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On Wednesday, JPMorgan updated its outlook on Keysight Technologies (NYSE:KEYS), increasing the price target to $177 from the previous $172 while maintaining an Overweight rating on the stock. With a current market capitalization of $28.13 billion and a price-to-earnings ratio of 46.18, InvestingPro data indicates the stock is trading at a high earnings multiple. The adjustment followed Keysight’s announcement of a strong performance in the second fiscal quarter, surpassing revenue and earnings expectations. The company also provided third-quarter guidance that exceeded market forecasts and upgraded its full-year outlook for fiscal year 2025.
Keysight’s robust growth in the Wireline segment, which saw double-digit expansion for the first time, was highlighted as a key factor in its success. The company maintains a healthy gross profit margin of 62.57% and operates with moderate debt levels, according to InvestingPro analysis. This growth is driven by significant deployments of 400G and 800G equipment, as well as research and development related to 800G and 1.6T technologies. This has allowed Keysight to continue its trajectory of long-term revenue growth, targeting the mid-point of 6%, even amidst a sluggish macroeconomic environment that has particularly affected the Electronic Industrial Solutions Group (EISG) segment.
Despite the challenges faced in the General Electronics and Autos end-markets, the strength in the Communications sector has been able to more than compensate for these headwinds. However, the company did encounter unexpected costs due to tariffs, estimating an annualized cost headwind of $75-$100 million. The peak of these headwinds is expected in the third fiscal quarter, with subsequent mitigation actions, primarily pricing adjustments, anticipated to moderate the impact.
Looking ahead, JPMorgan analysts believe that the demand outlook for fiscal year 2025, despite a slower macroeconomic climate, underscores the resilient secular growth drivers for Keysight. The company’s strong financial position is evidenced by a current ratio of 2.95, indicating ample liquidity to meet short-term obligations. As a result, revenue expectations for fiscal year 2026 have been raised. For deeper insights into Keysight’s valuation and growth prospects, investors can access comprehensive analysis through InvestingPro, which offers exclusive access to detailed financial metrics and expert research reports. Nevertheless, the acquisition of Spirent (LON:SPT), which is expected to take place in fiscal year 2026 and is seen as challenging on margins compared to Keysight, is projected to limit earnings growth to approximately 10% after more than 10% earnings per share (EPS) growth in fiscal year 2025.
In summary, the increased price target to $177 reflects a higher earnings multiple applied to the fiscal year 2026 earnings forecast, acknowledging the stronger than anticipated organic revenue drivers. The Overweight rating has been reiterated, signaling confidence in Keysight’s performance trajectory.
In other recent news, Keysight Technologies Inc. reported strong financial results for the second quarter of 2025, surpassing market expectations. The company achieved earnings per share of $1.70, exceeding the forecasted $1.65, and reported revenue of $1.31 billion, which also surpassed the anticipated $1.28 billion. Keysight has raised its full-year revenue growth expectation to between 5% and 7%, reflecting confidence in its market position and demand outlook. Additionally, the company is progressing with its acquisition of Spirent, with regulatory clearance from the U.K.’s Competition and Markets Authority and an expected closure in the third fiscal quarter. Analyst firm Barclays (LON:BARC) highlighted continued momentum in Keysight’s AI and defense sectors, while Deutsche Bank (ETR:DBKGn) noted the company’s improved top-line outlook. Keysight’s diversified supply chain and strategic investments in AI infrastructure have positioned it well amid ongoing tariff challenges. Despite some macroeconomic uncertainties, the company’s pipeline remains robust, and it anticipates a strong finish to the fiscal year.
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