Shares in test technology company Teradyne (TER 0.12%) declined by 21.4% in the week to Friday morning. The move comes after management updated the market on current trading conditions during its analyst day presentation on Tuesday.
Teradyne warns the market
The company’s main end market is automated test systems for semiconductors and data electronics. These are cyclical end markets subject to capital spending decisions in key industries such as consumer electronics, industrial, automotive, aerospace, and defense.
Unfortunately, the recent update suggests a slowdown is in place due to “uncertainty around tariffs and trade restrictions.” Accordingly, management cut its second-quarter and full-year guidance.
- Second-quarter revenue growth is now expected to be flat to down 10% from the first quarter, compared to a prior expectation of 5% to 10% growth.
- Full-year revenue growth is now expected to be up 5% to 10%, compared to a prior expectation of 15%.
These are pretty sharp revisions, and considering the prior guidance was given at the end of January, it’s clear there’s been a significant near-term impact. Management argues there have been “no cancellations, but some push outs and capital reviews.”
However, many capital spending cancellations start with a push-out.
Image source: Getty Images.
Where next?
Wait and see, but be aware that macroeconomic uncertainty is affecting corporate and consumer decision-making. Companies like Delta Air Lines and industrial giant 3M have also spoken of a near-term impact on their businesses.
That said, sentiment could turn around just as quickly when some of the trade disputes are resolved to the mutual benefit of all concerned. In that scenario, many push-outs could turn into pull-forwards in the coming quarters.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends 3M. The Motley Fool recommends Delta Air Lines and Teradyne. The Motley Fool has a disclosure policy.
