Can Teradyne (TER) Surprise This Earnings Season? - Analyst Blog

Teradyne Inc. TER is set to report first-quarter 2014 results on Apr 23. Last quarter, the company posted a 75.0% positive surprise. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

The company's earnings exceeded the Zacks Consensus Estimate driven by a lean cost structure and strong execution. However, revenues of $285.3 million were down 34.2% sequentially but up 14.9% year over year. Gross margins contracted sequentially due to lower volumes and an unfavorable mix.

For the first quarter, Teradyne expects to generate revenues in the range of $300–$330 million, up 10.4% sequentially at the mid-point. Non-GAAP earnings are expected in the range of 2–9 cents while GAAP earnings are expected within the range of (9) to (3) cents per share.

Earnings Whispers?

Our proven model does not conclusively show that Teradyne is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 7 cents. Hence, the difference is 0.00%.

Zacks Rank: Teradyne's Zacks Rank #2 (Buy) when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

You could consider other stocks with a positive Earnings ESP and Zacks Rank #1, 2 or 3 such as:

Westlake Chemical Corp. WLK, with Earnings ESP of +1.77% and a Zacks Rank #1 (Strong Buy).

Helmerich & Payne, Inc. HP, with Earnings ESP of +0.68% and a Zacks Rank #1.

Lincoln Electric Holdings Inc. LECO, with Earnings ESP of +1.11% and a Zacks Rank #1.