Keysight Earnings: In-Line Result as Communications Softness Again Offset by Automotive Strength

We maintain our $175 fair value estimate for wide-moat Keysight Technologies shares after fiscal second-quarter results bore no large surprises. Communications sales continue to stagnate amid a soft spending environment at commercial customers and weak consumer demand. Government and automotive markets remain bright spots that are helping to offset commercial communications weakness. Fiscal second-quarter profitability meaningfully beat our expectations from positive mix that we think will be short-lived. Still, we see a path to these strong margins longer-term, and make no changes to our positive growth expectations for Keysight and its comprehensive portfolio for communications testing. Shares have approached our fair value, popping 8% upon the release, which we believe is due to alleviation of fear that demand might weaken further. We see shares as fairly valued now.