A month has gone by since the last earnings report for Teradyne (TER). Shares have lost about 5.5% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Teradyne Q4 Earnings Top Estimates, Revenues Up Y/Y

Teradyne reported fourth-quarter 2024 earnings of 95 cents per share, which surpassed the Zacks Consensus Estimate by 5.56% and increased 20.3% year over year.

Revenues of $753 million beat the Zacks Consensus Estimate by 1.65% and increased 12.2% year over year. The growth is driven by strong AI-related demand.

TER’s Q4 Top-line Details

Revenues from Semiconductor Test platforms, System Test business, Wireless Test business and Robotics were $561 million (74.5% of total revenues), $58 million (7.7%), $36 million (4.8%) and $98 million (13%), respectively.

Strong momentum in the memory test end market, driven by High Bandwidth Memory and increased compute demand for AI applications, led to top-line growth. 

Gross margin was 59.4%, which expanded 280 basis points (bps) year over year.

In the reported quarter, selling and administrative expenses increased 9.4% year over year to $155.7 million. As a percentage of revenues, selling and marketing expenses were 20.7%, down 50 bps year over year.

Engineering and development expenses increased 25.6% year over year to $128.4 million. As a percentage of revenues, engineering and development expenses expanded 180 bps on a year-over-year basis to 17.1%.

TER’s Balance Sheet & Cash Flow

As of Dec. 31, 2024, Teradyne’s cash and cash equivalents (including marketable securities) were $599.6 million, higher than $551.7 million as of Sept. 29, 2024.

Net cash provided by operating activities was $2.82 billion in the fourth quarter, up from $1.66 billion in the prior quarter.

TER’s Q1 Guidance

For first-quarter 2025, Teradyne expects revenues between $660 million and $700 million. 

Non-GAAP earnings are expected to be between 58 cents and 68 cents per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Teradyne has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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 broadly trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Teradyne has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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This article originally published on Zacks Investment Research (zacks.com).

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