Why Keysight Technologies Shares Jumped Today

What happened

Shares of Keysight Technologies (NYSE: KEYS) have jumped today, up by 11% as of 12:17 p.m. EDT, after the company reported fiscal second-quarter earnings results. Keysight, which helps customers design and validate electronic products, beat expectations on both the top and bottom lines.

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So what

Revenue in the fiscal second quarter increased 10% to hit a record $1.09 billion, ahead of the consensus estimate of $1.07 billion in sales. That led to non-GAAP net income of $233 million, or $1.22 per share, easily topping analysts' forecast of $0.98 per share in adjusted profit. Keysight's guidance had called for revenue of approximately $1.06 billion to $1.08 billion, with adjusted earnings per share of $0.93 to $0.99.

"Keysight delivered another record quarter with both revenue and earnings exceeding the high-end of our guidance," CEO Ron Nersesian said in a statement. "In the second quarter, we saw growth across most end markets as customers continued R&D investments in next-generation technologies."

Now what

Keysight also announced a new share repurchase program of $500 million, which will replace the previous program of $350 million that still had $160 million remaining under its authorization.

In terms of outlook for the fiscal third quarter, Keysight expects revenue in the range of $1.02 billion to $1.06 billion, with non-GAAP earnings per share of $0.97 to $1.05. However, the company warned that the Trump administration's Huawei ban will impact revenue for the balance of the fiscal year.

"If you look specifically at the Huawei impact for Q3, we've reduced our revenue guide for next quarter by about $25 million as a result of the escalating trade situation in China," CFO Neil Dougherty said on the conference call. "The impact in the fourth quarter is larger just based on the funnel of opportunities that we had which was more heavily weighted toward Q4 versus Q3 ... in the second half of this year."

Shares had sold off when the ban was announced, and a $25 million hit is fairly small. In a research note this morning, Jefferies analyst Brandon Couillard argued that the market's initial reaction was overblown, and reiterated a buy rating and $100 price target.

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