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Teradyne (TER) Up 8.6% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Teradyne (TER). Shares have added about 8.6% in that time frame, underperforming 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 drivers.

Teradyne Q3 Earnings & Revenues Top Estimates, Fall Y/Y

Teradyne reported third-quarter 2023 earnings of 80 cents per share, surpassing the Zacks Consensus Estimate by 11.11% but declining 30.4% year over year.

Revenues of $704 million surpassed the Zacks Consensus Estimate by 2.83% and fell 14.9% year over year.

Quarter Details

Revenues from Semiconductor Test platforms, System Test business, Wireless Test business and Robotics were $498 million (70.7% of total revenues), $83 million (11.8%), $37 million (5.3%) and $86 million (12.2%), respectively.

Teradyne witnessed stable demand in Robotics. In the reported quarter, revenues dropped 4% year over year and increased 20% sequentially.

Gross margin was 56.6%, which contracted 212 basis points (bps) year over year.

In the reported quarter, selling and administrative expenses increased 2% year over year to $138.3 million. As a percentage of revenues, selling and marketing expenses were 19.6% compared with 16.4% reported in the year-ago quarter.

Engineering and Development, as a percentage of revenues, increased 130 basis points (bps) on a year-over-year basis to 14.8%.

Balance Sheet & Cash Flow

As of Oct 1, 2023, Teradyne’s cash, and cash equivalents (including marketable securities) were $716.5 million, lower than $708.4 million as of Jul 2, 2023.

Net cash provided by operating activities was $174.3 million for the third quarter, up from $142.8 million in the prior quarter.

The company returned $136 million to shareholders in the form of share repurchases and dividends in the reported quarter.

Guidance

For the fourth quarter of 2023, Teradyne expects revenues between $640 million and $700 million.

Non-GAAP earnings are expected between 58 cents and 78 cents per share for fourth-quarter 2023.

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How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -8.31% due to these changes.

VGM Scores

At this time, Teradyne has an average Growth Score of C, though it is lagging a bit 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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