BMO Capital Markets Reiterates Market Perform Rating, $68 PT on Teradata Corporation Following Negative Pre-Announcement

In a report published Tuesday, BMO Capital Markets analyst Keith Bachman reiterated a Market Perform rating and $68.00 price target on

. In the report, BMO Capital Markets noted, “Based on guidance, this does not appear to be a one quarter slippage of deals. Management is lowering estimates for both Sept and Dec Qs. Sept Q revs are expected be $665 million vs. our/Street of $705/$700 million, and Dec Q revs are expected to be around $745 million vs. our/Street of $828/$827 million. We are unclear why emerging markets and Japan are so weak. We have been of the view that TDC's longer-term revenue growth rate is 8%-10% y/y, not double digits. We note that US and European growth is roughly within this target growth rate. Therefore, we are left to wonder if emerging markets plus Japan are experiencing (1) macro demand weakness, (2) sales leadership, or (3) competitive issues. These geographies have been weak for a few quarters. If we assume that TDC can grow revs in the 7%-8% y/y range over the next two years, and EPS grows by 10%, this would suggest that EPS in FY15 could be about $3.30. Further, we believe that TDC should trade at a premium to the market with these growth rates, so perhaps a 16x-17x multiple. Therefore, we think TDC could, over time, return to a mid-$50 type of stock. However, as we head to a TDC user group event next week, we will seek to clarify the reason for the discrepancy between US/Europe and rest of world sales, and test our thesis that TDC can drive 7%-8% y/y top-line growth.” Teradata Corporation closed on Monday at $52.58.