Yahoo Finance Keysight (KEYS) Q2 Earnings Beat Estimates on Solid Revenues
Keysight Technologies, Inc. KEYS reported healthy second-quarter fiscal 2023 results, with the bottom and the top line beating Zacks Consensus Estimates.
Despite macroeconomic challenges, solid demand trends in several verticals such as automotive, semiconductor, aerospace, defense and increased investment in O-RAN, 5G and 6G research and AI-ML data centers led to year-over-year top line expansion.
Net Income
GAAP net income increased to $283 million or $1.58 per share from $258 million or $1.41 per share in the year-ago quarter. The upside can be attributed to higher interest income and growth in net sales.
Non-GAAP net income in the reported quarter was $380 million or $2.12 per share compared with $334 million or $1.83 per share in the year-earlier quarter. The bottom line beat the Zacks Consensus Estimate of $1.94.
Keysight Technologies Inc. Price, Consensus and EPS Surprise
Keysight Technologies Inc. price-consensus-eps-surprise-chart | Keysight Technologies Inc. Quote
Revenues
Revenues totaled $1,390 million, up 3% from the prior-year quarter’s levels of $1,351 million. Solid performance in Electronic Industrial Solutions segment and Aerospace, Defense end markets boosted the top line. The top line beat the consensus estimate of $1,379 million. However, orders declined 10% year over year to $1,319 million.
Revenues from Communication Solutions Group (CSG) were $937 million compared with $963 million in the prior-year quarter. Cautious but stable spending environment, particularly in smartphone and PC computing markets owing to inventory adjustments and macroeconomic challenges, dented net sales in this segment. However, strength in aerospace, defense and government induced by record net sales growth in radar system applications, spectrum operations, space, satellite, 5G and 6G research partially offset the declining trends. Increasing investments in non-terrestrial networks, O-RAN, early 6G and AI-ML data center networks were positive factors.
The Electronic Industrial Solutions Group (EISG) segment revenues rose to $453 million from $388 million in the prior-year quarter. The solid 17% year-over-year growth was largely propelled by record sales growth in Automotive, semiconductor and general electronics.
Region-wise, the company witnessed an 8% year-over-year decline in the Americas to $517 million. The downside was caused by lower demand among some larger customers in the region. Revenues from Europe were $229 million, up 5% from the year-ago quarter’s levels of $217 million. The upside was driven by strength in automotive with some crucial deal wins. Asia-Pacific revenues aggregated $644 million compared with $571 million in the prior-year quarter.
Other Details
During the quarter, the company’s non-GAAP gross profit totaled $927 million compared with $878 million in the year-ago quarter. Keysight’s non-GAAP gross margin was 66.7%, compared to year-ago quarter’s level of 65%. Non-GAAP operating margin was 30.4%, up from 28.8% in the prior-year quarter.
CSG reported a non-GAAP operating margin of 28.4%, up 20 basis points year over year. EISG reported a non-GAAP operating margin of 34.5%, up 420 basis points year over year owing to double-digit revenue growth in automotive, general electronics and semiconductor.
Cash Flow & Liquidity
In the second quarter of fiscal 2023, Keysight generated $423 million in cash from operating activities compared with $298 million a year ago, bringing the respective tallies for the first six months to $789 million and $522 million. As of Apr 30, 2023, the company had $2,498 million in cash and cash equivalents with $1,793 million of long-term debt.
Outlook
Despite macroeconomic challenges, the company expects demand trends of the first half of fiscal 2023 to persist in the second half as well. Given the strength of the company’s operating model and growth initiatives, management anticipates a better earnings performance.
For the third quarter of fiscal 2023, Keysight expects revenues in the range of $1.37-$1.39 billion. Non-GAAP earnings are estimated between $2.00 and $2.06 per share.
Zacks Rank & Stocks to Consider
Keysight currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
InterDigital, Inc. IDCC, sporting a Zacks Rank #1, delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%.
It is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.
Workday Inc. WDAY, carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 7.67%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 11.24%.
Workday is a provider of enterprise-level software solutions for financial management and human resource domains. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.
Meta Platforms Inc. META, sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video-sharing app Instagram and WhatsApp messaging app owing to acquisitions.
Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa.
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