It has been about a month since the last earnings report for Teradyne (TER Quick QuoteTER - Free Report) . Shares have added about 22.6% in that time frame, outperforming the S&P 500.

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

Teradyne Q3 Earnings & Revenues Beat Estimates

Teradyne reported third-quarter 2021 earnings of $1.59 per share, which surpassed the Zacks Consensus Estimate by 9.7% and increased 34.7% year over year.

Revenues of $951 million also surpassed the Zacks Consensus Estimate of $941.3 million. Further, the figure increased 16% year over year. Higher demand for both Test and Industrial Automation (“IA”) products drove top-line growth for the reported quarter.

Quarter Details

Revenues from Semiconductor Test platforms, System Test business, IA, and Wireless Test business were $688 million, $103 million, $91 million, and $69 million, respectively.

Test revenues were driven by strength in Semiconductor Test and Wireless Test. Also, IA revenues increased because Universal Robots globally delivered high growth.

Test shipments remained high for the reported quarter. But, shipments from the IA business were low owing to supply constraints in the product lines.

Non-GAAP gross margin was 60.1%, expanding 407 basis points (bps) year over year.

GAAP operating expenses increased 31.4% year over year to $248.6 million. As a percentage of revenues, GAAP operating expenses increased 306 bps year over year to 26.2%.

Selling and administrative (S&A) expenses grew 16.4% year over year to $134.8 million. Engineering and development (E&D) increased 12.97% year over year to $107.2 million. S&A expenses expanded 5 bps while E&D expenses contracted 30 bps as a percentage of revenues.

Acquired intangible assets amortization (AIAA) expenses declined 13.9% year over year to $5.4 million. As a percentage of revenues, AIAA expenses contracted 20 bps year over year.

Consequently, non-GAAP operating margin was 33.9%, which expanded 101 bps from the year-ago quarter.

Balance Sheet & Cash Flow

As of Oct 3, 2021, Teradyne’s cash and cash equivalents (including marketable securities) were $1.31 billion, higher than $1.24 billion as of Jul 4, 2021.

Net cash provided by operating activities was $522.7 million for the third quarter versus $206.3 million in the prior quarter.

Guidance

For the fourth quarter of 2021, Teradyne expects revenues between $820 million and $900 million.

Growing demand in Industrial/Automotive Test, Storage Test, and Industrial Automation is a major tailwind.

Non-GAAP earnings are expected between $1.14 and $1.40 per share for fourth-quarter 2021.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 8.16% due to these changes.

VGM Scores

Currently, Teradyne has a strong Growth Score of A, though it is lagging a lot 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Teradyne has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.