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Keysight Technologies (KEYS) Up 4.6% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Keysight (KEYS - Free Report) . Shares have added about 4.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Keysight Technologies due for a pullback? 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 drivers.
Keysight reported relatively healthy first-quarter fiscal 2024 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. However, the company reported a top-line decline year over year, owing to constrained spending behavior and inventory adjustments in the commercial communication business and revenue decline in aerospace and defense end markets.
Growing investment in AI-driven network and data center applications and healthy traction in automotive, digital health, software and services partially supported the top line. The company completed the acquisition of ESI group during the quarter. The buyout significantly expanded its design engineering, simulation and virtual prototyping software portfolio.
Net Income
Net income on a GAAP basis was $172 million or 98 cents per share, down from $260 million or $1.45 per share in the year-ago quarter. The decline is primarily attributed to top-line contraction year over year.
Non-GAAP net income in the reported quarter was $286 million or $1.63 per share compared with $363 million or $2.02 per share in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 4 cents.
Revenues
Quarterly net sales were $1.26 billion compared with $1.38 billion recorded in the year-ago quarter. Total orders declined 6% year over year to $1.22 billion. Weakness in multiple end markets hindered revenue growth. However, the top line beat the Zacks Consensus Estimate by $13 million.
Communication Solutions Group (CSG) generated $839 million in revenues, down 11% year over year. Despite growth in total orders, revenues declined in aerospace, defense and government end markets. Demand for electromagnetic spectrum operations, space/satellite and radar solutions remain strong.
In commercial communication, end-market customer spending remained cautious and inventory adjustments impacted the net sales. In the wireline business, the company witnessed order growth for its data center solutions. Demand in O-RAN, 5G RedCap and non-terrestrial networks business remains steady. The top line beat our revenue estimate of $814.1 million.
The Electronic Industrial Solutions Group (EISG) segment’s revenues dropped to $420 million from $442 million in the prior-year quarter. Soft demand trends in the consumer and industrial electronics market and project delays in the semiconductor sector affected the net sales from this vertical. However, robust demand for Keysight’s proprietary laser interferometer solutions partially reversed this trend.
Demand for EV solutions remained strong. The company witnessed multiple deal wins for digital health applications for various use cases like medical imaging, scanning and test automation. The top line fell short of our revenue estimate of $429.7 million.
Region-wise, Asia-Pacific revenues aggregated $490 million compared with $563 million in the prior-year quarter. Declining trends in all end markets led to a 13% year-over-year drop. The company reported an 8% year-over-year decline in the Americas to $514 million. Revenues from Europe were $255 million, down 1% from the year-ago quarter's levels.
Other Details
During the quarter, the company’s non-GAAP gross profit totaled $846 million compared with $901 million in the year-ago quarter, with gross margins of 67.2% and 65.2%, respectively. The non-GAAP operating margin was 28.2%, marginally down from 29.7% in the prior-year quarter. CSG reported a non-GAAP operating margin of 27%, down 170 basis points (bps) year over year. EISG reported a non-GAAP operating margin of 30.6%, down 120 bps year over year.
Cash Flow & Liquidity
In the first quarter of fiscal 2024, Keysight generated $328 million in cash from operating activities compared with $366 million a year ago. As of Jan 31, 2024, the company had $1.75 billion in cash and cash equivalents with $1.2 billion of long-term debt.
Outlook
For the second quarter of fiscal 2024, Keysight expects revenues in the range of $1.190-$1.210 billion. Non-GAAP earnings are estimated between $1.34 and $1.40 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -16.76% due to these changes.
VGM Scores
Currently, Keysight Technologies has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 these revisions indicates a downward shift. It's no surprise Keysight Technologies has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Keysight Technologies (KEYS) Up 4.6% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Keysight (KEYS - Free Report) . Shares have added about 4.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Keysight Technologies due for a pullback? 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 drivers.
Keysight Q1 Earnings Beat Estimates Despite Lower Revenues
Keysight reported relatively healthy first-quarter fiscal 2024 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. However, the company reported a top-line decline year over year, owing to constrained spending behavior and inventory adjustments in the commercial communication business and revenue decline in aerospace and defense end markets.
Growing investment in AI-driven network and data center applications and healthy traction in automotive, digital health, software and services partially supported the top line. The company completed the acquisition of ESI group during the quarter. The buyout significantly expanded its design engineering, simulation and virtual prototyping software portfolio.
Net Income
Net income on a GAAP basis was $172 million or 98 cents per share, down from $260 million or $1.45 per share in the year-ago quarter. The decline is primarily attributed to top-line contraction year over year.
Non-GAAP net income in the reported quarter was $286 million or $1.63 per share compared with $363 million or $2.02 per share in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate by 4 cents.
Revenues
Quarterly net sales were $1.26 billion compared with $1.38 billion recorded in the year-ago quarter. Total orders declined 6% year over year to $1.22 billion. Weakness in multiple end markets hindered revenue growth. However, the top line beat the Zacks Consensus Estimate by $13 million.
Communication Solutions Group (CSG) generated $839 million in revenues, down 11% year over year. Despite growth in total orders, revenues declined in aerospace, defense and government end markets. Demand for electromagnetic spectrum operations, space/satellite and radar solutions remain strong.
In commercial communication, end-market customer spending remained cautious and inventory adjustments impacted the net sales. In the wireline business, the company witnessed order growth for its data center solutions. Demand in O-RAN, 5G RedCap and non-terrestrial networks business remains steady. The top line beat our revenue estimate of $814.1 million.
The Electronic Industrial Solutions Group (EISG) segment’s revenues dropped to $420 million from $442 million in the prior-year quarter. Soft demand trends in the consumer and industrial electronics market and project delays in the semiconductor sector affected the net sales from this vertical. However, robust demand for Keysight’s proprietary laser interferometer solutions partially reversed this trend.
Demand for EV solutions remained strong. The company witnessed multiple deal wins for digital health applications for various use cases like medical imaging, scanning and test automation. The top line fell short of our revenue estimate of $429.7 million.
Region-wise, Asia-Pacific revenues aggregated $490 million compared with $563 million in the prior-year quarter. Declining trends in all end markets led to a 13% year-over-year drop. The company reported an 8% year-over-year decline in the Americas to $514 million. Revenues from Europe were $255 million, down 1% from the year-ago quarter's levels.
Other Details
During the quarter, the company’s non-GAAP gross profit totaled $846 million compared with $901 million in the year-ago quarter, with gross margins of 67.2% and 65.2%, respectively. The non-GAAP operating margin was 28.2%, marginally down from 29.7% in the prior-year quarter.
CSG reported a non-GAAP operating margin of 27%, down 170 basis points (bps) year over year. EISG reported a non-GAAP operating margin of 30.6%, down 120 bps year over year.
Cash Flow & Liquidity
In the first quarter of fiscal 2024, Keysight generated $328 million in cash from operating activities compared with $366 million a year ago. As of Jan 31, 2024, the company had $1.75 billion in cash and cash equivalents with $1.2 billion of long-term debt.
Outlook
For the second quarter of fiscal 2024, Keysight expects revenues in the range of $1.190-$1.210 billion. Non-GAAP earnings are estimated between $1.34 and $1.40 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -16.76% due to these changes.
VGM Scores
Currently, Keysight Technologies has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 these revisions indicates a downward shift. It's no surprise Keysight Technologies has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.