Teradyne’s (TER, Financial) stock performed the best it had in 2 years after posting first quarter earnings that exceeded analysts’ predictions for the tools maker known for testing of semiconductors and wireless products.
Teradyne reported an EPS of 17 cents surpassing most analysts’ predictions by 5 cents. Teradyne’s revenue for the current quarter stood at $342.4 million, higher than the $330 million predicted by the analysts.
The company reported operating expenses of $143.5 million which had dropped 1.1% from $145.1 million when compared year-on-year.
Teradyne’s balance sheet read $868.2 million, an increase from $828.0 million reported in the previous quarter. The company will be expecting reports showing EPS of 42 cents to 48 cents a share as well as revenue of $470 million to $500 million for the second quarter. Early on Friday, over 2.2 million shares of Teradyne had been traded, which exceeded the company’s average of 1.8 million shares daily.
Orders during the first quarter of 2015 were worth $490 million of which $397 million were from Semiconductor Tests and $66 million in System Tests.
Words from CEO
Mark Jagiela, CEO and President of Teradyne, spoke confidently of his company’s performance saying - ‘’A combination of new product success and strong demand in Semiconductor and Storage test drove company orders up nearly 50% sequentially. In Memory test, orders more than doubled sequentially due to increasing test demand for higher speed memories. We achieved record orders for both our recently introduced Magnum V memory test system and our UltraFLEX-M high- speed DRAM test system. In System-on-a-Chip test, orders grew 66% based on a combination of the success of our new IP750Ex-HD system for image sensor test, continued strength in mobile processors, and growing demand in analogue test. In Storage test, our new Saturn test system also booked record orders as lingering industry idle capacity has been absorbed and continued growth in cloud and enterprise storage drove new demand. Overall, while the full year test demand outlook remains mixed, given the substantial growth in our first quarter orders, we’re increasing our second quarter production plans to meet customer capacity needs.”
Steps going forward
Teradyne announced they had begun a credit agreement for 5 years for a senior secured credit facility of $350 million that would be available for general corporate usage as well as working capital.
On the dividend front, the company paid $13 million in dividends in the first quarter. Presently, Teradyne expects to repurchase at least $300 million of the $500 million shares authorized for the buyback program by the management board.
Final take
Thanks to Teradyne’s strengths, analysts are giving the company a ‘BUY’ rating. This rating is guided by the company’s clear and present strengths which should overshadow the company’s weaknesses. Teradyne’s strengths in various areas are its revenue growth, fairly solid financial position with manageable debt levels, consistent cash flow from operations and fast growing profit margins. These strengths should outweigh the negatives such as lackluster performance in the stock market.
