Teradyne Inc. TER reported second-quarter 2020 earnings of $1.33 per share, surpassing the Zacks Consensus Estimate of $1.04. The figure also increased 101.5% year over year and 33% sequentially.
Moreover, revenues of $838.7 million increased 438.7% year over year. The figure surpassed the Zacks Consensus Estimate by 10.6%.
Following strong second-quarter results and encouraging third-quarter guidance, Teradyne’s share price rose 3.99% in after-hours trading.
Teradyne, Inc. Price, Consensus and EPS Surprise
Teradyne, Inc. price-consensus-eps-surprise-chart | Teradyne, Inc. Quote
Inside the Headlines
Approximately 79% of revenues came from semiconductor testing platforms, 9% from the System Test business, 7% from Industrial Automation and the remaining 5% from the Wireless Test business.
The increase in total revenues was driven by strong test revenues, which grew 59% year over year on Semiconductor Test strength. Also, stronger-than-expected System on a Chip (SOC) test shipments — driven by increased demand for mobility-related test capacity — aided revenue growth.
However, Teradyne’s Industrial Automation segment declined 21% year over year in the second quarter due to manufacturing sector headwinds on a global basis.
Margins
Pro-forma gross margin was 56.2%, down 130 basis points (bps) from the prior-year quarter. The decrease was due to an unfavorable product mix.
Total operating expenses (selling and administrative & engineering and development) of $207.4 million increased 9% year over year. As a percentage of sales, both selling & administrative expenses and engineering & development costs decreased from the year-ago quarter.
Operating margin came in at 31.5%, up 770 bps from the year-ago quarter.
Balance Sheet
At second quarter-end, Teradyne’s cash and cash equivalents (including marketable securities) were $958.1 million, higher than $804.5 million in the prior quarter.
Net cash provided by operating activities were $225.8 million in the second quarter versus $43.1 million in the prior quarter.
During the quarter, the company repurchased $9.4 million of its common stock and paid $16.6 million as dividends.
Guidance
Management expects third-quarter 2020 revenues in the band of $745-$805 million. Non-GAAP earnings per share from continuing operations are likely to be in the range of $1.01-$1.17.
Management provided encouraging third-quarter guidance to reflect increased memory and storage test shipments, along with production ramps of new product design wins in SOC test.
The Zacks Consensus Estimate for third-quarter revenues and earnings per share is pegged at $606.86 million and 65 cents, respectively.
Zacks Rank and Key Picks
Currently, Teradyne carries a Zacks Rank #2 (Buy). Some better-ranked stocks in the broader technology sector include Microchip Technology Incorporated MCHP, eBay EBAY and Wayfair Inc. W. While Microchip Technology and eBay sport a Zacks Rank #1 (Strong Buy), Wayfair carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Microchip Technology, eBay, and Wayfair is currently projected at 14.5%, 11.71% and 23%, respectively.
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