Keysight’s recent quarterly report arrived with some positive surprises.
Keysight Technologies (KEYS 13.88%) stock is making big gains in Wednesday’s trading. The company’s share price was up 12.8% as of 3 p.m. ET, according to data from S&P Global Market Intelligence.
After the market closed yesterday, Keysight published results for the third quarter of its current fiscal year — a period that ended July 31. The business delivered sales and earnings that came in significantly above Wall Street’s expectations, and management issued forward guidance that came in better than anticipated.
Margin resilience powers a big quarterly beat for Keysight
Keysight posted sales of $1.22 billion, and non-GAAP (adjusted) earnings per share of $1.57. Meanwhile, the average analyst estimate had called for the business to report $1.19 billion in revenue and adjusted earnings of $1.35 per share.
Even though Keysight’s revenue fell roughly 12% year over year in Q2, the decline was lower than anticipated — and margins breezed past expectations. Even with some headwinds, gross margin came in at 67%, off only slightly from the 68% margin posted in last year’s quarter. Overall costs declined slightly in the quarter, and the business posted free cash flow of $222 million — up from $196 million in the prior-year period.
What’s next for Keysight Technologies?
For the fourth quarter of its current fiscal year, Keysight is guiding for sales to come in between $1.245 billion and $1.265 billion. Meanwhile, the average analyst estimate had called for sales of $1.25 billion prior to the update. The company also said that it expected adjusted earnings per share to be between $1.53 and $1.59. The guidance range came in significantly ahead of most analysts’ expectations, with the average Wall Street analyst target having previously called for adjusted earnings per share of $1.54 in the quarter.
Keysight’s management continues to expect that orders in this year’s second half will surpass orders in the first half. The company expects that gradual demand recovery will continue in 2025 unless macroeconomic pressures increase.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
