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5 Reasons Why TE Connectivity is a Solid Pick Right Now
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Shares of TE Connectivity Ltd. (TEL - Free Report) have had an impressive run over the past six months, returning almost double of the Zacks categorized Electronic-Miscellaneous industry average. The premium connectivity and sensor solutions manufacturer recorded a return of 24.3%.
The company has an excellent earnings surprise history, with an average positive surprise of 5.6%, for the trailing four quarters. TE Connectivity scored its fourth consecutive earnings beat, during the last reported quarter, with adjusted earnings of $1.27 per share, beating the Zacks Consensus Estimate by 6.7%.
The company had also offered a robust outlook entering into fiscal 2017. Here we have shortlisted five factors which make us believe the stock has more room to run.
Why Should you Buy?
Estimates Revisions: This Zacks Rank #2 (Buy) stock has been witnessing upward estimate revisions for the past few months. The Zacks Consensus Estimate for fiscal 2017 earnings has edged up from $4.35 to $4.36 over the same time frame, on the back of one upward estimate revision versus none lower.
Impressive ROE:TE Connectivity’s Return on Equity (ROE) ratio is 18.4%, way ahead of the industry average of 3.8%. This is one of the paramount profitability metrics of the company, reflecting the fact that the company reinvests more efficiently, compared to the industry.
Undervalued:The company has a trailing 12-month PE ratio of 16.94, which compares favorably with the Zacks categorized Electronic-Miscellaneous industry’s trailing 12-month PE ratio, pegged at 27.1. This indicates that the stock is undervalued, with a strong upside potential.
Overall, the company carries value score of B, which implies the stock is reasonably valued. The Value Style Score is a comprehensive measure of all valuation metrics into one actionable score. This is a key measure that helps investors avoid ‘value traps’ and pick stocks that are truly trading at a discount.
VGM Score:TE Connectivity has a VGM Score of ‘B’. Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics. In fact, our research shows that stocks with VGM Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 make solid investment choices.
Major Catalysts at a Glance: TE Connectivity is a market leader in the connectivity and sensor business, armed with a comprehensive portfolio. About 80% of the company’s revenues are driven by harsh environment applications. For the past five years, the company’s harsh business applications have been experiencing mid-single digit growth, driving top-line growth.
Going forward, the company believes that this business will provide ample opportunities for margin expansion.In addition, the transportation business remains as one of the key profit churners, anticipated to grow in mid-single digits, both organically and on an actual basis. Also, Commercial Transportation business is faring well on the back of content expansion in the heavy truck market, especially in Asia. The other businesses of the company, namely Industrial and Communications Solutions, are also faring well.
Improving Commercial Aerospace and Defense business lines have been driving growth for the Industrial segment. Further, the Communications segment has bright prospects and is likely to grow in low-single digits. SubCom is expected to remain as one of the strongest growth drivers, with its $1-billion backlog, benefiting from the build-out of the cloud.
BWX Technologies has a positive earnings surprise of 13.9% for the trailing four quarters, beating estimates each time.
Ballard Power Systems has managed to beat earnings twice, with a positive average surprise of 12.5% for the trailing four quarters.
AVX Corporation has a positive average surprise of 1.4% for the trailing four quarters.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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5 Reasons Why TE Connectivity is a Solid Pick Right Now
Shares of TE Connectivity Ltd. (TEL - Free Report) have had an impressive run over the past six months, returning almost double of the Zacks categorized Electronic-Miscellaneous industry average. The premium connectivity and sensor solutions manufacturer recorded a return of 24.3%.
The company has an excellent earnings surprise history, with an average positive surprise of 5.6%, for the trailing four quarters. TE Connectivity scored its fourth consecutive earnings beat, during the last reported quarter, with adjusted earnings of $1.27 per share, beating the Zacks Consensus Estimate by 6.7%.
The company had also offered a robust outlook entering into fiscal 2017. Here we have shortlisted five factors which make us believe the stock has more room to run.
Why Should you Buy?
Estimates Revisions: This Zacks Rank #2 (Buy) stock has been witnessing upward estimate revisions for the past few months. The Zacks Consensus Estimate for fiscal 2017 earnings has edged up from $4.35 to $4.36 over the same time frame, on the back of one upward estimate revision versus none lower.
Impressive ROE:TE Connectivity’s Return on Equity (ROE) ratio is 18.4%, way ahead of the industry average of 3.8%. This is one of the paramount profitability metrics of the company, reflecting the fact that the company reinvests more efficiently, compared to the industry.
Undervalued:The company has a trailing 12-month PE ratio of 16.94, which compares favorably with the Zacks categorized Electronic-Miscellaneous industry’s trailing 12-month PE ratio, pegged at 27.1. This indicates that the stock is undervalued, with a strong upside potential.
Overall, the company carries value score of B, which implies the stock is reasonably valued. The Value Style Score is a comprehensive measure of all valuation metrics into one actionable score. This is a key measure that helps investors avoid ‘value traps’ and pick stocks that are truly trading at a discount.
VGM Score:TE Connectivity has a VGM Score of ‘B’. Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics. In fact, our research shows that stocks with VGM Scores of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 make solid investment choices.
Major Catalysts at a Glance: TE Connectivity is a market leader in the connectivity and sensor business, armed with a comprehensive portfolio. About 80% of the company’s revenues are driven by harsh environment applications. For the past five years, the company’s harsh business applications have been experiencing mid-single digit growth, driving top-line growth.
Going forward, the company believes that this business will provide ample opportunities for margin expansion.In addition, the transportation business remains as one of the key profit churners, anticipated to grow in mid-single digits, both organically and on an actual basis. Also, Commercial Transportation business is faring well on the back of content expansion in the heavy truck market, especially in Asia. The other businesses of the company, namely Industrial and Communications Solutions, are also faring well.
Improving Commercial Aerospace and Defense business lines have been driving growth for the Industrial segment. Further, the Communications segment has bright prospects and is likely to grow in low-single digits. SubCom is expected to remain as one of the strongest growth drivers, with its $1-billion backlog, benefiting from the build-out of the cloud.
Stocks to Consider
Other similarly ranked stocks in the same space include BWX Technologies, Inc. (BWXT - Free Report) , Ballard Power Systems Inc. (BLDP - Free Report) and AVX Corporation . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BWX Technologies has a positive earnings surprise of 13.9% for the trailing four quarters, beating estimates each time.
Ballard Power Systems has managed to beat earnings twice, with a positive average surprise of 12.5% for the trailing four quarters.
AVX Corporation has a positive average surprise of 1.4% for the trailing four quarters.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>