Baird Downgrades Teradyne On Deceleration In Demand

Teradyne, Inc. TER reported better-than-expected first-quarter revenues and non-GAAP earnings per share Tuesday.

Second-quarter guidance trailed expectations, sending the company's shares down 14.67 percent to a seven-month low of $35.41.

The Analyst

Baird analyst Richard Eastman downgraded shares of Teradyne from Outperform to Neutral and lowered the price target from $52 to $40.

The Thesis

The demand outlook for Teradyne's mobile device test — which corresponds to half of its semi-test business and is structured to deliver more than 45 percent of incremental margin — declined sharply in Q1, Eastman said in a Wednesday note.

The company's Q2 guidance is reflective of the deceleration in semi-test demand and decremental EBIT conversion, the analyst said. 

"We expect this deceleration in orders to possibly negatively influence profitability through the second half of 2018 as well," Eastman said. 

Baird lowered its calendar 2018 and 2019 non-GAAP EPS estimates, although it warned of elevated forecasting risk due to a lack of visibility on order trends for the first half of 2018. The 2018 EPS estimate was reduced from $2.60 to $2.15 and the 2019 estimate was reduced from $2.98 to $2.50. 

The Price Action

Teradyne shares were plunging 16.4 percent to $34.69 at the time of publication Wednesday. 

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Photo courtesy of Teradyne.