Teradyne Fourth-Quarter Report, Guidance Beat Estimates

Teradyne shares climbed Thursday as analysts praised the test-equipment maker for soundly exceeding their first-quarter-guidance expectations.
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Teradyne (TER) - Get Report shares were higher Thursday as analysts praised the test-equipment maker for soundly exceeding first-quarter-guidance expectations.

The North Reading, Mass., company reported fourth-quarter GAAP net income per share slipped 5.1% to 75 cents a share from 79 cents in the year-earlier quarter.

Non-GAAP net income of 88 cents a share was up 40% from 63 cents. 

Fourth-quarter revenue of $655 million climbed 26% from $520 million a year earlier.  

Analysts surveyed by FactSet were expecting net income of 73 cents, or an adjusted 79 cents, on revenue of $611.7 million.

For Q1 2020 Teradyne expects GAAP net income of 75 cents to 85 cents a share, or an adjusted 86 cents to 96 cents. Revenue should come in at $670 million to $710 million, the company said. 

Analysts had been looking for earnings of 58 cents a share, or an adjusted 65 cents, on sales of $564.5 million.

The board authorized a $1 billion share buyback, with expectations to repurchase at least a quarter of that figure in 2020. And it lifted the quarterly dividend 11% to a dime a share from 9 cents, payable March 20 to holders of record Feb. 21.

Teradyne's test solutions are applied to products including semiconductors, electronic systems, wireless devices and others to ensure that they work as they were designed. 

"The first-quarter 2020 outlook was well above consensus, aided by early demand for [system on chip] (possibly Apple  (AAPL) - Get Report) and NAND flash test," Cowen analyst Krish Sankar said in a note to investors. 

The "[bigger] question is around sustainability of 5G as Apple fades off?"

Sankar, who rates Teradyne market perform with a price target of $42 a share, said that industrial automation improved sequentially in the December quarter. The improvement came from both universal robots and the mobile-industrial-robots product segment.

Deutsche Bank’s Sidney Ho, who maintains a hold rating, said management continues to cite the 5G infrastructure build as an area of upside, with this quarter helped by stronger performance in memory and wireless test.

“[Increasing] 5G and industrial automation appeal will help drive the stock multiple higher over time,” said Citi's Atif Malik, who has a buy rating on the stock.

“Bigger picture,” said Evercore ISI analyst C.J. Muse, “we continue to view Teradyne’s leverage to 5G infrastructure and handsets, an industrial recovery in industrial automation, an auto/industrial recovery in semi test, and incremental revenues from LitePoint [wireless-device testing] and [hard disk drive] test as supportive of as much as $5 in earnings power potentially pulled into the 2021 time frame.”

Muse pegs Teradyne outperform with an $85 price target.

At last check Teradyne shares were 3.3% higher at $76.03. In 2019 through Wednesday's trading, Teradyne shares had risen nearly 8%.