Teradyne Inc. TER reported first-quarter 2015 earnings of 17 cents per share, surpassing the Zacks Consensus Estimate by 5 cents. Adjusted earnings per share exclude one-time items but include stock-based compensation expense.
Following the results, shares gained 7.9% on the back of higher revenues and strong guidance.
Revenues
Revenues of $342.4 million were up 5.9% sequentially and 6.7% year over year. Also, revenues beat the Zacks Consensus Estimate of $330 million and were at the higher end of management’s guided range of $320–$345 million.
Approximately 79% of revenues came from semiconductor testing platforms, 11% from system testing and the remaining 10% from wireless testing business.
Bookings
Total orders amounted to $490.0 million, up 47.6% sequentially. Specifically, on a sequential basis, Semiconductor Test orders soared 75.7% to $397.0 million, while Systems Test Group orders declined 1.5% to $66 million and Wireless Test orders declined 30.8% to $27.0 million.
Margins
Reported gross margin was 56.2%, up 660 basis points (bps) sequentially and 420 bps year over year. The increase was backed by higher revenues and a favorable mix.
Total operating expenses of $143.5 million were down 1.1% from $145.1 million in the year-ago quarter. Engineering & development (E&D) expenses remained flat, while selling & administrative (S&A) expenses decreased as a percentage of sales. As a result, the reported operating margin came in at 10.3% versus 1.1% in the year-ago quarter.
GAAP net income was $32.8 million or earnings of 15 cents per share, up from net income of $0.9 million or breakeven earnings in the comparable quarter last year. Excluding special items but including stock-based compensation expense, non-GAAP net income was $37.6 million or 17 cents per share compared with $22.4 million or 11 cents in the year-ago quarter.
Balance Sheet
The company ended the quarter with cash and cash equivalents and marketable securities balance of $868.2 million, up from $828.0 million in the prior quarter. Trade receivables were $175.8 million, up from $151.0 million in the last quarter.
Cash flow from operations was $37.5 million versus $179.4 million in the earlier quarter. Capex was $21.1 million versus $24.0 million in the previous quarter.
Share Repurchase/Dividend
In the quarter, Teradyne repurchased 2.4 million shares and paid a total of $13 million in dividends.
Guidance
Management provided guidance for the second quarter of 2015. Revenues are expected in the range of $470–$500 million, up 41.8% sequentially at the mid-point. The Zacks Consensus Estimate is pegged at $440.0 million.
Non-GAAP earnings per share from continuing operations are expected in the range of 42 to 48 cents, higher than the Zacks Consensus Estimate of 33 cents. GAAP earnings are expected within 37 to 43 cents per share.
Conclusion
Teradyne’s first-quarter earnings beat the Zacks Consensus Estimate backed by stronger-than-expected revenues.
The company reported strong orders in Semiconductor market, indicating improving demand for its products in the near future.
We remain optimistic about Teradyne over the long term given the popularity of its products, the LitePoint acquisition and continuous design win momentum. However, weakness in key end markets could keep the shares under pressure in the near term.
Currently, Teradyne has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Broadcom Corp. BRCM, Nitto Denko Corporation NDEKY and DSP Group Inc. DSPG. While Broadcom sports a Zacks Rank #1 (Strong Buy), DSP Group and Nitto Denko have a Zacks Rank #2 (Buy).
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