Yahoo Finance Teradata (TDC) Down 2.5% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Teradata (TDC). Shares have lost about 2.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Teradata due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Teradata Q1 Earnings Beat Estimates, Revenues Fall Y/Y
Teradata reported first-quarter 2024 non-GAAP earnings of 57 cents per share, which beat the Zacks Consensus Estimate by 1.79%. The bottom line fell 6.6% year over year.
Revenues of $465 million surpassed the Zacks Consensus Estimate by 2.07%. The figure decreased 2.3% year over year on a reported basis and 1% on a constant-currency (cc) basis.
Total annual recurring revenues (“ARR”) at the first-quarter end decreased 2% year over year to $1.48 billion. The figure decreased 1% at cc.
Public cloud ARR surged 35% on a reported basis and 36% at cc year over year to $525 million. The cloud net expansion rate was 123%.
Top Line in Detail
Recurring revenues (contributing 83% to revenues) decreased 0.3% year over year on a reported basis (increased 4% at cc) to $388 million, surpassing the Zacks Consensus Estimate by 6.29%.
Perpetual software license and hardware revenues (1.7% of revenues) were down 38.5% year over year (down 2% at cc) to $8 million, beating the Zacks Consensus Estimate by 21.75%.
Consulting services’ revenues (15% of revenues) dropped 6.8% year over year (down 4% at cc) to $69 million, beating the Zacks Consensus Estimate by 1.13%.
Revenues from the Americas decreased 5.1% year over year on a reported basis (increased 5% at cc) to $372 million. EMEA revenues increased 6.8% year over year (down 4% at cc) to $125 million.
Revenues from the APJ region were down 6% year over year (down 2% at cc) to $63 million.
Operating Details
The gross margin on a non-GAAP basis was 62.2%, contracting 210 basis points (bps) year over year.
Selling, general & administrative (SG&A) expenses increased 5.2% year over year to $161 million. Research & development (R&D) expenses were $75 million, up 7.1% year over year.
As a percentage of revenues, SG&A contracted 250 bps year over year to 34.6%, whereas R&D contracted 140 bps to 16.1%.
The non-GAAP operating margin was 19.1%, down 350 bps year over year.
Balance Sheet
As of Mar 31, 2024, Teradata had cash and cash equivalents of $337 million compared with $486 million as of Dec 31, 2023.
Long-term debt as of Mar 31, 2024, was $474 million compared with $499 million as of Dec 31, 2023.
In the first quarter, Teradata generated $27 million in cash from operating activities compared with the previous quarter’s $176 million.
The company generated a free cash flow of $21 million in the reported quarter.
Guidance
For second-quarter 2024, non-GAAP earnings are expected to be between 46 and 50 cents per share.
For 2024, TDC expects non-GAAP earnings between $2.15 and $2.31 per share. The Zacks Consensus Estimate for earnings is pegged at $2.22, suggesting 7.25% year-over-year growth.
Public cloud ARR growth is projected between 35% and 41% on a year-over-year basis.
Total ARR is expected to exhibit growth of 4-8% from the 2023 level.
Teradata expects recurring revenues to increase 1-3% year over year.
Teradata expects total revenues to be up 0-2% from the year-ago reported figure. The consensus mark for 2023 revenues is pegged at $1.83 billion.
Moreover, cash flow from operations is expected to be between $360 million and $400 million. Free cash flow is anticipated to be in the $340-$380 million range.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -8% due to these changes.
VGM Scores
At this time, Teradata has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Teradata has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Teradata is part of the Zacks Computer- Storage Devices industry. Over the past month, Western Digital (WDC), a stock from the same industry, has gained 3.4%. The company reported its results for the quarter ended March 2024 more than a month ago.
Western Digital reported revenues of $3.46 billion in the last reported quarter, representing a year-over-year change of +23.3%. EPS of $0.63 for the same period compares with -$1.37 a year ago.
Western Digital is expected to post earnings of $1.02 per share for the current quarter, representing a year-over-year change of +151.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Western Digital. Also, the stock has a VGM Score of F.
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