A month has passed by for the reason that final earnings report for Keysight (KEYS). Shares have misplaced about 4.8% in that timeframe, underperforming the S&P 500.
Will the current unfavourable development proceed main as much as its subsequent earnings launch, or is Keysight due for a breakout? Earlier than we dive into how traders and analysts have reacted as of late, let’s take a fast take a look at the latest earnings report as a way to get a greater deal with on the essential drivers.
Keysight Q3 Earnings Beat Estimate Regardless of Decrease Revenues
Keysight reported comparatively sturdy third-quarter fiscal 2024 outcomes, with the underside and the highest strains surpassing the respective Zacks Consensus Estimate. Nonetheless, the corporate reported a top-line decline yr over yr. Weak point in a number of finish markets, together with common electronics, semiconductor and automotive, impeded the online gross sales progress. Sturdy demand for AI associated community knowledge heart infrastructure options and wholesome momentum in software program and providers partially cushioned the highest line.
Internet Earnings
Internet earnings on a GAAP foundation was $389 million or $2.22 per share, up from $288 million or $1.61 per share within the year-ago quarter. Regardless of top-line decline, earnings tax advantages led to larger internet earnings.
Non-GAAP internet earnings within the reported quarter was $275 million or $1.57 per share in contrast with $393 million or $2.19 per share within the prior-year quarter. The underside line surpassed the Zacks Consensus Estimate by 22 cents.
Revenues
Quarterly internet gross sales have been $1.22 billion in contrast with $1.38 billion recorded within the year-ago quarter. Complete orders declined 1% yr over yr to $1.24 billion. Weak demand in a number of finish markets hindered income progress. Nonetheless, the highest line beat the Zacks Consensus Estimate by $24 million.
Communication Options Group (CSG) generated $847 million in revenues, down 8% yr over yr. Funding delays in new tasks led to a decline in revenues from the Aerospace, Protection & Authorities finish markets. Nonetheless, regular funding in radar & spectrum operations, house and satellite tv for pc and quantum options partially reversed this development.
Demand setting remained combined within the business communications vertical. Nonetheless, the corporate witnessed sturdy progress within the wireline enterprise. Strong investments in knowledge heart networks for 400 gig, 800 gig and terabit knowledge charges, AI mannequin coaching and community efficiency, drove internet gross sales within the wireline enterprise. Buyer spending remained cautious within the wi-fi enterprise. The highest line beat our income estimate of $797.2 million.
The Digital Industrial Options Group (EISG) section’s revenues dropped to $370 million from $464 million within the prior-year quarter. Delicate demand within the common electronics market affected internet gross sales. In automotive, the corporate reported a decline in orders and revenues. Weak point within the EV market and decrease auto manufacturing have been headwinds.
Regardless of enchancment in orders, revenues have been down yr over yr within the semiconductor market, owing to excessive stock ranges. Excessive demand for parametric wafer check options from foundry and reminiscence prospects partially reversed this development. Demand for proprietary interferometry programs was sturdy. The highest line fell in need of our income estimate of $394.2 million.
Area-wise, Asia-Pacific revenues aggregated $496 million in contrast with $583 million within the prior-year quarter. The corporate reported an 11% year-over-year decline within the Americas to $500 million. Revenues from Europe have been $221 million, down 15% from the year-ago quarter’s ranges.
Different Particulars
In the course of the quarter, the corporate’s non-GAAP gross revenue totaled $781 million in contrast with $910 million within the year-ago quarter, with gross margins of 64.1% and 65.9%, respectively. The non-GAAP working margin was 26%, down from 31% within the prior-year quarter.
CSG reported a non-GAAP working margin of 26.3%, down 370 foundation factors (bps) yr over yr. EISG reported a non-GAAP working margin of 20.1%, down 1,380 bps yr over yr.
Money Movement & Liquidity
Within the 9 months ended Jul 31, Keysight generated $693 million in money from working actions in contrast with $1.03 billion a yr in the past. As of Jul 31, 2024, the corporate had $1.63 billion in money and money equivalents, with $1.19 billion of long-term debt.
Outlook
For the fourth quarter of fiscal 2024, Keysight expects revenues within the vary of $1.245-$1.265 billion. Non-GAAP earnings are estimated between $1.53 and $1.59 per share.
How Have Estimates Been Transferring Since Then?
Up to now month, traders have witnessed a downward development in estimates revision.
VGM Scores
At the moment, Keysight has a poor Progress Rating of F, nevertheless its Momentum Rating is doing a bit higher with a D. Following the very same course, the inventory was allotted a grade of D on the worth facet, placing it within the backside 40% for this funding technique.
General, the inventory has an combination VGM Rating of F. In the event you aren’t centered on one technique, this rating is the one you ought to be inquisitive about.
Outlook
Estimates have been broadly trending downward for the inventory, and the magnitude of those revisions has been internet zero. Notably, Keysight has a Zacks Rank #3 (Maintain). We anticipate an in-line return from the inventory within the subsequent few months.
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Keysight Technologies Inc. (KEYS) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
