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Teradyne (TER) Up 14.3% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Teradyne (TER). Shares have added about 14.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Teradyne 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.

Teradyne Q3 Earnings Beat Estimates

Teradyne reported third-quarter 2022 earnings of $1.15 per share, above the midpoint of management’s guided range of 90 cents and $1.16 per share. Earnings surpassed the Zacks Consensus Estimate by 10.6%. However, the bottom line decreased 4.96% sequentially and 27.7% year over year.

Revenues of $827.1 million were above the midpoint of the guided range of $760-$840 million for the September quarter. Revenues surpassed the Zacks Consensus Estimate by 3.2%. The figure dipped 1.6% sequentially and 12.99% on a year-over-year basis.

The year-over-year decline was a result of declining Test and Industrial Automation revenues.

Quarterly Details

Revenues from Semiconductor Test platforms, System Test business, Industrial Automation and Wireless Test business were $576 million (69.6% of total revenues), $116 million (14%), $89 million (10.8%) and $46 million (5.6%), respectively.

Test revenues and Industrial Automation revenues declined 14% and 2% from the respective prior-year quarter’s levels.

Operating Results

Non-GAAP gross margin was 58.7%, contracting 140 basis points (bps) year over year.

Operating expenses increased 2.1% year over year to $253.9 million. As a percentage of revenues, operating expenses increased 454 bps year over year to 30.7%.

Non-GAAP operating margin was 28.8%, which contracted 580 bps from the year-ago quarter’s reading.

Balance Sheet & Cash Flow

As of Oct 2, 2022, Teradyne’s cash and cash equivalents (including marketable securities) were $710.7 million, lower than $781.9 million on Jul 3, 2022.

Net cash provided by operating activities was $271.6 million for the third quarter compared with $115.5 million in the prior quarter.

Guidance

For the fourth quarter of 2022, Teradyne expects revenues between $670 million and $750 million.

Non-GAAP earnings are expected between 62 cents and 86 cents per share for fourth-quarter 2022.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Teradyne has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Teradyne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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