Teradata (TDC +26.82%) stock rocketed 26.5% through 10:25 a.m. ET Wednesday after the company crushed its third-quarter earnings report last night.
Heading into the report, analysts forecast the data management specialist would earn $0.54 per share on $406.3 million in quarterly revenue. Teradata actually earned $0.72 per share (adjusted for one-time items) on sales of $416 million -- then guided higher for both Q4 and the year.
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Teradata Q3 earnings
While Teradata beat on earnings, its earnings as calculated according to generally accepted accounting principles (GAAP) fell significantly short of the $0.72 adjusted profit noted above. GAAP profit was only $0.42 per share -- but that's still up 27% year over year. Free cash flow rose similarly, to $88 million for the quarter.
Also worth highlighting: Revenue of $416 million, although better than expected, was down 5% year over year, and recurring revenue slimmed by 2%.
CEO Steve McMillan still called this a quarter of "solid execution," noting free cash flow in particular exceeded his expectations.
NYSE: TDC
Key Data Points
Is Teradata stock a buy?
Turning to guidance, Teradata warned that sales are still falling, with revenue probably down 2% to 4% year over year, and recurring revenue in particular falling 1% to 3%. Management nonetheless predicts GAAP profit will be up from last year, $0.26 to $0.30 per share, and ahead of analyst estimates.
Full-year profit should range from $1.22 to $1.26, with free cash flow between $260 million and $280 million. On a $26 stock with a $2.5 billion market cap, that works out to a P/E ratio of barely 21 -- and a cheap price-to-free-cash-flow ratio of barely 9.2.
Even after today's run-up, Teradata looks more than cheap enough to buy.
