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TE Connectivity (TEL) Q3 Earnings Top Estimates, Sales Up Y/Y

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TE Connectivity Ltd. (TEL - Free Report) has reported third-quarter fiscal 2021 adjusted earnings of $1.79 per share, which surpassed the Zacks Consensus Estimate by 13.3%. The figure surged 203.4% year over year.

Net sales in the reported quarter were $3.8 billion, which beat the consensus mark of $3.7 billion. The figure rose 51% from the year-ago quarter.

Top-line growth was driven by well-performing transportation, communications and industrial solutions of the company.

However, TE Connectivity witnessed pandemic-induced supply-chain constraints, which were acting as headwinds.

Nevertheless, the company’s strong momentum across hybrid and electric vehicles, and data and devices remains a major positive.

TE Connectivity Ltd. Price, Consensus and EPS Surprise

 

TE Connectivity Ltd. Price, Consensus and EPS Surprise

TE Connectivity Ltd. price-consensus-eps-surprise-chart | TE Connectivity Ltd. Quote

Top-Line Details

Transportation Solutions: The segment generated $2.3 billion, which accounted for 58.9% of the net sales. The figure surged 81% year over year. This can be attributed to strong content growth, which led to a 101% year-over-year rise in the company’s automotive sales. Commercial transportation sales grew 64% year over year. Sensor sales grew 26% from the year-ago quarter on the back of solid momentum among auto and commercial transportation applications.

Industrial Solutions: The segment generated $1 billion, which accounted for 26.1% of net sales. The figure rose16% year over year. This was driven by robust industrial equipment sales, which grew 42% from the prior-year quarter. Solid momentum across renewable applications led to 8% growth in energy sales. Recovery in interventional procedures led to 11% year-over-year growth in the medical category.

However, weakness in the commercial aerospace market remained a headwind.

Communications Solutions: The segment generated $578 million, which accounted for 15% of net sales. Further, the figure rose35% year over year. This was driven by solid content growth from cloud applications, which led to a year-over-year riseof 19% in data and devices sales. Appliance sales grew 64% from the prior-year quarter,which contributed well.

Operating Details

Per management, gross profit was $1.3 billion, which was up 79.3% year over year. As a percentage of revenues, the figure expanded 520 basis points (bps) from the year-ago quarter to 32.9%.

We note that selling, general and administrative expenses, and research and development expenses of $366 million and $168 million rose14% and 15.1% year over year, respectively.

The company’s adjusted operating margin was 19.1% in the reported quarter, which expanded 970 bps year over year.

Balance Sheet & Cash Flow

As of Jun 25, 2021, cash and cash equivalents were $1.4 billion, down from $1.7 billion as of Mar 26, 2021.

Long-term debt was $3.63 billion in the fiscal third quarter, up from $3.60 billion in the prior quarter.

The company generated $682 million of cash from operations in the reported quarter compared with $580 million in the previous quarter.

It generated free cash flow of $539 million. The company returned $447 million to its shareholders.

Guidance

For fourth-quarter fiscal 2021, TE Connectivity expects net sales of $3.8 billion. The Zacks Consensus Estimate for the same is pegged at $3.7 billion.
    
Adjusted earnings are projected to be$1.65 per share. The consensus mark is pegged at $1.56 per share.

For fiscal 2021, net sales are projected at $14.9 billion. The consensus mark for the same is pegged at $14.7 billion.

Adjusted earnings for fiscal 2021 are expected to be $6.47 per share. The Zacks Consensus Estimate for the same stands at $6.16 per share.

Zacks Rank and Other Stocks to Consider

Currently, TE Connectivity carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are KLA Corporation (KLAC - Free Report) , Carrier Global Corporation (CARR - Free Report) and Trimble Inc. (TRMB - Free Report) . All three companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
    
The long-term earnings growth rates of KLA, Carrier Global and Trimble are pegged at 14.03%, 13.38% and 10.1%, respectively.