A month has gone by since the last earnings report for Teradyne (TER Quick QuoteTER - Free Report) . Shares have lost about 3.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Teradyne due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Teradyne Q2 Earnings & Revenues Beat Estimates

Teradyne reported second-quarter 2021 earnings of $1.91 per share, which surpassed the Zacks Consensus Estimate by 9.8% and increased 44% year over year.

Revenues of $1.09 billion also surpassed the Zacks Consensus Estimate of $1.05 billion. Further, the figure increased 29.76% year over year. Strong performance of Test and Industrial Automation (“IA”) businesses drove top-line growth for the reported quarter.

Quarter Details

Revenues from Semiconductor Test platforms, System Test business, IA and Wireless Test business were $834 million, $105 million, $92 million and $55 million, respectively.

Test demand across all end markets served remained high for the reported quarter. Moreover, system-on-a-chip test shipments grew approximately 30% year over year.

Further, the IA business witnessed strong recovery as IA revenues increased 57% year over year. Also, its Universal Robots delivered growth in North America, Europe and China driven by global economic recovery and expanding range of automation solutions.

Non-GAAP gross margin was 59.6%, expanding 340 basis points (bps) year over year.

GAAP operating expenses increased 1.81% year over year to $258.1 million. As a percentage of revenues, GAAP operating expenses decreased 645 bps year over year to 23.77%.

Selling and administrative (S&A) expenses grew 23.7% year over year to $140.1 million. Engineering and development (E&D) increased 16.9% year over year to $110 million. Nonetheless, S&A and E&D expenses contracted 60 bps and 109 bps as a percentage of revenues, respectively.

Acquired intangible assets amortization (AIAA) and restructuring and other (R&O) expenses declined 39.6% and 93.3% year over year to $5.4 million and $2.5 million, respectively. As a percentage of revenues, AIAA and R&O expenses contracted 57 bps and 421 bps year over year, respectively.

Consequently, non-GAAP operating margin was at 36.5%, which expanded 500 bps from the year-ago quarter.

Balance Sheet & Cash Flow

As of Jul 4, 2021, Teradyne’s cash and cash equivalents (including marketable securities) were $1.24 billion, lower than $1.31 billion on Apr 4, 2021.

Net cash provided by operating activities was $206.3 million for the second quarter versus $38.1 million in the prior quarter.

Guidance

For the third quarter of 2021, Teradyne expects revenues between $880 million and $960 million.

Continuous demand from both Test and Industrial Automation end markets are major tailwinds.

Non-GAAP earnings are expected between $1.29 and $1.55 per share for third-quarter 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 5.26% due to these changes.

VGM Scores

At this time, Teradyne has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Teradyne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.