In the current September quarter, Terdayne Inc. (NYSE:TER) strongly beat both revenue ($344 million versus $327 million) and earnings (34c versus 23c) in the current quarter, and also guided revenues in-line ($270-300 million versus $284 million) and earnings modestly lower (8c-16c versus 15c) for the December quarter. Bookings fell to $240 million, including $196 million in the Semiconductor Test and $44 million in the Systems Test Group, down sequentially from $333 million in the June quarter, including $257 million in Semiconductor Test and $76 million in the Systems Test Group.
The stock currently trades at a forward 11 P/E, in the bottom one-third of its historic P/E range. However, it faces headwinds going forward as earnings are projected to fall from $1.60 on current TTM basis to $1.24 in FY 2012. Our historical records of current and forward quarter revenue and earnings for the last six quarters (not including the current quarter), and the stock’s performance in the period immediately following that is as follows (see Table):
June 2011 quarter report: Despite the strong beat on both revenue and earnings, the stock reacted strongly negative down 8% at the open the next day due to the sharply lower guidance for the September quarter. It fell 25% over the next week.
March 2011 quarter report: Despite the modest beat on both revenue and earnings, the stock reacted strongly negative down 15% at the open and over the next week due to lower guidance for the June quarter.
December 2010 quarter report: The stock gapped up over ten percent, and was up a third over the next three-four weeks, due to a strong beat on both current and forward guidance revenue and earnings.
September 2010 quarter report: The stock gapped down nine percent on meeting current quarter, but a huge miss on both forward revenue and earnings guidance for the December quarter.
June 2010 quarter report: The stock was up 8%-10% on a strong beat in both current and forward revenues and earnings.
March 2010 quarter report: The stock was up 10% on a strong beat in both current and forward revenues and earnings.
TER has traded at five to six times TTM earnings in the past. Given the poor guidance, the sequential fall in bookings in both the Semiconductor Test and the Systems Test Group, and the overall poor macro-economic environment, we believe that it is unlikely that TER will break through above the 200-day moving average which is within striking distance of yesterday’s close. It is more likely though that it is headed lower, at least to the 50-day moving average near $12 and recent lows near $10.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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