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Teradata (TDC) Up 9% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Teradata (TDC - Free Report) . Shares have added about 9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Teradata 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 catalysts.
Teradata Q3 Earnings Beat Mark
Teradata reported third-quarter 2022 non-GAAP earnings of 31 cents per share, which beat the Zacks Consensus Estimate by 10.7%. The metric declined 27.9% year over year and 6.1%, sequentially.
Revenues of $417 million were down 3%, sequentially. The same also decreased 9% year over year on a reported basis and 4% on a constant currency (cc) basis. Also, revenues missed the Consensus mark by 0.9%.
The year-over-year decline in revenues is due to a decrease in recurring, perpetual and consulting revenues.
Total annual recurring revenues (ARR) at the third quarter-end decreased 4% year over year to $1.37 billion. The figure was flat on a cc basis. The decline was a result of closing its business operations in Russia.
Public cloud ARR surged 89% on a reported basis and 99% at cc year over year to $279 million. Growth was driven by rising cloud deals. Strong momentum in all three geographical regions also drove the public cloud ARR.
However, the ongoing macroeconomic challenges and constant currency headwinds affected the quarterly performance.
Top-Line Details
Recurring revenues (accounting for 79% of revenues) decreased 6% year over year (down 2% at cc) to $331 million.
Perpetual software license and hardware revenues (3% of revenues) were down 22% year over year (down 22% at cc) to $14 million.
Consulting services’ revenues (17% of revenues) declined 20% from the year-ago level (down 12% at cc) to $72 million.
Revenues from the Americas declined 3% year over year (down 1% at cc) to $242 million. Europe, the Middle East & Africa (EMEA) revenues fell 21% from the year-ago figure (down 13% at cc) to $105 million. Revenues from the Asia Pacific and Japan (APJ) were down 10% from the year-ago level (0% at cc) to $70 million.
Operating Details
Gross margin on a non-GAAP basis was 62.6%, expanding 130 basis points (bps) year over year.
Selling, general & administrative (SG&A) expenses decreased 6.6% year over year to $155 million. Research & development (R&D) expenses were $79 million, in line with the year-ago quarter’s level. As a percentage of revenues, SG&A expanded 108 bps year over year to 37.2%, while R&D expanded 177 bps to 18.9%.
Non-GAAP operating margin was 12.9%, down 250 bps from the year-ago quarter’s level.
Balance Sheet & Other Details
As of Sep 30, 2022, Teradata had cash and cash equivalents of $506 million compared with $545 million as of Jun 30, 2022.
Total debt (including current portion) as of Sep 30, 2022, was $498 million compared with $497 million as of Jun 30, 2022.
In the third quarter, Teradata generated $34 million cash from operating activities compared with the previous quarter’s $105 million.
In the reported quarter, Teradata’s free cash flow was $31 million.
Guidance
For fourth-quarter 2022, non-GAAP earnings are expected between 28 cents and 32 cents per share.
For 2022, non-GAAP earnings are expected between $1.58 and $1.62 per share.
Public cloud ARR is projected to increase 80% on a year-over-year basis.
Total ARR is expected to decline year over year in the low-to-mid-single-digit range.
Teradata expects recurring revenues to decline to a low-single-digit-to-mid-single-digit range from the 2021 level.
TDC projects total revenues to fall from the year-ago actuals in the mid-to-high-single-digit range on a reported basis. The metric is expected to decline in the low-single-digit range at CC from the 2021 level.
Cash flow from operations is expected to be $420 million, while free cash flow is projected at $400 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -40.63% due to these changes.
VGM Scores
Currently, Teradata has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 downward for the stock, and the magnitude of this revision has been net zero. Notably, Teradata has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Teradata (TDC) Up 9% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Teradata (TDC - Free Report) . Shares have added about 9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Teradata 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 catalysts.
Teradata Q3 Earnings Beat Mark
Teradata reported third-quarter 2022 non-GAAP earnings of 31 cents per share, which beat the Zacks Consensus Estimate by 10.7%. The metric declined 27.9% year over year and 6.1%, sequentially.
Revenues of $417 million were down 3%, sequentially. The same also decreased 9% year over year on a reported basis and 4% on a constant currency (cc) basis. Also, revenues missed the Consensus mark by 0.9%.
The year-over-year decline in revenues is due to a decrease in recurring, perpetual and consulting revenues.
Total annual recurring revenues (ARR) at the third quarter-end decreased 4% year over year to $1.37 billion. The figure was flat on a cc basis. The decline was a result of closing its business operations in Russia.
Public cloud ARR surged 89% on a reported basis and 99% at cc year over year to $279 million. Growth was driven by rising cloud deals. Strong momentum in all three geographical regions also drove the public cloud ARR.
However, the ongoing macroeconomic challenges and constant currency headwinds affected the quarterly performance.
Top-Line Details
Recurring revenues (accounting for 79% of revenues) decreased 6% year over year (down 2% at cc) to $331 million.
Perpetual software license and hardware revenues (3% of revenues) were down 22% year over year (down 22% at cc) to $14 million.
Consulting services’ revenues (17% of revenues) declined 20% from the year-ago level (down 12% at cc) to $72 million.
Revenues from the Americas declined 3% year over year (down 1% at cc) to $242 million. Europe, the Middle East & Africa (EMEA) revenues fell 21% from the year-ago figure (down 13% at cc) to $105 million. Revenues from the Asia Pacific and Japan (APJ) were down 10% from the year-ago level (0% at cc) to $70 million.
Operating Details
Gross margin on a non-GAAP basis was 62.6%, expanding 130 basis points (bps) year over year.
Selling, general & administrative (SG&A) expenses decreased 6.6% year over year to $155 million. Research & development (R&D) expenses were $79 million, in line with the year-ago quarter’s level. As a percentage of revenues, SG&A expanded 108 bps year over year to 37.2%, while R&D expanded 177 bps to 18.9%.
Non-GAAP operating margin was 12.9%, down 250 bps from the year-ago quarter’s level.
Balance Sheet & Other Details
As of Sep 30, 2022, Teradata had cash and cash equivalents of $506 million compared with $545 million as of Jun 30, 2022.
Total debt (including current portion) as of Sep 30, 2022, was $498 million compared with $497 million as of Jun 30, 2022.
In the third quarter, Teradata generated $34 million cash from operating activities compared with the previous quarter’s $105 million.
In the reported quarter, Teradata’s free cash flow was $31 million.
Guidance
For fourth-quarter 2022, non-GAAP earnings are expected between 28 cents and 32 cents per share.
For 2022, non-GAAP earnings are expected between $1.58 and $1.62 per share.
Public cloud ARR is projected to increase 80% on a year-over-year basis.
Total ARR is expected to decline year over year in the low-to-mid-single-digit range.
Teradata expects recurring revenues to decline to a low-single-digit-to-mid-single-digit range from the 2021 level.
TDC projects total revenues to fall from the year-ago actuals in the mid-to-high-single-digit range on a reported basis. The metric is expected to decline in the low-single-digit range at CC from the 2021 level.
Cash flow from operations is expected to be $420 million, while free cash flow is projected at $400 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -40.63% due to these changes.
VGM Scores
Currently, Teradata has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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 downward for the stock, and the magnitude of this revision has been net zero. Notably, Teradata has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.