MTS Systems (MTSC) Misses Q3 EPS by 15c, Revenues Miss; Lowers FY18 EPS/Revenue Outlook

MTS Systems (NASDAQ: MTSC) reported Q3 EPS of $0.49, $0.15 worse than the analyst estimate of $0.64. Revenue for the quarter came in at $194.7 million versus the consensus estimate of $204.69 million.

• Revenues of $194.7 million, including strong Sensors revenue growth of 14% year-over-year
• Gross margin of 39.2%, including Sensors gross margin above 50%
• Diluted earnings per share of $0.47, a decline of $0.08 year-over-year
• Test backlog of $326.3 million, driven by strong sequential Test orders growth of 33% over the prior quarter
• Continued deleveraging of the balance sheet with $20 million of debt payments
• Declared 146th consecutive quarterly dividend of $0.30 per share

"Our Sensors business continued its strong performance with its fifth consecutive quarter of double-digit revenue growth, gross margin above 50% and an increase in operating margin," stated Dr. Jeff Graves, President and Chief Executive Officer. "Our comprehensive Sensors product portfolio and the expanded ability to support customers worldwide provides us with the confidence that our Sensors business will continue its momentum, especially as factory automation, defense programs and industrial markets drive robust demand for our products across our entire Sensors portfolio."

"Our Test business continued to navigate a dynamic and volatile auto industry as rapid technological advances in electric, autonomous and automated driver assistance vehicles continued to affect the timing of many of our Test projects," stated Dr. Graves. "While revenues from backlog conversion were lower than our initial estimates and impacted Test profitability in the quarter, strong order growth of 17% year-over-year, driven by both our ground vehicles and materials Test sectors, has us positioned well with our leading technology and product offerings that meet the precision, durability and reliability requirements of our customers. This order growth translated to a strong increase in backlog, which ended the quarter at $326 million. Despite a strong orders profile in the third quarter, we expect continued volatility in the near-term order patterns, specifically relating to the auto industry durability testing market."

GUIDANCE:

MTS Systems sees FY2018 EPS of $3.25-$3.35, versus the consensus of $2.35. MTS Systems sees FY2018 revenue of $775-785 million, versus the consensus of $806.25 million.

For earnings history and earnings-related data on MTS Systems (MTSC) click here.

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