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Here's How Keysight (KEYS) Looks Ahead of Earnings in Q1

Keysight Technologies, Inc. KEYS is slated to report first-quarter fiscal 2021 results on Feb 18.

For the fiscal first quarter, Keysight anticipates revenues to be $1.14-$1.16 billion. The Zacks Consensus Estimate for the same is currently pegged at $1.16 billion, indicating an improvement of 5.8% from the prior-year quarter’s reported figure.

Non-GAAP earnings per share are projected at $1.32-$1.38. The consensus mark for the bottom line of $1.38 per share has been revised a cent upward over the past 30 days, suggesting growth of 9.5% from the year-ago period’s reported figure.

Notably, the company’s earnings beat estimates in three of the trailing four quarters and missed the same once. It has a trailing four-quarter earnings surprise of 11.83%, on average.

Factors Likely to Impact Q1 Results

Strong uptick in chip design activity is likely to have favored Keysight’s results for the fiscal first quarter. Robust uptake of the company’s semiconductor measurement solutions on the back of semiconductor companies’ allegiance to develop chips with the aid of next-generation process technologies is expected to have contributed to the to-be-reported quarter’s performance.

Keysight Technologies Inc. Price and EPS Surprise

Keysight Technologies Inc. price-eps-surprise | Keysight Technologies Inc. Quote

Solid momentum in high-speed networking, smartphone processors and high-performance data center applications is driving demand for the company’s solutions in process node technology testing and its momentum in the first-to-market solutions. This may have aided the company’s earnings in the fiscal first quarter.

Additionally, strong adoption of electronics-based testing equipment across medical devices and pharmaceutical markets might have benefited the company’s performance in the quarter to be reported. Moreover, as employees are compelled to work from home due to the COVID-19 pandemic, demand for high-speed connectivity surged, which in turn, is expected to have bolstered adoption of the company’s 5G testing solutions. This uptrend might reflect on the impending quarterly results.

In fact, deal wins from Jabil JBL, QUALCOMM Incorporated, NVIDIA, Auden Techno Corp, Altiostar, Allion Labs deserve a special mention in this regard. Strong acceptance of the company’s offerings is expected to have instilled investor confidence in the stock.

Notably, shares of the company have gained 56.3% in the past year compared with the industry’s growth of 47.8%.

Moreover, momentum in orders across the wireless ecosystem, primarily fueled by Higher 5G investment and a sturdy adoption of Ixia’s Network Applications & Security solutions, might get reflected in Communications Solutions Group’s (CSG) revenues for the fiscal first quarter.

Furthermore, recovery in automotive sector as economies reopened and lockdowns eased might have contributed to CSG revenues. Notably, the Zacks Consensus Estimate for CSG is pegged at $867 million, indicating 6% growth from the year-ago period’s reported number.

Markedly, Keysight is strengthening its product portfolio with a focus on augmenting software testing capabilities. In fact, robust growth in Software and services revenues is boosting Keysight’s business model, bolstering recurring revenue growth and leading to expansion in gross margins.

Also, improving production and services operations despite persistent supply-chain challenges are expected to have benefited the company’s performance in the fiscal first quarter.

Likewise, momentum in the company’s latest innovative PathWave Test 2021 software and latest support solutions including Keysight Care is expected to have led to margin growth in the fiscal first quarter.

However, softness in spending across the aerospace end-market is likely to have impeded growth in the Electronic Industrial Solutions Group’s (EISG) segmental revenues. Notably, the Zacks Consensus Estimate for EISG revenues stands at $289 million, suggesting growth of 4.3% from the prior-year quarter’s reported figure.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Keysight this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Keysight has an Earnings ESP of +3.75% and a Zacks Rank #3, currently. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks That Warrant a Look

Here are some other stocks worth considering as our proven model shows that these too have the right combination of elements to beat on earnings this season.

CrowdStrike CRWD currently has an Earnings ESP of +57.75% and a Zacks Rank #2.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Workday WDAY has an Earnings ESP of +1.16% and a Zacks Rank #2, at present.

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