Teradyne Inc. (TER) is expected to see a huge improvement in earnings in 2010 compared to the darker days of 2009 as technology sales rebound. The stock is cheap, with a forward P/E of 6.6, well below the industry average of 15.
Teradyne manufactures Automatic Test Equipment used to test various electronics including consumer electronics, automotive, computing, telecommunications and electronics in the aerospace and defense industries.
Revenue Jumped 173% in the First Quarter
On Apr 21, Teradyne reported its first quarter results and crushed it on revenue compared with the year ago period and even compared with the fourth quarter of 2009.
Revenue climbed 173% to $330 million in the first quarter. $290 million was in the Semiconductor Test segment and $40 million was in the Systems Test Group. Revenue grew 23% from the fourth quarter of 2009.
The company also booked $534 million in the first quarter with $460 million in the Semiconductor Test segment and $74 million in the Systems Test Group.
Teradyne surprised on the Zacks Consensus by 43.5%. Earnings per share were 33 cents compared with the Zacks Consensus of 23 cents. Teradyne has surprised on the Zacks Consensus 4 quarters in a row by 22.4%.
Good Times Expected to Continue in the Second Quarter
The company provided guidance of revenue between $390 and $460 million, which is higher than that pocketed in the first quarter. It also saw earnings per share between 45 and 52 cents.
“Our wireless, microcontroller, and power management segments continued to expand and we’re encouraged to see demand increasing in Memory and Hard Disk Drive test,” said Mike Bradley, President and CEO.
“With another quarter of strong top line growth, our business model in the second quarter is poised to deliver the highest profit rate in nearly ten years,” he added.
Zacks Estimates Climb
Analysts had to revise their estimates based on the report and guidance. The Zacks consensus for the second quarter soared to 46 cents from 22 cents just 60 days before. This is at the lower end of the company’s range.
The 2010 Zacks Consensus also jumped in the last 2 months to $1.62 from 95 cents.
Teradyne lost 27 cents last year so this revised estimate is a gain of 699% over 2009 earnings.
The company is expected to report second quarter earnings on July 22.
Value Fundamentals
While Teradyne has an extremely low P/E ratio, it also has an attractive price-to-book ratio of 2.5.
The company sports a PEG ratio of 0.5, which puts it as a deep value stock since it’s under 1.0.
Teradyne is a Zacks #1 Rank (strong buy) stock.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
