What happened
Keysight Technologies (KEYS 0.76%) stock is sinking in Friday's trading. The company's share price was up 10.9% as of 10:15 a.m. ET, according to data from S&P Global Market Intelligence.
After the market closed yesterday, Keysight published results for its fiscal third quarter, which ended July 31. The company posted sales in line with the market's expectations and earnings that beat Wall Street's target. But while the equipment testing and measurements specialist's Q3 results came in better than anticipated, its forward guidance underwhelmed investors.
So what
Keysight's revenue was in line with analyst expectations and flat year over year in the third quarter, coming in at $1.38 billion. On the other hand, the company's non-GAAP (adjusted) earnings per share of $2.19 in the period came in significantly better than the average analyst estimate's call for per-share earnings of $2.04. While adjusted earnings inched up from $2.01 per share in the prior-year period, generally accepted accounting principles (GAAP) earnings of $1.61 per share were down from earnings of $1.87 per share in last year's quarter.
For the fourth quarter, management is guiding for adjusted earnings per share between $1.83 and $1.89 on revenue between $1.29 billion and $1.31 billion. If the company were to hit the midpoint of its current guidance range, sales would decline roughly 10% year over year and adjusted earnings would fall roughly 13%.
Now what
Following the Q3 results, an analyst at Barclays downgraded the firm's rating on Keysight stock from "overweight" to "equal weight." The analyst cited a lack of positive performance catalysts until the second half of the company's next fiscal year as a core reason for the downgrade.
KEYS PE Ratio (Forward) data by YCharts. PE Ratio = price-to-earnings ratio. PS Ratio = price-to-sales ratio.
On the heels of today's big pullback, Keysight stock is now down roughly 22% year to date. The company is now valued at roughly 16.4 times this year's expected earnings and 4.3 times expected sales.
