Susquehanna maintained a Positive rating on Keysight Technologies (NYSE:KEYS) but lowered the price target to $185 from $195. The firm's analysis followed the company's earnings report, which indicated signs of improvement in quarterly bookings year-over-year and a bottoming out of quarterly revenues.
Despite a positive outlook, the firm noted the necessity of time to fully ascertain the trajectory of the recovery and the earning power potential.
Keysight's new orders in the July quarter showed a 2% quarter-over-quarter increase and remained flat year-over-year, slightly surpassing expectations. The performance was attributed to better-than-anticipated results in wireline (Networking) and Semiconductors, while Aerospace, Defense & Government (ADG) was weaker due to project funding issues and wireless continued to be soft.
The company reported double-digit order growth in wireline for Data Center on 400G/800G solutions, encompassing both Research & Development and manufacturing. The midpoint of the October quarter guidance also slightly exceeded expectations.
Keysight's commentary suggested an improvement in bookings for the October quarter, but visibility into the January quarter (1QFY25) remains unclear, which is typically a weaker period seasonally. Nevertheless, the company anticipates a cycle recovery in FY25, even though the slope of this recovery is not yet clear.
Keysight Technologies surpassed Q3 financial expectations, reporting revenue of $1.2 billion and earnings per share (EPS) of $1.57. The company also reported a slight increase in orders for the quarter, primarily driven by commercial communications growth.
BofA Securities adjusted its outlook on Keysight, raising its price target from $135 to $150 while maintaining an Underperform rating. This adjustment follows Keysight's Q3 performance, which showed a slight year-over-year decline in core orders by 1%, an improvement from previous quarters.
Keysight has announced plans to expand its serviceable available market and pursue mergers and acquisitions. The Spirent (LON:SPT) acquisition has received shareholder approval and is expected to close in the first half of fiscal year 2025. The company also repurchased 1.07 million shares for $150 million, ending the quarter with a strong cash position of $1.6 billion.
InvestingPro Insights
As Keysight Technologies (NYSE:KEYS) navigates a landscape of both challenges and opportunities, recent data from InvestingPro provides a snapshot of the company's financial health and market performance. With a market cap of approximately $24.04 billion and a P/E ratio standing at 30.24, Keysight operates with a moderate level of debt, which is a positive sign for investors considering the company's leverage and risk profile. Additionally, the firm's liquid assets surpass its short-term obligations, indicating a strong liquidity position that can support operations and strategic initiatives.
InvestingPro Tips highlight significant returns over the past week, with Keysight's stock price showing an 8.88% total return, reflecting investor optimism in the short term. Meanwhile, analysts predict that the company will be profitable this year, which aligns with the positive earnings report and suggests a potential for sustained financial performance. However, it's important to note that analysts also anticipate a sales decline in the current year, which could impact future earnings.
For investors seeking a deeper dive into Keysight's financials and market prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/KEYS. These tips provide further insights that could help shape investment decisions in the context of the company's recent earnings report and market dynamics.
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