Teradata Corporation (TDC - Get Rating), is leveling up cloud capabilities and is a leading provider of connected multi-cloud data platforms for enterprise analytics. It reported solid financial results in the third quarter of 2024. The company reported a record quarterly revenue of $440 million, surpassing analysts’ estimate of $417.71 million. Also, its non-GAAP EPS of $0.69 topped the analysts’ expectations of $0.56.

During the third quarter, Teradata continued expanding its cloud business presence and delivered innovations to strengthen its market-wide position. The company’s public cloud ARR for the nine months of 2024 increased 25.6% from the prior year’s period to $570 million. It now expects public cloud ARR growth of 18% to 22% year-over-year.

Recently, TDC collaborated with NVIDIA (NVDA - Get Rating) to enhance its Vantage platform via NVIDIA AI to benefit large, global organizations. Also, it announced new capabilities for VantageCloud Lake and ClearScape Analytics for enterprises to easily implement and see immediate ROI from generative AI (GenAI) use cases.

With its continuous endeavors in innovation and strategic collaborations with industry leaders like NVDA and Amazon (AMZN - Get Rating), the company is strengthening its product offerings, growing its customer base, and expanding its market presence.

Buoyed by its strong performance in the third quarter, TDC projects non-GAAP EPS in the range of $0.40 to $0.44 for the fourth quarter. And for the full year 2024, its non-GAAP EPS is expected to be $2.30 to $2.34.

The company’s stock performance has also been notable in recent periods. TDC’s stocks have surged 10% over the past month and 17.2% over the past three months to close the last trading session at $32.11.

Let’s analyze the factors that could influence TDC’s performance in the upcoming months.

Positive Recent Developments

On December 3, TDC strengthened its relationship with Amazon’s (AMZN) Amazon Web Services (AWS) to deliver ‘rapid-start’ Gen AI use cases when leveraging Teradata VantageCloud on AWS, integrated with Amazon Bedrock. The integration allows TDC customers access a large repository of 60+ Gen AI use cases across various functions and industries.

It delivers customer-improved experiences, boosts employee productivity, and streamlines business processes.

On November 19, TDC made Teradata AI Unlimited available for public preview via the Microsoft Fabric Workload Hub. It is designed to speed up trusted AI innovations delivered at an enterprise scale and features TDC’s robust analytics functionality, which makes ClearScape Analytics available to all.

Robust Financials

TDC’s total revenue increased marginally year-over-year to $440 million during the third quarter that ended September 30, 2024. The company’s non-GAAP gross profit of $271 million indicates growth of 2.7% from the prior year’s quarter. Its non-GAAP operating income grew 57.1% from the year-ago value to $99 million.

In addition, the company’s non-GAAP net income came in at $67 million, reflecting a 55.8% increase year-over-year growth, while its non-GAAP EPS rose 64.3% from the previous year’s quarter to $0.69, respectively. Its free cash flow was $69 million for the quarter, up 91.7% from the prior year’s quarter.

Also, the company’s cash and cash equivalents and total assets amounted to $348 million and $1.66 billion as of September 30, 2024.

Favorable Analyst Estimates

Analysts expect TDC’s EPS for the first quarter (ending March 2025) to increase 11.9% year-over-year to $0.64. The consensus revenue estimate for the same quarter is $447.66 million. Moreover, TDC has an impressive earnings surprise history, having topped consensus EPS estimates in each of the trailing four quarters.

For the fiscal year ending December 2024, the company’s EPS is expected to grow 12.8% year-over-year to $2.33. Additionally, Street expects TDC’s EPS for the fiscal year 2025 to increase 5.6% year-over-year to $2.47.

High Profitability

TDC’s trailing-12-month gross profit margin and net income margin of 60.96% and 4.56% are 21.2% and 20% higher than the industry averages of 50.29% and 3.80%, respectively. Its trailing-12-month EBIT margin of 11.79% is significantly higher than the industry average of 5.42%. Similarly, its trailing-12-month levered FCF margin of 18.95% is 69.3% higher than the industry average of 11.19%.

Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 66.40%, 17.79%, and 4.94% favorably compared to the industry averages of 4.52%, 3.22%, and 2.10%, respectively.

Low Valuation

In terms of forward non-GAAP P/E, TDC is currently trading at 13.75x, 48.1% lower than the industry average of 26.52x. Also, the stock’s forward EV/Sales and Price/Sales of 1.89x and 1.75x are considerably lower than the industry averages of 3.27x and 3.27x, respectively.

Additionally, the stock’s forward EV/EBITDA and Price/Cash Flow of 7.19x and 10.06x are 54.9% and 56.3% lower than the industry averages of 15.94x and 23.02x, respectively.

POWR Ratings Reflect Promise

TDC’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. TDC has an A grade for Quality, consistent with its higher-than-industry profitability. The stock also has an A grade for Value, justified by its lower valuation.

TDC has topped among the 78-stock B-rated Technology – Services industry.

Beyond what I have stated above, we have also given TDC grades for Sentiment, Momentum, Growth, and Stability. Get access to all the TDC Ratings here.

Bottom Line

The cloud solutions segment is currently buzzing with wide prospects, and TDC stands to capitalize on the trends with its wide product offerings and sound strategies. The company is integrating its operations with industry leaders to gain a competitive edge and offer the best solutions.

Also, its new innovations, which are tailored to cater to different requirements of new-age customers, will benefit its business.

Thus, with solid revenue growth, accelerating profitability, and lower valuation, TDC could be an ideal fit for your portfolio now.

How Does Teradata Corporation (TDC) Stack Up Against Its Peers?

While TDC has an overall POWR Rating of A, investors could also check out these other stocks within the B-rated Technology – Services industry with A (Strong Buy) or B (Buy) ratings: Leidos Holdings Inc. (LDOS - Get Rating), Key Tronic Corporation (KTCC - Get Rating), and Jabil Inc. (JBL - Get Rating).

For exploring more A and B-rated technology stocks, click here.

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TDC shares were trading at $32.38 per share on Monday afternoon, up $0.27 (+0.84%). Year-to-date, TDC has declined -25.58%, versus a 28.65% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

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