Teradyne Declares Pricing Of $400M Unsecured Senior Notes

Teradyne Inc. (NYSE:TER) recently announced the pricing of unsecured senior notes totaling $400 million in a private placement. These bonds carry a coupon rate of 1.25% per year and are due to mature in 2023.

Shares of Teradyne have been have been steadily treading higher on a year-to-date basis. The stock has returned 23.46% compared with the Zacks Electronic Test Equipment industry’s gain of 20.36%.

Coming back to the news, the notes have been offered to qualified institutional buyers only and in accordance with Rule 144A under the Securities Act of 1933, as amended. The company also granted initial purchasers of the notes the option to buy up to an additional $60 million aggregate principal amount of the notes to cover any over-allotment. This option is exercisable for 30 days.

Interest on the notes will be paid semi-annually on Jun 15 and Dec 15, starting 2017. The offering is expected to close on Dec 12, 2016, subject to customary closing conditions.

In connection with the pricing of the notes, Teradyne has entered into more convertible note hedge transactions with the initial purchasers or their affiliates.

Teradyne expects the proceeds from these offerings to be approximately $392.0 million or $450.8 million if the underwriters exercise in full their option to purchase additional notes. Teradyne intends to use approximately $28.7 million of the net proceeds from this offering to pay the cost of the convertible note hedge transactions and repurchase up to $50 million of shares. The remaining net proceeds will be used for general corporate purposes.

Teradyne is a leading provider of automated test equipment. The company reported decent third -quarter results, with both the top line and the bottom line outperforming the respective Zacks Consensus Estimate.

Exiting the third quarter, Teradyne had cash and short-term investments of approximately $896.4 million, up from $823.2 million in the prior quarter. Cash flow from operations was roughly $203.8 million compared with $180.7 million in the previous quarter. The company also paid a quarterly dividend worth $12.1 million.

We believe that the company has a strong balance sheet, which will help it to capitalize on investment opportunities and pursue strategic acquisitions, further improving its growth prospects. Moreover, we believe that the senior notes offering will bring down the company’s cost of capital, thus strengthening its balance sheet and supporting growth.

TERADYNE INC Price and Consensus

TERADYNE INC Price and Consensus | TERADYNE INC Quote

Currently, Teradyne sports a Zacks Rank #1 (Strong Buy). Some other favorably placed stocks in the industry are Cognex Corporation (NASDAQ:CGNX) and Itron, Inc. (NASDAQ:ITRI) , carrying a Zacks Rank #1, and Fortive Corporation (NYSE:FTV) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cognex Corporation delivered a positive earnings surprise of 24.92% in the trailing four quarters.

Itron, Inc. delivered a positive earnings surprise of 30.55%, on average, in the trailing four quarters.

Fortive Corporation delivered a positive earnings surprise of 8.42% in the trailing four quarters.

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