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Teradyne's Earnings Beat, Ups View

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Teradyne Inc. (TER - Free Report) reported first-quarter 2013 earnings of 9 cents per share, beating the Zacks Consensus Estimate of 3 cents. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.


Revenues of $280.4 million were up 12.9% sequentially but down 29.3% year over year and slightly above management’s guidance of $260.0–$280.0 million due to improving demand.

Around 75.4% of revenues in the quarter came from semiconductor testing platforms, 12.6% from system testing and the remaining 12.1% from the LitePoint wireless testing business.


Total bookings in the quarter amounted to $400.0 million, of which $259.0 million were in Semiconductor Test, $109.0 million in Wireless Test and $32 million in the Systems Test Group.

Total orders were up 47% sequentially, driven by a 42% increase in Semiconductor Test orders and 322% increase in Wireless Test orders.


Reported gross margin for the quarter was 54.7%, up 420 basis points (bps) sequentially and 660 bps year over year. Higher volumes led to gross margin expansion in the quarter.

Operating expenses of $130.7 million were up 2.2% from $127.9 million in the year-ago quarter. The reported operating margin was 1.6%, down significantly from 11.7% in 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 income was $6.6 million or earnings per share of 3 cents, down from a net income of $33.6 million or 15 cents in the comparable quarter last year. Excluding special items but including stock-based compensation expense, non-GAAP net income was $18.2 million or 9 cents per share compared with $60.2 million or 30 cents a share in the year-ago quarter.

Balance Sheet

The company ended the first quarter with cash and cash equivalents and marketable securities balance of $770.0 million, roughly flat sequentially. Trade receivables were $166.6 million, up from $153.4 million in the prior quarter.

Cash flow from operations was ($36.5) million versus $11.2 million in the year-ago quarter. Capex was $22.5 million versus $27.1 million in the year-ago quarter.


Management also provided guidance for the second quarter of 2013. Accordingly, revenues are expected to come in at around $380–$420 million, up 48.1% sequentially at the mid-point. Non-GAAP earnings from continuing operations are expected to be 26 to 36 cents a share and GAAP earnings per share are expected to be 12 to 20 cents per share.


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

In the last quarter, the company reported higher orders and also raised its second quarter guidance, indicating macro visibility and 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 in the longer 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 #3 (Hold). Investors can also consider some other stocks with positive Zacks Rank and Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method) such as:

Applied Materials, Inc. (AMAT - Free Report) , Earnings ESP of +7.69% and Zacks Rank #1 (Strong Buy)

Fiserv Inc. (FISV - Free Report) , with an ESP of +3.03% and a Zacks Rank #2 (Buy) (AMZN - Free Report) , with an ESP of +100.0% and a Zacks Rank #3 (Hold)

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