Teradyne Earnings Were Great. The Stock Gets Crushed on Guidance.

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Stock in robotics and semiconductor test equipment maker

Teradyne

was plummeting after the company reported better-than-expected fourth-quarter numbers. The fourth quarter isn’t the issue, investors are focused on the outlook.

Shares were down 26% to $106.15. The

S&P 500
and the

Dow Jones Industrial Average
were up 1.8% and 1.6%, respectively.

Teradyne (ticker: TER) reported $1.37 in per-share earnings from $885 million in sales. Wall Street was looking for profits of $1.29 a share from $868 million in sales.

Teradyne guided for 88 cents in per-share earnings from about $735 million in sales for the first quarter of 2022. Wall Street was looking for earnings of $1.30 a share and $878 million in sales. It’s a wide gap. What’s more, the company said sales in the first half of 2022 will fall 15% to 20% “due to push out of 3 [nanometer] technology ramp.”

The 3 nanometer, essentially, refers to the size of the node on a semiconductor. Smaller means more nodes and faster chips.

Management focused on the long term in the company’s news release.

“We enter 2022 with strong long-term test and automation demand trends in place and we’ve increased the mid-point of the revenue and non-GAAP earnings per share estimates in our 2024 earnings model to $4.9 billion and $8 respectively,” said CEO Mark Jagiela. Teradyne generated about $6 in per-share earnings from $3.7 billion in sales for all of 2021.

“However, in 2022, we expect a slower technology transition in one of our major end markets to result in lower System-on-a Chip test demand.” That’s the 3 nanometer problem.

Stock in competitor

Advantest

(6857.Japan) was off 7% in overseas trading as investors digested what Teradyne’s warning means for others.

Coming into Thursday trading, Teradyne stock had gained about 4% over the past 12 months.

Write to Al Root at [email protected]