Keysight (KEYS): Solid Stock For A Winning Portfolio
Zacks Investment Research | Mar 23, 2018 03:25AM ET
Keysight Technologies Inc. (NYSE:KEYS) is one of the top-performing technology stocks, with an impressive return in share price driven on strong fundamentals. The odds in favor of an upside in the near term are quite high and consequently, investors looking for solid returns should add the stock to their portfolio.
We believe that the company’s focus on expanding its software portfolio on the back of strong demand for its solutions will fuel growth. This along with key acquisitions in line with company’s goals amplifies its growth prospects.
Keysight sports a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A. In a year’s time, shares have gained 41.7%, outperforming S&P 500's rally of 15.7%.
The company has a remarkable earnings surprise history. It outpaced the Zacks Consensus Estimate in the trailing four quarters, with an average positive earnings surprise of 13%.
Upbeat Q1, Outlook Positive for Q2
Keysight reported non-GAAP earnings of 51 cents per share surpassed the Zacks Consensus Estimate of 39 cents per share.
Non-GAAP revenues advanced 18% from the year-ago quarter to $856 million. Orders surged 39% year over year. Management remains positive about tapping key growth segments of a number of end markets.
Management also remains elated on the completion of the integration of Ixia and its better-than-expected capabilities to tackle the damage done by the Santa Rosa fire.
For the second quarter of fiscal 2018, non-GAAP revenues are projected at $964 million. Currently, the corresponding Zacks Consensus Estimate is pegged at $965.33 million.
Non-GAAP earnings for second-quarter fiscal 2018 are anticipated to be approximately 81 cents per share. Currently, the corresponding Zacks Consensus Estimate is pegged at 84 cents per share.
Northbound Estimate Revisions
Keysight has witnessed solid earnings estimate revision activity over the past month, suggesting bullish sentiment on the company’s prospects in the short term.
Over the last 30 days, third-quarter fiscal 2018 estimates were revised upward, resulting in the Zacks Consensus Estimate rising from 74 cents to 76 cents per share. The figure reflects year-over-year growth of 24.59%.
The Zacks Consensus Estimate for fiscal 2018 and 2019 is currently pegged at $3.66 and $4.17, respectively. The figure reflects year-over-year growth of 17.00% and 11.32%, respectively, consequently portraying a positive picture of Keysight’s long-term outlook.
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Growth Drivers
The company’s continuous focus on launching new solutions for growth markets like 5G, Internet of Things (IoT), next-generation wireless, high-speed datacenters and automotive & energy bodes well for its top-line.
The company’s partnerships with the likes of Verizon Communications Inc (NYSE:VZ) and Qualcomm Technologies, Inc., a subsidiary of Qualcomm (NASDAQ:QCOM) are aiding it to achieve 5G commercialization related milestones.
Recently, Keysight jointly demonstrated its 5G Protocol R&D Toolset and a 5G mobile test device with Qualcomm Technologies, Inc. in Mobile World Congress (“MWD”) 2018.
Additionally, the acquisitions of Ixia, Anite and AT4 Wireless have enriched the company’s 5G solutions portfolio.
The company had also released the latest version of its SystemVue electronic system level (“ESL”) software, in its previous quarter. It is aimed at providing designers with the first-of-its-kind 5G design and verification process.
Moreover, IoT also presents significant growth opportunity based on the company’s broad and diverse portfolio that effectively addresses the needs of customers related to power consumption, RF performance, interoperability and conformance testing.
The growing demand for electric and hybrid cars also bode well for the company’s product portfolio, which was enhanced with the acquisition of Scienlab.
Further, increasing electronic content in vehicles, radar technologies for autonomous driving and high-power devices and applications are driving demand for the company’s solutions in this end market. The company’s Detroit based Automotive Solution Center that was opened in the recent past remains another positive.
In January, the company released PathWave. Management claims that it is the industry’s first software platform to include product development through its operational lifecycle.
We expect the aforementioned aspects to help Keysight sustain strong momentum and stay unperturbed amid difficult times. Consequently, we suggest that investors buy the stock for the time being.
Other Stocks to Consider
Veeva Systems Inc, (NYSE:VEEV) and DST Systems, Inc (NYSE:DST) are other top-ranked stocks in the broader technology sector, both sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here .
Veeva Systems and DST Systems have a long-term earnings growth rate of 17% and 10%, respectively.
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