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Keysight (KEYS) Q3 Earnings & Revenues Beat Estimates, Up Y/Y

Keysight Technologies KEYS reported third-quarter fiscal 2021 non-GAAP earnings of $1.54 per share, outpacing the Zacks Consensus Estimate by 6.9% and increasing 29.4% year over year.

Revenues increased 23% year over year to $1.25 billion, surpassing the Zacks Consensus Estimate by 2%. The upside can be attributed to double-digit growth across segments as well as geographies served.

Core revenues (excluding the impact of currency and revenues from acquisitions in a year’s time) rose 21% on a year-over-year basis to $1.22 billion.

Top Line in Detail

Orders increased 23% on a year-over-year basis (20% on a core basis) to $1.31 billion in the reported quarter.

Communications Solutions Group (“CSG”) revenues were $875 million, up 15% year over year (up 13% on a core basis). The increase was driven by continued investments in global 5G deployments, the roll-out of new 5G chipsets and devices, 400G and 800G ethernet for data centers, as well as early 6G research, space, electromagnetic spectrum operations, and satellite applications.
 

Keysight Technologies Inc. Price, Consensus and EPS Surprise

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

 

Electronic Industrial Solutions Group (“EISG”) revenues increased 48% year over year (up 44% on a core basis) to $371 million. Solid demand for the company’s semiconductor, general electronics, automotive and energy solutions drove top-line growth.

In terms of end-markets, Aerospace, Defense and Government (“ADG”) revenues jumped 39% year over year to $280 million. Commercial Communications (“CC”) revenues climbed 6% year over year to $595 million. Electronic Industrial (“EI”) revenues were $371 million, up 48% year over year.

In terms of geography, revenues from Americas were $499 million, up 37% (up 34% on a core basis) year over year, driven by strength in EI, ADG and CC.

Revenues from Europe  increased 27% (up 20% on a core basis) on a year-over-year basis to $201 million.

Revenues from Asia Pacific increased 12% (up 11% on a core basis) on a year-over-year basis to $546 million. CC revenues suffered due to trade restrictions.

Operating Details

Keysight reported non-GAAP gross margin of 65.1% that expanded 60 basis points (bps) in the fiscal third quarter. CSG gross margin of 65.7% expanded 50 bps while EISG’s gross margin of 63.7% expanded 130 bps on a year-over-year basis.

Non-GAAP operating expenses were $472 million in the fiscal third quarter of 2021, up 21.6% year over year.

Non-GAAP operating margin expanded 110 bps to 27.2%. While CSG operating margin contracted 30 bps, EISG’s operating margin expanded 450 bps on a year-over-year basis.

Balance Sheet & Cash Flow

As of Jul 31, 2021, Keysight had cash & cash equivalents of $2.15 billion compared with $1.99 billion as of Apr 30, 2021.

Long-term debt, as of Jul 31, was $1.79 billion, unchanged from Apr 30.

Cash flow from operations in the quarter was $257 million compared with $402 million reported in the prior quarter.

Free cash flow was $217 million compared with the previous quarter’s $369 million.

In second-quarter fiscal 2021, the company acquired approximately 1.59 million shares on the open market at an average price of $138.36, totaling $220 million.

Guidance

For fourth-quarter fiscal 2021, Keysight anticipates revenues in the range of $1.25-$1.27 billion. Non-GAAP earnings are projected between $1.59 and $1.65 per share.

Zacks Rank & Stocks to Consider

Keysight currently has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Apple AAPL, Avnet AVT and Carrier Global CARR. While both Apple and Avnet sport a Zacks Rank #1 (Strong Buy), Carrier Global carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long term earnings growth rate for Apple, Avnet and Carrier Global is 12.7%, 25.4% and 14.5%, respectively.


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