Yahoo Finance Why Is Keysight (KEYS) Down 3.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Keysight (KEYS). Shares have lost about 3.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Keysight due for a breakout? 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.
Keysight Q1 Earnings Beat Estimates, Top Line Grows Y/Y
Keysight reported impressive first-quarter fiscal 2023 results, beating both the bottom-line and top-line estimates. Against the backdrop of moderating demand and challenging macro-dynamics, the company recorded year-over-year higher revenues backed by strong operating discipline and the strength of its differentiated portfolio.
Net Income
GAAP net income increased to $260 million or $1.45 per share from $229 million or $1.24 per share in the year-ago quarter primarily due to top-line expansion.
Non-GAAP net income in the reported quarter was $363 million or $2.02 per share compared with $305 million or $1.65 per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimate of $1.85.
Revenues
Revenues totaled $1,381 million, up 10% from the prior-year quarter’s levels of $1,250 million Led by healthy growth across all segments. The top line beat the consensus estimate of $1,370 million. However, orders declined to $1,300 million compared with $1,495 in the prior-year quarter. Geopolitical volatility owing to war in Europe and tensions with China, cautious demand trend from customers in the face of macroeconomic uncertainty led to a 13% year-over-year decline.
Revenues from Communication Solutions Group (CSG) were $939 million compared with $878 million reported in the prior-year quarter. Strong demand for the company’s 5G, O-RAN, 800G and terabit communication solutions and strength in aerospace, defense and government led to 7% year-over-year revenue growth.
The Electronic Industrial Solutions Group (EISG) segment revenues rose to $442 million compared with $372 million in the prior-year quarter. The solid 19% year-over-year growth was majorly propelled by expansion in general electronics, next-generation energy and automotive solutions.
Region-wise, the company witnessed 16% year-over-year growth in the Americas as revenues rose to $561 million from $483 million in the prior-year quarter. Revenues from Europe were $257 million, up 14% from the year-ago quarter’s levels of $226 million. Solid performance in electronic industrial solutions, commercial communications, aerospace, defense and government boosted revenue growth from these regions. Asia-Pacific revenues aggregated $563 million compared with $541 million in the prior-year quarter.
Other Details
During the quarter, the company’s non-GAAP gross profit totaled $901 million compared with $824 million in the year-ago quarter. Keysight’s non-GAAP gross margin was 65.2%, marginally lower than the year-ago quarter’s level of 65.9%. Non-GAAP operating margin was 29.7%.
CSG reported a non-GAAP gross margin of 67.5%, while EISG reported a non-GAAP gross margin of 60.5%. CSG's non-GAAP operating margin was 28.7% and EISG’s non-GAAP operating margin was 31.8%.
Cash Flow & Liquidity
In the first quarter of fiscal 2023, Keysight generated $366 million in cash from operating activities compared with $224 million a year ago. As of Jan 31, 2022, the company had $2,228 million in cash and cash equivalents with $1,793 million of long-term debt.
Outlook
For the second quarter of fiscal 2023, Keysight expects revenues in the range of $1.37-$1.39 billion, indicating revenue growth of 1-3%. Non-GAAP earnings are estimated between $1.91 and $1.97 per share. Net interest and other income/expenses are expected in the band of $6-$8 million and management estimates a non-GAAP tax rate of 12%.
Management expects macroeconomic challenges to persist in the near term and customers are likely to remain cautious for the next couple of quarters. However, the business expects that its software-centric solutions are well-positioned to meet customers' needs and will enable it to outperform the market.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, Keysight has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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
Keysight has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Keysight Technologies Inc. (KEYS) : Free Stock Analysis Report
