Teradyne (TER) Hits 52-Week High on Solid Q4 Performance

Shares of Teradyne Inc. TER hit a new 52-week high of $21.83 on Mar 30, eventually closing at $21.56. The company returned 15.1% in the past one-year period and approximately 4.3% year-to-date. Average volume of shares traded over the last three months was roughly 2,105K.

What is Driving Teradyne?

Teradyne is a leading provider of automated test equipment. The company is primarily focused on the semiconductor test market which contributes a major portion of its revenues. It also provides specialized system testing equipment for specific end markets.

We believe that the company is being driven by the recovering core semiconductor business (processors, MCUs and power management), long-term opportunities in the high-growth wireless test market, growing memory market exposure, product line-up and a lean cost structure.

The price appreciation may be attributed to Teradyne's strong fundamentals and better-than-expected fourth-quarter 2015 results reported on Jan 27. Since then, the stock has gained 8.5%.

In the fourth quarter, Teradyne reported earnings of 13 cents per share, surpassing the Zacks Consensus Estimate by 3 cents backed by increased order growth in the Semiconductor Test market. Revenues of $318.0 million came above the Zacks Consensus Estimate and within management's guided range of $295–$320 million.

Moreover, the company provided solid revenue and earnings guidance for the upcoming quarter as semiconductor companies such as Intel have increased their capital spending for fiscal 2016. Management expects revenues in the $410–$440 million range, up 33.6% sequentially at the mid-point. Non-GAAP earnings per share from continuing operations are expected within 23 cents to 29 cents.

Also, Teradyne has an impressive record of returning cash to shareholders through share buybacks and regular dividends payouts. In the fourth quarter, Teradyne repurchased $73.1 million shares and paid $12.3 million as dividends.

Moreover, Teradyne's expansion into new growth areas is a big positive. The $285 million Universal Robots acquisition in Jun 2015 will help the company to expand into the cobot (collaborative robot) market, which, according to ABI Research, is expected to grow ten-fold from $100 million in 2015 to $1 billion by 2020.

Additionally, Teradyne delivered an average positive earnings surprise of nearly 23.04% over the trailing four quarters. The Zacks Rank #2 (Buy) company's solid market position, acquisition strategy, consistent design win momentum, continued innovation and strong long-term growth potential position it well.

Stocks to Consider

Some stocks that have been performing well in the same space are Travelport Worldwide Limited TVPT, Groupon, Inc. GRPN and Gaiam Inc. GAIA. While Travelport sports a Zacks Rank #1 (Strong Buy), Groupon and Gaiam have a Zacks Rank #2.

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