A month has gone by since the last earnings report for Teledyne Technologies (TDY Quick QuoteTDY - Free Report) . Shares have lost about 2.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Teledyne due for a breakout? 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 drivers.

Teledyne Q2 Earnings Top Estimates, Sales Decline Y/Y

Teledyne Technologiesreported second-quarter 2020 adjusted earnings of $2.43 per share, which surpassed the Zacks Consensus Estimate of $2.01 by 20.9%.

Including one-time items, the company reported second-quarter GAAP earnings per share of $2.48, which declined 11.4% from the year-ago quarter’s $2.80.

The year-over-year bottom-line decline can be attributed to decrease in sales during the reported quarter. However, the quarterly bottom line exceeded the earlier announced GAAP earnings guidance range of $1.90-$2.05.

Operational Highlights

In the quarter under review, total sales amounted to $743.3 million, which missed the Zacks Consensus Estimate of $743.7 million by a whisker. The top line declined 4.9% from $782 million in the year-ago quarter. Except for the Engineered Systems segment, all other segments recorded year-over-year sales decline in the second quarter.

Segmental Performance

Instrumentation: Sales at this segment slipped 0.4% year over year to $263.1 million in the second quarter, owing to lower sales from marine instrumentation and test and measurement instrumentation.

Operating income fell 1% year over year to $48.5 million on account of increased severance and facility consolidation costs.

Digital Imaging: Quarterly sales at this division declined 4.3% yearover year to $237.6 million. The deterioration can be attributed to lower sales of X-ray products for dental and medical applications and geospatial imaging products.

Operating income decreased 9.3% year over year to $46.8 million on account of lower sales.

Aerospace and Defense Electronics: At this segment, quarterly sales of $143.1 million declined18.7% from the prior-year quarter owing to decreased sales for aerospace electronics as well as  defense and space electronics.

Operating income plunged 54.7% year over year to $17.5 million due to lower sales and higher severance and facility consolidation costs.

Engineered Systems: Sales at this division grew 6.4% year over year to about $99.5 million in the second quarter. The uptick was driven by higher sales of engineered products and turbine engines.

Operating income rose 20% to $10.8 million on account of higher sales and improved mix of manufacturing programs.

Financial Condition

Teledyne’s cash and cash equivalents totaled $382.8 million as of Jun 28, 2020, compared with $199.5 million at the end of 2019. Long-term debt was $750.8 million compared with $750 million at 2019-end.

Cash from operations at the end of the second quarter amounted to $155.8 million compared with $83.2 million at the end of second-quarter 2019.
In the reported quarter, capital expenditures were $16.6 million compared with $18.1 million in the year-ago quarter. Moreover, the company generated free cash flow of $139.2 million compared with $65.1 million in the year-ago quarter.

Guidance

Teledyne expects to generate GAAP earnings per share in the range of $2.25-$2.45 in the third quarter of 2020. Currently, the Zacks Consensus Estimate for Teledyne’s third-quarter earnings is pegged at $2.43 per share, which lies near the higher end of its bottom-line expectations.

For 2020, the company has raised the lower end of its earlier expected earnings guidance range. Notably, Teledyne currently expects to generate earnings in the range of $9.45-$10 compared with the earlier band of $9.30-$10.

Currently, the Zacks Consensus Estimate for Teledyne’s full-year earnings is pegged at $9.60 per share, which lies below the midpoint of its updated bottom-line expectations.

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, Teledyne has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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 this revision indicates a downward shift. Notably, Teledyne has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.