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Technology Stocks : Teradyne
TER 158.92+1.9%Nov 21 9:30 AM EST
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To: Yiqun Xie who wrote (736)4/15/1998 5:50:00 PM
From: Ty  Read Replies (1) of 1184
 
>> Both the EPS and orders are expected with no surprise.

True, DMG lowered their order expectations to $350 million on Mar 2. However, the rest of the analysts have yet to issue a downward earnings revision. Zacks currently has Q2 expectations at $0.60. I don't see how TER can meet these expectations with only $350 million in orders. In Q4, TER received $458 million in orders and in Q1 we had $432 million in sales with a high gross margin of 42%. This resulted in $0.58 EPS. I see several possibilities:

1) Investors don't care about next couple of quarters and invest for the future.

2) TER surprises everyone and generates $450 million in revenues from $350 million in orders to hit the $0.60 estimate. This is not going to happen. Sales are almost always less than revenues.

3) A slew of analysts come out with downward earnings revisions to bring the mean consensus down from $0.60 to $0.35 (my very rough estimate from sales of $320 million).

4) Analysts do not revise estimates. TER pre-announces earnings will be below expectations.

5) Nobody does anything and TER reports Q2 earnings of $0.35 when the estimate was $0.60.

Cases 3,4,5 would have a bad psychological effect on the stock. These are just some of my thoughts. I am long on this stock and I would like TER to do well. However, I would like to be realistic and hear the other side of the story. My investment strategy is to trade short term if the near future looks shaky. This philosophy my differ from those of you who buy and hold for several years.

Comments?

P.S. Does anyone know the First Call estimate for Q2?
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