Yahoo Finance TE Connectivity (TEL) Up 6.8% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for TE Connectivity (TEL). Shares have added about 6.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is TE Connectivity due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
TE Connectivity Q2 Earnings Beat Estimates, Sales Fall Y/Y
TE Connectivity reported second-quarter fiscal 2024 adjusted earnings of $1.86 per share, which surpassed the Zacks Consensus Estimate by 1.64% and increased 12.7% year over year.
The year-over-year growth was driven by strong margin expansion.
Net sales in the reported quarter were $3.97 billion, which beat the consensus mark by 1.64%. The figure declined 4.6% on a reported basis and 3% organically on a year-over-year basis.
Orders were $4 billion in the reported quarter, up 6% sequentially.
Top-Line Details
Transportation solutions segment generated revenues of $2.38 billion, which accounted for 60.1% of net sales. The figure decreased 4% year over year and beat the Zacks Consensus Estimate by 0.03%.
The company witnessed a 3% decline in automotive sales. Organically, auto sales increased 1%.
Sensor sales were down 11% year over year. Commercial transportation sales fell 5% year over year.
TEL’s initiatives to exit lower-margin and lower-growth products negatively impacted sensor sales, along with weakness in industrial markets.
Industrial solutions segment generated revenues of $1.14 billion, which accounted for 28.8% of net sales and beat the Zacks Consensus Estimate by 0.33%. The figure declined 4% year over year.
Industrial equipment sales declined 23% year over year, while Aerospace, defense and marine increased 15%. Energy sales remained unchanged year over year, while Medical increased 6%.
The Communications solutions segment generated revenues of $440 million, which accounted for 11.1% of net sales. The figure declined 9.5% year over year but beat the consensus mark by 0.14%.
The year-over-year decline was attributed to broad market weakness. Data and device sales decreased 5% and appliance sales fell 16% year over year.
Operating Details
In second-quarter fiscal 2024, GAAP gross margin expanded 350 basis points (bps) year over year to 34.4%.
Selling, general and administrative expenses, as a percentage of revenues, increased 70 bps year over year to 11.2%. Research, development and engineering expenses, as a percentage of revenues, expanded 20 bps to 4.6%.
GAAP operating margin expanded 450 bps year over year to 17.4%. Adjusted operating margin expanded 260 bps year over year to 18.5% in the reported quarter.
Balance Sheet & Cash Flow
As of Mar 29, 2024, cash and cash equivalents were $1.18 billion, up from $1.17 billion as of Dec 29, 2023.
Long-term debt was $2.96 billion as of Mar 29, 2024 compared with $3.59 billion as of Dec 29, 2023.
TE Connectivity generated $710 million in cash from operations in the reported quarter, down from $719 million in the previous quarter.
TEL generated a free cash flow of $543 million in the reported quarter, down from $570 million reported in the previous quarter.
Guidance
For third-quarter fiscal 2024, TE Connectivity expects net sales of $4 billion with year-over-year organic growth driven by the Transportation and Communications segments.
Adjusted earnings are projected at $1.85 per share, indicating growth of 5% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, TE Connectivity has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, TE Connectivity has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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TE Connectivity Ltd. (TEL) : Free Stock Analysis Report
