimate of $1.94.
Revenues
Revenues totaled $1,390 million, up 3% from the prior-year quarter’s levels of $1,351 million. Solid performance in Electronic Industrial Solutions segment and Aerospace, Defense end markets boosted the top line. The top line beat the consensus estimate of $1,379 million. However, orders declined 10% year over year to $1,319 million.
Revenues from Communication Solutions Group (CSG) were $937 million compared with $963 million in the prior-year quarter. Cautious but stable spending environment, particularly in smartphone and PC computing markets owing to inventory adjustments and macroeconomic challenges, dented net sales in this segment. However, strength in aerospace, defense and government induced by record net sales growth in radar system applications, spectrum operations, space, satellite, 5G and 6G research partially offset the declining trends. Increasing investments in non-terrestrial networks, O-RAN, early 6G and AI-ML data center networks were positive factors.
The Electronic Industrial Solutions Group (EISG) segment revenues rose to $453 million from $388 million in the prior-year quarter. The solid 17% year-over-year growth was largely propelled by record sales growth in Automotive, semiconductor and general electronics.
Region-wise, the company witnessed an 8% year-over-year decline in the Americas to $517 million. The downside was caused by lower demand among some larger customers in the region. Revenues from Europe were $229 million, up 5% from the year-ago quarter’s levels of $217 million. The upside was driven by strength in automotive with some crucial deal wins. Asia-Pacific revenues aggregated $644 million compared with $571 million in the prior-year quarter.
Other Details
During the quarter, the company’s non-GAAP gross profit totaled $927 million compared with $878 million in the year-ago quarter. Keysight’s non-GAAP gross margin was 66.7%, compared to year-ago quarter’s level of 65%. Non-GAAP operating margin was 30.4%, up from 28.8% in the prior-year quarter.
CSG reported a non-GAAP operating margin of 28.4%, up 20 basis points year over year. EISG reported a non-GAAP operating margin of 34.5%, up 420 basis points year over year owing to double-digit revenue growth in automotive, general electronics and semiconductor.
Cash Flow & Liquidity
In the second quarter of fiscal 2023, Keysight generated $423 million in cash from operating activities compared with $298 million a year ago, bringing the respective tallies for the first six months to $789 million and $522 million. As of Apr 30, 2023, the company had $2,498 million in cash and cash equivalents with $1,793 million of long-term debt.
Outlook
Despite macroeconomic challenges, the company expects demand trends of the first half of fiscal 2023 to persist in the second half as well. Given the strength of the company’s operating model and growth initiatives, management anticipates a better earnings performance.
For the third quarter of fiscal 2023, Keysight expects revenues in the range of $1.37-$1.39 billion. Non-GAAP earnings are estimated between $2.00 and $2.06 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Keysight has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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, Keysight has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Keysight (KEYS) Up 4.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Keysight (KEYS - Free Report) . Shares have added about 4.1% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Keysight Q2 Earnings Beat Estimates on Solid Revenues
Keysight reported healthy second-quarter fiscal 2023 results, with the bottom and the top line beating Zacks Consensus Estimates.
Despite macroeconomic challenges, solid demand trends in several verticals such as automotive, semiconductor, aerospace, defense and increased investment in O-RAN, 5G and 6G research and AI-ML data centers led to year-over-year top line expansion.
Net Income
GAAP net income increased to $283 million or $1.58 per share from $258 million or $1.41 per share in the year-ago quarter. The upside can be attributed to higher interest income and growth in net sales.
Non-GAAP net income in the reported quarter was $380 million or $2.12 per share compared with $334 million or $1.83 per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimate of $1.94.
Revenues
Revenues totaled $1,390 million, up 3% from the prior-year quarter’s levels of $1,351 million. Solid performance in Electronic Industrial Solutions segment and Aerospace, Defense end markets boosted the top line. The top line beat the consensus estimate of $1,379 million. However, orders declined 10% year over year to $1,319 million.
Revenues from Communication Solutions Group (CSG) were $937 million compared with $963 million in the prior-year quarter. Cautious but stable spending environment, particularly in smartphone and PC computing markets owing to inventory adjustments and macroeconomic challenges, dented net sales in this segment. However, strength in aerospace, defense and government induced by record net sales growth in radar system applications, spectrum operations, space, satellite, 5G and 6G research partially offset the declining trends. Increasing investments in non-terrestrial networks, O-RAN, early 6G and AI-ML data center networks were positive factors.
The Electronic Industrial Solutions Group (EISG) segment revenues rose to $453 million from $388 million in the prior-year quarter. The solid 17% year-over-year growth was largely propelled by record sales growth in Automotive, semiconductor and general electronics.
Region-wise, the company witnessed an 8% year-over-year decline in the Americas to $517 million. The downside was caused by lower demand among some larger customers in the region. Revenues from Europe were $229 million, up 5% from the year-ago quarter’s levels of $217 million. The upside was driven by strength in automotive with some crucial deal wins. Asia-Pacific revenues aggregated $644 million compared with $571 million in the prior-year quarter.
Other Details
During the quarter, the company’s non-GAAP gross profit totaled $927 million compared with $878 million in the year-ago quarter. Keysight’s non-GAAP gross margin was 66.7%, compared to year-ago quarter’s level of 65%. Non-GAAP operating margin was 30.4%, up from 28.8% in the prior-year quarter.
CSG reported a non-GAAP operating margin of 28.4%, up 20 basis points year over year. EISG reported a non-GAAP operating margin of 34.5%, up 420 basis points year over year owing to double-digit revenue growth in automotive, general electronics and semiconductor.
Cash Flow & Liquidity
In the second quarter of fiscal 2023, Keysight generated $423 million in cash from operating activities compared with $298 million a year ago, bringing the respective tallies for the first six months to $789 million and $522 million. As of Apr 30, 2023, the company had $2,498 million in cash and cash equivalents with $1,793 million of long-term debt.
Outlook
Despite macroeconomic challenges, the company expects demand trends of the first half of fiscal 2023 to persist in the second half as well. Given the strength of the company’s operating model and growth initiatives, management anticipates a better earnings performance.
For the third quarter of fiscal 2023, Keysight expects revenues in the range of $1.37-$1.39 billion. Non-GAAP earnings are estimated between $2.00 and $2.06 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Keysight has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. 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, Keysight has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.