Will Healthy Y/Y Revenue Growth Boost Keysight's Q2 Earnings?

Keysight Technologies, Inc. KEYS is scheduled to report second-quarter fiscal 2025 results on May 20, after the closing bell. It pulled off a trailing four-quarter earnings surprise of 7.63%, on average.

Based in Santa Rosa, CA, the leading electronic design company is expected to report higher year-over-year revenues, backed by strength in both segments. Management’s focus on expanding its business through collaborations with established players in various sectors is a positive.

Factors at Play

In the to-be-reported quarter, Keysight announced that it has collaborated with Coherent Corp., a leading provider of advanced illumination solutions for 3D sensing applications, to enable tuning, validation and 200G characterization of the latter’s new vertical-cavity surface-emitting laser technology. By enabling higher data rates, the state-of-the-art multimode technology promises to facilitate the deployment of Artificial Intelligence/Machine Learning services while reducing both power consumption and capital expenditure for short-reach data interconnects. This will likely help large-scale data centers reduce operational expenses and minimize their environmental impact.

In the April quarter, Keysight unveiled a broad array of innovative products, underscoring its commitment to advancing next-generation test and design solutions. Among these was the Next-Generation Embedded Security Testbench, a solution engineered to address growing security challenges of modern chips and embedded devices. Built on a modular framework, the solution combines major components into a consolidated system which speeds up and streamlines the testing process, augmenting the reliability of security assessments.

The company also launched an innovative photonic design automation software solution as part of its Advanced Design System suite of tools. Dubbed Photonic Designer, this cutting-edge solution is tailored to streamline workflows from initial concept to simulation, emulation, and manufacturing, enhancing design accuracy and simplifying compliance-driven validation. These developments are likely to have a positive impact on the company’s upcoming results.

In the to-be-reported quarter, Keysight further strengthened its radio frequency (RF) and microwave instrument portfolio with the launch of six new analog signal generators, two vector signal generators, eight RF synthesizers and three signal source analyzers. Designed to support frequencies up to 54 GHz across both single- and multi-channel platforms, these compact, high-performance instruments enable RF engineers to conduct more precise component and device characterization. All these advancements are poised to drive incremental demand and contribute to revenue growth in the upcoming quarter.

Overall Expectations

Our estimate for revenues from the Communications Solutions Group segment is pegged at $870.2 million, suggesting 3.6% year-over-year growth. Revenues from the Electronic Industrial Solutions Group vertical are projected to be $409.2 million, up 8.8% year over year. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)  

For the second quarter of fiscal 2025, the Zacks Consensus Estimate for revenues is pegged at $1.28 billion, indicating year-over-year growth from $1.22 billion. The consensus estimate for adjusted earnings per share is pegged at $1.65, suggesting an improvement from the $1.41 per share reported a year ago.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Keysight in the fiscal second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.37%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Keysight Technologies Inc. Price and EPS Surprise

Keysight Technologies Inc. price-eps-surprise | Keysight Technologies Inc. Quote

Zacks Rank: Keysight has a Zacks Rank #3.

Stocks to Consider

The Earnings ESP for Altimmune ALT is +6.60% and carries a Zacks Rank of 2 currently. The company is scheduled to report quarterly numbers on May 13. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stantec STN has an Earnings ESP of +6.87% and carries a Zacks Rank of 2 currently. The company is scheduled to report quarterly numbers on May 14. 

Capital Southwest CSWC has an Earnings ESP of +3.23% and carries a Zacks Rank of 2 currently. The company is scheduled to report quarterly numbers on May 14.

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This article originally published on Zacks Investment Research (zacks.com).

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