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TE Connectivity (TEL) Q2 Earnings & Sales Beat, Rise Y/Y

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TE Connectivity Ltd. (TEL - Free Report) has reported second-quarter fiscal 2022 adjusted earnings of $1.81 per share, which surpassed the Zacks Consensus Estimate by 5.8%. The figure rose 15% year over year.

Net sales in the reported quarter were $4.01 billion, which beat the consensus mark of $3.81 billion. The figure rose 7% from the year-ago quarter.

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

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% of net sales. The figure grew 1% year over year. The company witnessed 1% growth in automotive sales, which was driven by the growing proliferation of electric vehicles and strong content trends of electronification. Further, commercial transportation sales grew 3% year over year.

However, sensor sales fell 3% from the year-ago quarter. Nevertheless, the solid momentum of the sensor business across transportation applications was a positive.

Industrial Solutions: The segment generated $1.07 billion, which accounted for 27% of net sales. The figure rose 13% year over year. This was driven by robust industrial equipment sales, which grew 39% from the prior-year quarter, owing to the growing capital investment in factory automation applications. Solid momentum across renewable applications also remained positive for the company’s energy business.

However, declining energy, medical and, aerospace, defense and marine sales were concerning.

Communications Solutions: The segment generated $618 million, which accounted for 15% of net sales. Further, the figure rose 24% year over year. This was driven by solid content growth in high-speed cloud applications, which led to a year-over-year rise of 39% in data and devices sales. Appliance sales grew 5% from the prior-year quarter, which contributed well.

Operating Details

Per management, the gross profit was $1.3 billion, which was up 10.5% year over year. As a percentage of revenues, the figure expanded 110 basis points (bps) from the year-ago quarter to 33.4%.

We note that selling, general and administrative expenses, and research and development expenses of $416 million and $185 million rose 3.7% and 6.3% year over year, respectively.

The company’s adjusted operating margin was 18.4% in the reported quarter, which expanded 140 bps year over year.

Balance Sheet & Cash Flow

As of Mar 25, 2021, cash and cash equivalents were $749 million, down from $982 million as of Dec 24, 2021.

Long-term debt was $3.4 billion in the fiscal second quarter, down from $3.5 billion in the prior quarter.

The company generated $413 million of cash from operations in the reported quarter compared with $532 million in the previous quarter.

Further, it generated a free cash flow of $242 million.

The company returned $670 million to shareholders.

Guidance

For third-quarter fiscal 2022, TE Connectivity expects year-over-year net sales growth of 1.4% and 3.3% on a reported and organic basis, respectively. The Zacks Consensus Estimate for the same is pegged at $3.98 billion.
    
Adjusted earnings are projected at $1.75 per share. The consensus mark is pegged at $1.81 per share.

Zacks Rank and Stocks to Consider

Currently, TE Connectivity carries a Zacks Rank #4 (Sell).

Investors interested in the broader technology sector can consider stocks like Jabil (JBL - Free Report) , Jack Henry & Associates (JKHY - Free Report) and Broadcom (AVGO - Free Report) . While Jabil currently sports a Zacks Rank #1 (Strong Buy), Broadcom and Jack Henry & Associates carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Jabil has gained 4.3% over a year. The long-term earnings growth rate for JBL is currently projected at 12%.

Jack Henry & Associates has gained 18.4% over a year. The long-term earnings growth rate for JKHY is currently projected at 17%.

Broadcom has gained 22% over a year. The long-term earnings growth rate for AVGO is currently projected at 14.5%.