Keysight Earnings: We Trim Our Short-Term Forecast and Valuation and See Shares Fairly Valued

We trim our fair value estimate for shares of wide-moat Keysight Technologies to $157 per share, from $166, to reflect a softer short-term environment than we’d previously modeled. Keysight’s results came in above the top end of management guidance, but fiscal second-quarter guidance just missed our model, and management’s outlook for the fiscal second half was below our forecast. Keysight continues to face softer customer spending, particularly in its wireless communications and industrial markets. We still like the firm’s relatively stronger demand in aerospace, defense, and government customers, and it’s seeing some upside in data center spending from artificial intelligence, or AI. We continue to expect stronger long-term results from Keysight and appreciate its moaty, comprehensive portfolio for communications testing. Shares slid commensurate to our fair value trim after the results were reported, and we see the stock as fairly valued.